VERSACE COLORS THE FUTURE

Byline: Janet Ozzard / With contributions from Amy B. Barone / Pete Born, New York

MILAN — Versace is perfectly willing to admit that not every woman is going to spend thousands of dollars on one of the company’s couture metal mesh dresses. But pulling out a few dollars for a lipstick is a much easier proposition.
During a recent interview here at the beauty company’s headquarters on the Via Manzoni — one of several buildings in the neighborhood that house the Versace businesses — chief executive officer Santo Versace spoke of plans for the beauty business and the company. It has been almost a year since the murder of his brother Gianni, the founder and namesake of the company.
“It’s very important,” he said of beauty. “It gives us more space, a specialization.”
And it can attract another consumer to the Versace name, he said. “A metal mesh dress from the couture collection — not every woman is going to be able to buy it. It’s easier to buy into ‘the dream’ with the perfumes, the jeans, the eyewear.”
Currently, most of Versace’s $138 million beauty volume comes from a stable of fragrances, but now there’s the 164-stockkeeping-unit makeup line launched last fall. Luciano Abbati, Gianni Versace Profumi’s managing director, believes that eventually the fragrance and color businesses will be on equal footing.
Beauty currently generates about 15 percent of Versace’s total sales, but Versace hopes to swell that to 20 percent within five years.
The beauty arm of the business is still 25 percent owned by the Milan-based Rofin SpA, but there are no plans now to buy out that share, Versace said.
Versace Profumi has a staff of 80, and the headquarters now occupies 2,500 square feet. That includes two fully equipped salons where small groups of Versace makeup consultants are brought for training sessions.
The Versace name is big business, raking in $977 million in 1997 in wholesale sales for the fashion business, excluding beauty. There are about 300 signature stores selling the various women’s and men’s apparel lines and home furnishings. The company showed a new watch collection in April, and there are numerous new shops set to open in London, Milan and South America before the end of the year.
There are big plans for Versace Profumi, too. Versace and Abbati hope to double the volume over in the next three years, despite the Asian financial crisis.
In Asia, Versace beauty has cut back shipments by 50 percent in most countries, according to Abbati. “We’re careful with orders there, because people have no purchasing power, and goods will go right into the gray market,” said Abbati.
But Asia isn’t out of the picture. Abbati said that the makeup is selling well in Hong Kong and Singapore, and “we have big plans for Japan.” Currently only the fragrances are sold there, but the makeup will be introduced at the beginning of next year. It will also be launched in the Versace boutique in Sydney, Australia, this fall.
“As for China, over the next few months we will begin with distributors, starting with Beijing and Shanghai,” said Abbati. “Rather than start big there, there will be strict control. We have high prices.”
The makeup will also be launched at duty-free stores in Taiwan and Indonesia next year. With much of Asia in the dumps, Versace is looking at other markets, especially Central and South America and Eastern Europe. In Uruguay, the color cosmetics are sold duty-free in the airport serving the high-end resort Punta del’Este. The line is also at duty-free stores and Versace boutiques in Argentina and Brazil, and in better-priced department stores in Chile.
But the company is not looking for growth at the cost of control. “Control is key,” said Versace. “It depends on the market, but one needs the right contract to hand over marketing and advertising responsibility.”
“We prefer our own sales agents and our own organization,” added Abbati. “If not, there are two choices: Stay with a distributor or develop a specific agreement [with a partner].”
As for the U.S., Versace Profumi now oversees business there directly. Last December, its New York sales agency, Europarfums, resigned the account, complaining of gray-market problems. Now Versace runs the U.S. with Linda Switzer as vice president of sales and marketing.
Versace wants to keep distribution on the makeup very limited; currently the line is sold in 250 Italian perfumeries, at Harvey Nichols and Selfridges in the U.K., at Sephora in France and at Bergdorf Goodman, Nordstrom and some Neiman Marcus doors in the U.S.
“Makeup means training and support,” said Abbati. “A simple distributor is not able to give you all that.”
Even with the tight distribution, makeup sales are exceeding plan, he said. “We kept forecasts modest,” Abbati said. But this year, the company doubled the molds in order to meet demand.
In the U.S., Abbati said he plans to add 12 more Neiman Marcus doors by yearend to the eight it already sells. “We’re developing an EDP system,” he said of the U.S. “By mid-1998, we expect to have 22 independent sales reps, and we’re in the process of hiring account executives. We want a broader distribution for Jeans there — about 1,000 doors.
“The U.S. has been a learning experience. We transferred the idea of Christmas gift sets from there to Italy and got good results,” he continued. “Over the past three years, we tripled Italian sales with this strategy.”
The U.K., said Abbati, is in part a test market for other areas of the world. “It’s a cross between the U.S. and Europe,” he said. “We’ve invested huge amounts there. After six months of sales, the business is split 50-50 [between fragrance and makeup]. In three years we expect sales globally to follow the same ratio, based on U.K. results.”
The makeup will be introduced in Edinburgh and Glasgow this summer, where Versace is building counters. Donatella Versace, who has taken over the creative direction at the company, oversees the color cosmetics development, working with makeup artist Renato Bernardi.
“Donatella might say she wants a blue eye shadow, and Renato helps her find the right quality, for example,” said Abbati.
The line is priced near the brands that Abbati said are its competitors, such as Lancome and Christian Dior. A Versace lipstick goes for about $20.
On the fragrance front, Abbati said the six Jeans scents still sell well, adding that Red Jeans sold 2 million units last year and White sold about 1.5 million.
A new women’s fragrance will be introduced this fall, he said. “There will be no cannibalization of the other brands. It’s a new concept,” he said.
The company relaunched Gianni Versace and V’e Versace in new packaging this spring, and despite industry grumbling about Europe’s stagnant fragrance market, Abbati feels there’s room for growth.
“We expect to double beauty sales in the next three years,” he said. “We already invested 35 to 40 percent of our [beauty] turnover in advertising and promotion and will continue in this direction. Since 1994, we’ve had no losses.” —

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