Small Italian fashion firms are finding it’s not so easy to break into the American market.
This story first appeared in the September 27, 2002 issue of WWD. Subscribe Today.
If you’re not an Armani or a Gucci, with a big name and an ad budget to match, the American market can be a tough place. And no one knows it better than Italy’s small, family-run fashion companies.
The workshops of small-town Italy can be worlds away from the showrooms of Manhattan — and not just in distance. To bridge that gap between cottage industry finesse and cutthroat U.S. retailers, these petite players, with names like Cinzia Rocca and Liviana Conti, need to muster every resource available.
Quite simply, it is often too costly and competitive to take on the American market. While these companies make exceptionally well-crafted products, they lack the name recognition of their competitors. And as some have managed to carve out a niche in the U.S., others have opted to focus on other markets, notably Russia, Scandinavia, China, Japan and elsewhere in Asia. As a result, the U.S. could be missing out on lines that might otherwise provide the newness that retailers and their fashion customers crave.
“They have a harder time in the U.S. market,” said Carlo Pambianco, a Milan-based luxury goods consultant. “They don’t have the image of the big brands, but they have the same costs.”
The bottom-line business approach in the U.S. poses another challenge for Italy’s emerging fashion groups, most of which are small, family-run outfits.
Large American department stores are “big companies that are listed on the stock market and have budgets to respect,” said Francesco Dalla Rovere, a member of the family that controls bridge line VictorVictoria.
“In Italy, if you call and say you’ll be a little late with an order, they say ‘OK, no problem’ but in the U.S. they say ‘OK, arrivederci,” he said.
VictorVictoria is no stranger to the States. It once ran a New York showroom under its previous owners, but the Dalla Rovere family shuttered the U.S. operation when it bought the brand two years ago.
“When we bought the brand, there were many problems with products and distribution,” said Dalla Rovere, citing qualms with ill-fitting clothes and substandard materials. Once the family has resolved those issues, it plans to bring the label back to the U.S., but he couldn’t specify when.
The American market is one of extremes, and while it might be easy to open a showroom in New York and sell out the collection when times are good, “in a downturn, you risk death,” as Dalla Rovere puts it.
“It’s easy to fall in love, but it’s also easy to get a kick in the teeth,” he said, adding that VictorVictoria is concentrating efforts in Italy, elsewhere in Europe and Japan.
These barriers to the American market have forced companies like Liviana Conti and Ermanno Scervino to look elsewhere for growth. These groups aren’t making the U.S. market a number one priority and in economic times like these, there’s no rush.
“It is not encouraging to invest in the U.S.,” said Toni Scervino, chief executive officer of the Florence-based fashion house Ermanno Scervino, which has a limited presence in the U.S. through retailers like Neiman Marcus and Linda Dresner. He noted that companies must be well-organized and structured before entering such a tough market. Russia and Japan hold more immediate potential, in his view.
Indeed, limited exposure to the U.S. market has paid off for these companies.
“Despite the moment, we haven’t felt aftershocks,” said Antonella Faedi, export manager at Liviana Conti, which saw its 2001 sales rise to about $6 million from $5 million in 2000. She said 2002 sales should come in between $7.5 million and $8 million. Dollars are converted from euros at current exchange rates.
The company, based near the northern town of Forli, sells in Italy as well as in several foreign countries, including Russia, Japan and Hong Kong. It has pegged Scandinavian and eastern European markets for the most growth potential.
The privately held firm does about 5 percent of its business in the U.S. through stores like Henri Bendel. Liviana Conti wants to expand in the U.S. slowly by selling through its showroom in Milan rather than through a high-rent boutique in New York, Faedi said, explaining that the company has found more than enough buyers willing to come to Milan to place their orders.
“It’s a market that requires a lot of attention, both financial and creative,” she said. “We want to take it slow and see how it goes.”
