Byline: Samantha Conti / With contributions from Luisa Zargani / David Moin, New York

MILAN — Giorgio Armani may not need Bernard Arnault after all: The 65-year-old designer is out to stake his own claim in the lucrative accessories market, with help from Dawn Mello.
WWD has learned that Armani, in a major strategic move, is setting up a special division, with offices in Milan and Florence, that will design luxury leather accessories under the Giorgio Armani and Emporio Armani labels. The division will also oversee every aspect of production in small, independent workshops around Tuscany.
“Although our roots are in apparel, our clients are increasingly looking to us for a broad range of accessories,” the designer told WWD. “Through the new focus and investment…we expect to satisfy this growing demand, and build our existing accessories business.”
The company also confirmed that Mello, the former chief merchant at Bergdorf Goodman, would be a consultant to the new business.
“Dawn has great experience in accessories and definitely has perspective to lend to the new division,” said Robert Triefus, Armani’s corporate vice president of communications. He added that Armani would like his company to be as successful in accessories as it is in apparel.
Triefus declined to give projections or discuss the content of the accessories line, saying it was too early. He did say, however, that the accessories would be sold through the designer’s name-brand stores and in the high-end department stores that carry Giorgio Armani.
Industry sources here say Armani also plans to buy some of the independent factories and workshops that will produce the collection, in a bid to control the quality of the product as much as possible. “There will be new acquisitions down the road,” said one source. Triefus declined to comment on those reports.
The accessories project, Triefus said, fits into Armani’s strategy of tightening control over his numerous businesses and plumping up the company with new, diverse product lines.
Sources close to Armani said that in this boom age of accessories, the designer felt like something of a frustrated bystander, watching competitors like Gucci and Prada report exploding sales in footwear, handbags and small leather items. “I think we’re probably the only fashion house around that generates money with clothing and not accessories,” he told WWD in June.
Milan’s master of minimalism, who for years showed his runway collections virtually unadorned, began to show an interest in accessories in the mid-Nineties. Although he tried in earnest to build a serious accessories business, he never reached the levels of his competitors.
Last year, Armani’s accessories sales — including watches and fragrances — made up 40 percent of the company’s overall wholesale revenue. Industry sources say the leather accessories accounted for well under half of that figure. Armani’s 1998 wholesale revenue, including income from licensed and franchised operations, totaled $1.3 billion.
By comparison, Gucci reported that sales of leather goods and shoes generated some 56 percent of the company’s $531 million revenues in the first half. At Prada, footwear and leather goods generate more than 77 percent of sales.
“Armani’s presence in the accessories market until now has been timid — and limited,” said Armando Branchini, the vice president of InterCorporate, a luxury goods consulting firm here.
Triefus added that the “first big impact” of the new accessories division would be evident in the fall-winter 2000 and spring-summer 2001 collections. Last year, Armani canceled its main licenses and placed the production and distribution of leather accessories under the umbrella of its wholly owned subsidiary Intai.
Armani’s bags and small leather products had been produced under license by the Italian manufacturer Redwall. Industry sources say the relationship between Armani and Redwall, which began in 1994, had its ups and downs: Armani had little experience in accessories but wanted tight control over the product and distribution. Redwall, however, still produces some accessories for Armani, but not under license.
Armani said earlier this year that he was mulling a joint venture with Bernard Arnault’s LVMH — among others — for the production of accessories. “Ideally, an eventual joint venture would allow me to take advantage of synergies and swap know-how. Maybe my future partner could provide factories that make accessories, and I could lend my knowledge to ready-to-wear.”
Earlier this year, a top LVMH executive said that the French company “could gain a lot in terms of Italian apparel production know-how….And we could offer Armani a great deal in helping develop his leather goods.” LVMH, at the time, was deep into its battle for control of Gucci, a battle that was eventually won by Gucci management with the help of a new partner, Francois Pinault’s Pinault-Printemps-Redoute. In light of Arnault’s defeat, an LVMH/Armani alliance became an even more intriguing possibility.
LVMH would certainly make a formidable partner: In the first nine months of 1998, Louis Vuitton alone posted sales of $1 billion — all of which came from accessories. That company also has the highest operating profits in the business — 48 percent — due chiefly to direct production and distribution, and the use of relatively inexpensive raw materials, rather than leather, for its signature printed bags.
But Triefus stressed that Armani’s accessories project was totally “unconnected” to LVMH. He also downplayed Armani’s past talk of slowly handing the company’s reins over to a joint-venture partner in a bid to insure the future of the label.
“Armani believes his company is moving forward with a strong momentum, and that the future will be very much about the organic growth of Giorgio Armani SpA,” Triefus said. As reported, Giorgio Armani, which celebrates its 25th anniversary next year, will launch cosmetics and home collections in 2000.
Armani also plans to open a major retail complex on Milan’s Via Manzoni — a few blocks from La Scala — which will house Emporio Armani, Armani jeans and Armani Casa stores, in addition to two restaurants.
Triefus said the Florence-based team that will plot the accessories project will be announced in the near future. Andrea Ciccoli, a consultant for Bain, Cuneo & Associati, said Armani’s choice of players will be key to the success of the division.
“He can’t rely on Dawn Mello alone to build this business. He needs four or five very experienced, very practical people in there — preferably former Gucci, Prada and Ferragamo employees,” said Ciccoli.
“On the management side he needs strong people to develop logistics, sourcing and delivery systems. He has to understand that the accessories business is totally different from the clothing business,” he added.
Mello, an industry veteran with built-in radar for spotting new talent, opened her own consulting firm earlier this year — and has traveled the accessories road before. In 1989, the late Maurizio Gucci hired her away from Bergdorf’s to help him reposition the ailing Gucci brand at the top of the luxury goods market.
She served as Gucci’s creative director for five years and was responsible for hiring Tom Ford, who was working as a designer for Perry Ellis Jeans. Mello worked closely with Gucci and Ford to polish the brand. After Mello left the company, Ford teamed up with Domenico De Sole, who was Gucci’s financial chief at the time, and Gucci’s sales and image skyrocketed.
“I learned so much from her,” Ford told WWD last month. “I went to Gucci because of her, and I wasn’t disappointed.” Treifus called Mello “a great merchant who will be able to connect all the dots between developing the product and the retail end.”
Both Mello and Armani have come a long way since they first met more than 20 years ago and she examined some of his first efforts. “Giorgio Armani and his partner showed us the women’s collection,” Mello told WWD recently. “As I recall, there was a bare lightbulb in the ceiling of the showroom. I remember them peeking around the corner and wanting to know whether we liked it or not.”
Though Armani, one of the world’s most financially successful designers and the head of Italy’s most profitable company, has come relatively late to the accessories table, industry observers say there is still time for him to make his mark.
“We’ve just finished a study which shows that luxury accessories, both for the person and the home, will have a higher growth rate than apparel from now until at least 2004,” said Branchini of InterCorporate.
“Because the market is so polarized — on one end you have the big brand names, and on the other you have unbranded products — it will be easy for Armani to carve his niche. He needs, however, to build a strong, individual, very visible collection.”
Another industry observer, who asked not to be named, added that there is no danger of Armani poaching Gucci, Prada or Fendi clients. “Armani’s image and product are so classic that he will not compete with the other, edgier companies. His client base for accessories will be the same as his client base for clothing.”
Even the competition says there’s still time for Armani to strike. “Fashion today is focused on accessories, so it’s only natural that big fashion names take advantage of this golden moment and push their creativity to its outer limits,” said Silvia Venturini, who runs Fendi’s accessories design office with her mother, Anna Fendi.