Armani swims against the tide
Wednesday, 26 March 2008
Adrian Michaels
FANCY shopping for your next holiday in Spain? Try some red swimming trunks from the "Ibiza Style" section of Armani Exchange's website, part of the "sexy looks" on offer that are "perfect" for a Spanish island often associated with the young British booze-and-clubbing brigade. It is a world away from the "formal elegance" and "aristocratic mindset" of the clothes on offer from website of the upscale, chic Giorgio Armani brand.
Italian fashion companies, facing the threat of cheaper production in emerging markets such as China, have been moving ever upmarket for some time. In recent years Versace has closed down seven of its lower-end lines and diversified into new luxury markets such as hotels. Renzo Rosso of Diesel has added to his famous jeans by signing up designers and pushing into other lines of luxury clothing.
The purpose has been to preserve margins and the cachet of "Made in Italy", but Armani stands apart from this trend. Giorgio Armani, the 73-year-old founder of the fashion empire that bears his name, is scrapping for business at all levels - from the top to the bottom of the fashion world.
Armani pursues a distinctive strategy by targeting the entire spectrum of consumers and incomes through five distinct brands. Giorgio Armani, the top-end luxury brand, sees itself as competing against Chanel or Hermès (to avoid confusion, company insiders refer to this brand by its full name and the company owner only as "Mr Armani"). Emporio Armani is the top offering of more fashionable items, competing with Dolce & Gabbana. Armani Collezioni sits below Giorgio Armani, representing a more affordable and accessible elegance, portraying itself in the same league as Hugo Boss or Burberry. Armani Jeans' casualwear competes with Diesel or Tommy Hilfiger. And Armani Exchange is the group's "fast fashion" chain, vying with names such as French Connection and Banana Republic.
The group aims for a sharp delineation of its business segments, developing each into a complete offering of clothing and accessories. John Hooks, deputy managing director, views that as the route to growth. "We have a very respectable presence in each segment of the market and that's what we can build on."
But such a strategy requires great care: how does a company sell Armani Exchange underwear to American or Japanese teenagers without detracting from the prestige of the Giorgio Armani brand and deterring richer customers from visiting its exclusive stores?
Mr Hooks, in a rare interview covering Armani's management strategy, says it demands great discipline. Developing five lines of business requires five approaches to everything the group does, from property location, design of stores and staff training to ambience, logistics, financing and packaging.
Giorgio Armani, for example, is generally available only in stand-alone stores in select locations. It is about the "the purity of the experience", says Mr Hooks.
In the UK, customers can shop for Armani Collezioni in department stores and outside London but Giorgio Armani is available only in the country's sole store on Sloane Street in the capital. In New York, Giorgio Armani and Emporio Armani sit alongside other smart boutiques on Madison Avenue, staffed by finely tailored and attentive employees, trained to explain the cut of the clothing. By contrast, the staff at 5th Avenue's Armani Exchange, which reverberates with pop music, tend to be younger and trendier. Employees, says Mr Hooks, are promoted within a brand and do not typically jump between them.
In earlier fashion eras, he says, the difference could be more easily discerned in the products on offer. The top luxury brands might only produce evening wear or work clothes. But now you can buy jeans - in Japanese denim at $500 - in Giorgio Armani as well as lower-quality jeans made in China for $90 at Armani Exchange.
"There is a very subtle classification going on that is much less apparent than before," Mr Hook says. "It complicates things enormously but it also makes things much more exciting."
Apart from the quality of the denim, those Giorgio Armani jeans will be presented differently, perhaps in very small piles, laid out in intimate shopping areas designed with luxuriant glossy materials such as limestone, marble or pleated satin.
Advertising campaigns also diverge. Giorgio Armani is placed in lifestyle magazines and never on the internet or on billboards or outdoors. By contrast, almost all of Milan's billboards appear to be adorned with semi-dressed famous footballers and models wearing products from Armani Jeans. And in Armani Exchange's advertising, "people are not that dressed actually", Mr Hooks quips.
Logistics and distribution are another area where different rules apply for different brands. A dress in a Giorgio Armani store that costs €5,000 ($7,670), might be moved, singly, from a store in Antwerp to Brussels. "You don't do that for jeans," Mr Hooks says.