Meanwhile, Ermanno Scervino, which designed Cher’s elaborate wardrobe for “Tea With Mussolini,” watched its 2001 sales swell by 50 percent to about $28 million and it forecasts growth by another 25 percent in 2002. About half of those sales come from Italy and the other 50 percent from the rest of the world, including such markets as Germany, France, Spain, Lebanon, Kuwait and Dubai. About 15 to 20 percent of sales derive from North America.
The company is trying to reduce its dependence on Italy so exports will make up 60 to 70 percent of its business. In one step to diversify, it is beefing up distribution in Japan. Ermanno Scervino signed a deal in March with retail group Sann Freres to sell in Japanese department stores. Meanwhile, the company plans to open its first wholly owned boutique in Tokyo over the next year-and-a-half.
Despite the challenges of entering the U.S. market, making it in America is not an impossible dream. Some smaller companies have managed to rise above the fray, and now count the American market as a critical part of their business strategies.
Cinzia Rocca, owned by Brescia-based Rodel SpA, has been in the U.S. since 1989, but the beginning was rough, remembers Jacopo Rocca, president of the company he runs with his sister Cinzia. She’s the designer behind the collection, which features fur-lined coats and reversible fabrics.
High costs of running a showroom in New York and establishing a distribution network caused the company’s American operation to lose money for the first three years of operation. But things changed course eventually. The U.S. accounted for 28.2 percent of Rodel’s sales in 2001. There are now about 300 sales points in the U.S., including Saks Fifth Avenue and Bloomingdale’s.
“When you have the courage [to go to the U.S.], the returns are very big,” he said.
Sales in the U.S. alone rose 27.4 percent, while the company’s consolidated revenue grew by 9.3 percent to about $24 million. Rocca sees 2002 consolidated sales coming in at about $28 million and pretax profit growing by 50 percent from about $946,000 in 2001.
Rodel said sales in the U.S. so far this year are up by 30 percent, and the company expects to maintain that growth rate for the rest of 2002.
In a similar breakthrough story, Milan-based Piazza Sempione, known for its conservative yet fashionable collections for young professional women, has made a name for itself. It started distributing in the U.S. in 1991, just one year after the company was founded by husband-and-wife team Roberto Monti, currently ceo, and designer Marisa Guerrizio.
These days, sales in the U.S. account for 38 percent of revenue through stores such as Neiman Marcus, Barneys New York, Nordstrom, Saks Fifth Avenue and Bergdorf Goodman. In 2001, Piazza Sempione saw its 2001 consolidated sales rise about 18 percent to about $35 million.
Piazza Sempione, like many other companies its size, prides itself on handcrafted goods made in-house and a favorable price-to-quality ratio to lure American customers already saturated with tons of brands. These smaller labels also tend to embrace trends without going over the edge and forsaking practicality.
That more conservative approach helps Piazza Sempione grab ahold of its audience of young, style-conscious career women. “A customer who loves to buy an item that won’t go out of style by next season,” volunteered Monti.
Les Copains embraces a similar philosophy of balancing the quality of its fine-wool knits with reasonable prices, and now counts the U.S. as its third biggest market after Italy and Japan.
The Bologna-based group operates a flagship on Madison Avenue, as well as 16 directly owned sales corners in Saks Fifth Avenue stores. Bergdorf Goodman, and Saks Jandel also carry the brand.
“Despite the uncertain economic climate, the last two seasons were particularly strong for Les Copains in the U.S.,” said Mario Bandiera, founder and ceo of the knitwear company, which also produces the Trend Les Copains line designed by Antonio Marras.
“[Sales in] our corners at Saks Fifth Avenue as of June 30 grew by 37 percent,” Bandiera said.
Consolidated sales came in around $145 million in 2001 and are seen rising to about $155 million in 2002. The U.S. accounts for about 12 to 15 percent of turnover. Les Copains’ margin before interest, taxes, depreciation and amortization came in at 2.5 percent and is seen rising to 3 percent this year.
Les Copains made its name back in the Sixties by inventing a wool yarn soft enough that it feel like cotton, as well as a flattering line of small, body-hugging sweaters.
“In these difficult times, consumers are very attentive to the quality-to-price ratio, and this has been a strong, winning point for us,” Bandiera said.