By  on January 31, 2005

When Giorgio Armani staged a massive  fashion show in New York in October, it wasn’t an exclusive affair. He invited the general public to the show and said he was on a mission to “democratize” fashion.“Naturally, I know that I’m going a bit against the rules in America, where there are nights reserved just for the VIPs and other nights where everyone is invited,” Armani said at the time, just before traveling to New York. “I think that I’ll be breaking the rules slightly.”Broken the rules he has. Many industry titans, perhaps most famously Louis Vuitton and Gucci, have shunned the idea of second lines and product diversification. Reaching out to the masses is risky business, they claim. But Armani, who owns no fewer than five fashion labels, sees the sub-brands as an opportunity. In fact, some could argue, his exploitation of designer denim and T-shirts has actually aggrandized his iconic stature.Back in the Eighties, Italian teenagers wore cropped jackets to show off the Armani logo eagles on their jeans’ back pockets. Today, Americans need look no farther than the nearest shopping mall with an A|X Armani Exchange to buy into designer cachet with a $34 tank top. Armani is one of the few names in high fashion to have a presence on the Milan catwalk as well as near the local Starbucks.The trick has been to maintain status while making a piece of the dream accessible to a broader swath of consumers.“He’s always wanted to reach out and give things to people according to what they can afford. So he’s got this profound democratic spirit himself,” said John Hooks, Armani’s commercial and marketing director. Hooks said preventing cannibalization is tricky, but the company has succeeded by using each brand to conquer a different market segment or retail channel.“My job really is to be the sort of director of the orchestra. To make sure they all play in harmony and not against each other,” he said. “The message has to be clear to the consumer. Concentrate on Giorgio Armani and Emporio Armani. The other lines…live off the reflected glory of those two.”Paola Leoni, managing director of Milan-based ASI Consulting, said Armani’s scrupulous control over his brand name allowed the designer to diversify downward without tarnishing his image.“I think he was one of the first to do brand loading on second lines without losing the value of his name,” she said. “He anticipated the trend of luxury for the masses, a market that subsequently exploded.”Armani launched diffusion lines relatively early in his career. In 1979, just four years after founding his company and his signature Borgonuovo label, Armani started his first diffusion lines, at the time dubbed Giorgio Armani Le Collezioni and Mani. In 1981, Armani created the Emporio Armani and AJ/Armani Jeans collections. Ten years later, an even more mainstream A|X Armani Exchange was born.“The kids wouldn’t buy an item only because it had the Armani label,” the designer’s founding partner, the late Sergio Galeotti, told Time magazine in 1982. “We had to meet their demands — and their price range.” Alfredo Passariello, chief executive of outerwear firm Belfe and a former ceo of Armani’s jeans and manufacturing arm Simint, remembers the importance the designer placed on the jeans business. “[AJ/Armani] Jeans was a line with which he was particularly involved,” said Passariello. “It was an easy product. It was as easily recognizable as Armani.”These lines are also easily recognizable on Armani’s balance sheet. Black Label Giorgio Armani makes up 31 percent of the company’s 1.63 billion euros in wholesale turnover ($2.13 billion at current exchange). Emporio Armani is the second most important brand, with 27 percent of sales. Armani Collezioni generates 19 percent of revenue. Jeans and A|X accounts for 15 percent and 7 percent of the business, respectively. Hooks said fashion pundits should resist the urge to position Armani Group brands into a pyramid structure, with top-tier Black Label Giorgio Armani filtering down to a wide A|X base. Rather, he views a system by which the luxurious Giorgio Armani label inspires a less expensive but just as classic Collezioni label, while trendier Emporio Armani complements a more widely distributed Jeans collection. A|X, only present in North America and some Asian countries, exists unto its own universe. Its U.S. business is owned by London-based Christina Ong, who pays royalties to Armani.“I think that’s fundamental to the success: having the brand united by a common aesthetic vision but clearly separated in segments of the market,” he said.And that means demarcating distribution. Some of the group’s lines are destined more for distribution through freestanding stores, such as Giorgio Armani, Emporio Armani and A|X, while Armani Collezioni and AJ/Armani Jeans are geared toward wholesale channels like department stores and multibrand specialty boutiques.“The customer who buys Giorgio Armani Black Label knows he’s buying  Giorgio Armani Black Label,” Hooks said. “The customer who buys Armani Collezioni white label doesn’t necessarily even know about [Black Label]. He knows he’s buying an Armani suit.”Armani is also trying to distinguish the various lines on the product side. Over the years, the company has been buying up factories and manufacturing assets from its former licensees to take production in-house. Hooks said while there might have been a tendency for past licensees like GFT and Simint to compete with similar products for different lines, he thinks it will now be easier for a vertically integrated Armani Group to reduce overlap among the brands. Another priority for Armani is tweaking the brand image of Emporio Armani from that of a younger diffusion line to that of a trendier, more fashion-oriented complement to the top-tier Giorgio Armani line.“We’re working to change that perception,” Hooks said. “They express two different spirits. They’re two different faces of Armani — luxury and fashion innovation. So they’re complementary.” Armando Branchini, vice president of consultancy Intercorporate, said he thinks Emporio Armani’s product range should be increased, particularly in areas like sportswear. He also suggested Armani consider reducing some prices to reach more potential customers.“They need to find what’s missing in their brand system,” Branchini said. “Emporio gives them access to a young clientele.” As he outlined his expansion plans for the U.S. late last year, Giorgio Armani noted unexploited potential for Emporio Armani in the U.S. market. There are only about 11 Emporio Armani stores in the U.S., a small number compared with the 30 or so in Italy. But the company might need to make the brand image more approachable before it can expand it substantially.“Emporio in the U.S. was a bit forgotten,” he said in October. “It got off to a later start than in Europe. At first, Emporio was treated like a luxury brand in the States. We had doormen. It’s one thing to have that for Hermès, another for Emporio.”

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