But for all the group's commitment to the cheaper ranges, Giorgio Armani and Emporio Armani still have the lion's share of communication and marketing effort. One of the group's golden rules is that broadening out at the bottom of the market can only be done by reinforcing and promoting the top to protect the brand.
So although Armani Exchange accounts for 2,000 people of the 7,000 who work on Armani brands, Giorgio Armani and Emporio Armani have 70 per cent of the advertising and promotional budget. (Exchange is only 25 per cent owned by Armani so technically its people are not employed by the group.)
This mirrors wholesale revenues. Giorgio Armani and Emporio Armani accounted for 63 per cent of the €1.6bn consolidated revenues in 2006.
Mr Hooks says Armani wants "brand extension not brand stretching" and acknowledges that "there is always a danger of being ripped apart" by dilution. Expansion of brands is also carefully controlled to protect the top. Armani Exchange only opened in the UK and Japan, for example, once the more luxurious brands were present. "We never allow [Exchange] to go into markets where the other brands are not well established," says Mr Hooks.
Rivals such as Tommy Hilfiger, fashion experts say, have had mixed success in moving upmarket when they were already strongly associated with the lower end.
Even Armani Exchange's products have been carefully controlled. It had almost no perfumes, watches, sunglasses or underwear for some time, for fear of damaging the attraction of items that often act as entry points into the more upmarket brands. Now Armani is confident that Armani Exchange can offer sunglasses, but it makes sure they are not available in the same department stores that sell Emporio Armani eyewear.
Having laid down the rules, though, Mr Armani is starting to break them. Five Armani superstores are open or planned in Milan, Munich, Hong Kong, Tokyo and New York, each housing a selection of the brands, which are kept apart internally. Like Versace and Bulgari, Mr Armani is expanding the top of the range by opening hotels and resorts. Armani is also selling property in Dubai.
Today's rules could be forgotten tomorrow, Mr Hooks freely acknowledges. "Fashion by its very nature is precarious, the ground is always crumbling below our feet. You have to constantly reinvent yourself."
FANCY shopping for your next holiday in Spain? Try some red swimming trunks from the "Ibiza Style" section of Armani Exchange's website, part of the "sexy looks" on offer that are "perfect" for a Spanish island often associated with the young British booze-and-clubbing brigade. It is a world away from the "formal elegance" and "aristocratic mindset" of the clothes on offer from website of the upscale, chic Giorgio Armani brand.
Italian fashion companies, facing the threat of cheaper production in emerging markets such as China, have been moving ever upmarket for some time. In recent years Versace has closed down seven of its lower-end lines and diversified into new luxury markets such as hotels. Renzo Rosso of Diesel has added to his famous jeans by signing up designers and pushing into other lines of luxury clothing.
The purpose has been to preserve margins and the cachet of "Made in Italy", but Armani stands apart from this trend. Giorgio Armani, the 73-year-old founder of the fashion empire that bears his name, is scrapping for business at all levels - from the top to the bottom of the fashion world.
Armani pursues a distinctive strategy by targeting the entire spectrum of consumers and incomes through five distinct brands. Giorgio Armani, the top-end luxury brand, sees itself as competing against Chanel or Hermès (to avoid confusion, company insiders refer to this brand by its full name and the company owner only as "Mr Armani"). Emporio Armani is the top offering of more fashionable items, competing with Dolce & Gabbana. Armani Collezioni sits below Giorgio Armani, representing a more affordable and accessible elegance, portraying itself in the same league as Hugo Boss or Burberry. Armani Jeans' casualwear competes with Diesel or Tommy Hilfiger. And Armani Exchange is the group's "fast fashion" chain, vying with names such as French Connection and Banana Republic.
The group aims for a sharp delineation of its business segments, developing each into a complete offering of clothing and accessories. John Hooks, deputy managing director, views that as the route to growth. "We have a very respectable presence in each segment of the market and that's what we can build on."
But such a strategy requires great care: how does a company sell Armani Exchange underwear to American or Japanese teenagers without detracting from the prestige of the Giorgio Armani brand and deterring richer customers from visiting its exclusive stores?
