ITALIANS STREAMLINE FOR HARDER TIMES
Byline: Samantha Conti
MILAN — The Nineties are fast turning into the decade of the diet for Italian fashion houses and manufacturers.
Companies that grew plump during the fashion feast of the Eighties have discreetly begun to trim the fat — tightening logistics, streamlining manufacturing and delivery and improving customer communications — in a bid to become more competitive.
And while few confess to slashing budgets, nearly everyone admits to pinching pennies.
The best example is Gruppo Finanziario Tessile, which began hemorrhaging money after the designer boom began to fade. Today, under the ownership of Gemina, an investment company belonging to Fiat, the company has begun to slim down and turn a profit.
Over the last 18 months, GFT managing director Angelo Barozzi has closed an Italian production plant, citing a 20 percent drop in orders; cut GFT’s workforce by 4.4 percent; closed a money-losing plant in Spain, and sold off its majority stake in the German clothing group Baumler because it was no longer a strategic investment.
“Today, profitability comes more from cost-cutting than from sales. Downsizing has become a necessity,” said Silvano Storer, the new chief of Marzotto’s clothing division and a former Benetton executive. “To compete, you have to improve your product, image and service and cut costs.”
Storer, who began working with Marzotto late last year, said his plans are to “clear out and shorten the pipeline” that leads from the factory floor to the retailer. He’s teaching Marzotto’s sales staff to be more efficient and aggressive, arranging for them work directly from showrooms rather than through agents, and telling them to concentrate on the sell-through.
Marzotto manufactures lines for Gianfranco Ferre and Missoni under license in addition to in-house lines such as Accento by Marzotto.
In the medium term, Storer also said he would like to see more aggressive advertising — with a modest budget.
“I have always believed in intelligent, provocative advertising — not because I come from Benetton — but because provocation helps a company stand out. The goal is to be visible and spend as little money as possible achieving it.”
Gilmar, which manufactures the Gerani, Iceberg and Cento X Cento collections and lines for Marc Jacobs, Anna Sui and Christian Lacroix under license, is another company that’s trying to unclog the passageway between factory floor and department store.
In two years, the company has invested some $3 million (5 billion lire) in computer technology that has cut delivery time by 50 percent.
“The ultimate goal of this project is to provide the client with better service at a lower cost to us,” said Mario Massetti, Gilmar’s general director.
“These changes have been on managers’ minds for a long time now, and the trigger, I think, was the slowdown in European consumption. It forced fashion companies to improve their service and therefore their ability to compete. They’re trying to smooth out the supply chain from A to Z,” said Stefano Proverbio, a partner at McKinzie & Co.
In addition to a slow European market, the Italians are having to deal with a stronger, revalued lira, which is expected to take a toll on exports. A stronger lira was Italy’s ticket back into the ERM, a system of currency-trading bands and a first step toward European Monetary Union (EMU).
Giorgio Armani is another company that’s watching its waistline.
Pino Brusone, general director of Giorgio Armani SpA, said the company has always kept a close eye on the budget, but is making an even bigger effort this year. He said the company’s controller’s office has been “reinforced” to insure that not one lira goes astray.
“The climate today is different from what it was in the Eighties. We are more vigilant. Once upon a time, we didn’t talk to our suppliers about prices or deliveries. Today, we try to extract the best possible conditions from them,” Brusone said.
Vigilance is a big part of his job as the new chairman and managing director of Simint, the maker of Armani’s jeans lines. Last year, Simint bounced into the black after years of losses.
It is now his role to insure that the newly restructured company continues to turn a profit, making sure levels of unsold stock remain minimal, and, most important, that deliveries are on time. Brusone added that he was shooting for March 20 as the last delivery date for the collection.
Gianni Versace is also spending more carefully. This season, for the first time, the house will hold presentations, rather than runway shows, for its Istante and Versus lines.
“The runway is a big waste of time and distracts from the clothes. On the one hand, it is a difficult event to replace. On the other, you risk conceiving an outfit for the effect it will have on the catwalk,” Gianni Versace said.
Versace said he would like to hold more intimate, special events aimed more at clients rather than at the press.
“Today, I am convinced I’d sell just as much if I deserted the runways altogether,” he said.
Fashion houses are also making wiser decisions about gifts.
Instead of lavishing goodies on journalists during the Christmas season — a practice that reached its height in the late Eighties — more houses are making discreet donations to charity. Last Christmas, for example, Laura Biagiotti made donations to a leukemia research fund, Alberta Ferretti to an association that studies birth defects and Krizia to two groups that help handicapped children.
“For years now, we’ve given the money set aside for Christmas gifts to a variety of charity organizations,” said Gianfranco Barbetti, commercial director for Gianfranco Ferre. “Cutting costs means spending more wisely and according to criteria more in line with our times.”
One area where companies are investing money is advertising and promotion because they provide an immediate return on investment. Ferre has increased its budget for trunk shows “because they give us immediate visibility,” said Barbetti. “They also allow us to promote our lines while they are on the selling floor.”
Missoni has boosted its advertising and promotions budget 20 to 30 percent worldwide and 30 percent in the U.S. this season.
“The formula for success in today’s market is to sell better and sell more. If you make an investment, you have to be sure it will bear fruit soon,” said Vittorio Missoni, the company’s commercial director. “It costs a lot of money to sell a collection today. The only solution is to sell more clothing and to sell it more efficiently. We can do that through advertising.”
Ferragamo is doing the same, fattening its ad budget this season “by a substantial double-digit figure,” according to managing director Ferruccio Ferragamo.
“Now is the time to consolidate our business, and we want to have closer contact with our clientele through advertising and promotional events,” he said.