Mr Hooks, in a rare interview covering Armani's management strategy, says it demands great discipline. Developing five lines of business requires five approaches to everything the group does, from property location, design of stores and staff training to ambience, logistics, financing and packaging.
Giorgio Armani, for example, is generally available only in stand-alone stores in select locations. It is about the "the purity of the experience", says Mr Hooks.
In the UK, customers can shop for Armani Collezioni in department stores and outside London but Giorgio Armani is available only in the country's sole store on Sloane Street in the capital. In New York, Giorgio Armani and Emporio Armani sit alongside other smart boutiques on Madison Avenue, staffed by finely tailored and attentive employees, trained to explain the cut of the clothing. By contrast, the staff at 5th Avenue's Armani Exchange, which reverberates with pop music, tend to be younger and trendier. Employees, says Mr Hooks, are promoted within a brand and do not typically jump between them.
In earlier fashion eras, he says, the difference could be more easily discerned in the products on offer. The top luxury brands might only produce evening wear or work clothes. But now you can buy jeans - in Japanese denim at $500 - in Giorgio Armani as well as lower-quality jeans made in China for $90 at Armani Exchange.
"There is a very subtle classification going on that is much less apparent than before," Mr Hook says. "It complicates things enormously but it also makes things much more exciting."
Apart from the quality of the denim, those Giorgio Armani jeans will be presented differently, perhaps in very small piles, laid out in intimate shopping areas designed with luxuriant glossy materials such as limestone, marble or pleated satin.
Advertising campaigns also diverge. Giorgio Armani is placed in lifestyle magazines and never on the internet or on billboards or outdoors. By contrast, almost all of Milan's billboards appear to be adorned with semi-dressed famous footballers and models wearing products from Armani Jeans. And in Armani Exchange's advertising, "people are not that dressed actually", Mr Hooks quips.
Logistics and distribution are another area where different rules apply for different brands. A dress in a Giorgio Armani store that costs €5,000 ($7,670), might be moved, singly, from a store in Antwerp to Brussels. "You don't do that for jeans," Mr Hooks says.
But for all the group's commitment to the cheaper ranges, Giorgio Armani and Emporio Armani still have the lion's share of communication and marketing effort. One of the group's golden rules is that broadening out at the bottom of the market can only be done by reinforcing and promoting the top to protect the brand.
So although Armani Exchange accounts for 2,000 people of the 7,000 who work on Armani brands, Giorgio Armani and Emporio Armani have 70 per cent of the advertising and promotional budget. (Exchange is only 25 per cent owned by Armani so technically its people are not employed by the group.)
This mirrors wholesale revenues. Giorgio Armani and Emporio Armani accounted for 63 per cent of the €1.6bn consolidated revenues in 2006.
Mr Hooks says Armani wants "brand extension not brand stretching" and acknowledges that "there is always a danger of being ripped apart" by dilution. Expansion of brands is also carefully controlled to protect the top. Armani Exchange only opened in the UK and Japan, for example, once the more luxurious brands were present. "We never allow [Exchange] to go into markets where the other brands are not well established," says Mr Hooks.
Rivals such as Tommy Hilfiger, fashion experts say, have had mixed success in moving upmarket when they were already strongly associated with the lower end.
Even Armani Exchange's products have been carefully controlled. It had almost no perfumes, watches, sunglasses or underwear for some time, for fear of damaging the attraction of items that often act as entry points into the more upmarket brands. Now Armani is confident that Armani Exchange can offer sunglasses, but it makes sure they are not available in the same department stores that sell Emporio Armani eyewear.
Having laid down the rules, though, Mr Armani is starting to break them. Five Armani superstores are open or planned in Milan, Munich, Hong Kong, Tokyo and New York, each housing a selection of the brands, which are kept apart internally. Like Versace and Bulgari, Mr Armani is expanding the top of the range by opening hotels and resorts. Armani is also selling property in Dubai.
Today's rules could be forgotten tomorrow, Mr Hooks freely acknowledges. "Fashion by its very nature is precarious, the ground is always crumbling below our feet. You have to constantly reinvent yourself."