China is king for the Ermenegildo Zegna Group.
In the almost 20 years since the Italian luxury men’s wear company entered the market, China has grown to represent some 25 percent of Zegna’s annual sales of 797 million euros, or $1.11 billion, last year, Ermenegildo Zegna, chief executive officer, said during a presentation Monday. The country may eventually account for as much as 50 percent of sales.
From 2005 to 2009, sales in China rose 33 percent, and the brand now operates 62 stores in 33 cities in the country. Those stores, which include a Peter Marino-designed flagship that opened in Shanghai last summer, “have to be big and create a wow effect,” Zegna said, because shoppers there seek excitement and exclusivity.
The most important products to the Chinese consumer are luxury sportswear and leather accessories, he said, revealing sportswear accounts for 50 percent of the business there and leather accessories 20 percent. Executives at the top of their fields don’t feel the need to wear suits, opting for high-end casualwear instead. “An owner of an enterprise wears what he wants,” Zegna said.
A growth area for this market — and other emerging markets — is made-to-measure. Zegna pointed to a limited edition suit with a retail price of $20,000 that “sold out in one month” in Brazil, India and China. Watches that sell for $30,000 are also popular, he noted.
“If you give them an exclusive, limited edition product and a reason to buy,” they will shop, he said. Toward this end, the company plans to create a special watch and apparel collection in China next year to celebrate the brand’s 20th anniversary in the country.
Since entering the market, Zegna said his business has learned the advantage of knowing the consumer. For example, loyal Chinese customers generally shop six times a year, so Zegna creates new products at that cadence to fulfill the demand, he said.
Zegna said other markets are viewed as growth areas for the company. India, for example, is expected to have 10 stores operating by 2013 and should be the largest market in Southeast Asia by mid-decade, he said. Brazil will have 12 stores by 2013, and the company hopes to enter Vietnam and South Africa, as well.
“You have to be a pioneer and a risk-taker,” Zegna said.
This focus on emerging markets comes from Zegna’s view that “the recession is here to stay in mature markets. We don’t see a recovery yet in the U.S., Japan or Europe,” he said. And although the $220 billion luxury market is expected to increase sales by 10 percent in 2010, it suffered an 8 percent decline last year.
Zegna itself mirrors those figures with sales falling 8.4 percent in 2009. However, the ceo said the company expects to post a 15 percent gain for 2010. “And we believe it will stay positive in 2011,” he said. “The big luxury brands will become bigger, and those who are just surviving will be kicked out.”
The goal for the brand, which is celebrating its centennial this year, is to hit 1 billion euros in sales next year. That milestone was actually the goal for this year, Zegna said, but the recession delayed reaching that figure. “But Zegna came out of the crisis stronger,” he said.
The executive, whose grandfather founded the business as a textile mill in Trivero, Italy, said the company has maintained its focus on quality and luxury. “Our DNA has stayed the same,” he said. “The values and the culture that were instilled 100 years ago remain.”
He said heritage and family remain very important, particularly as the business enters new markets. “A strong family makes a strong company, and a strong company makes a strong family,” he said. The company remains “manic about quality,” and while competitors may tout Made in Italy as their mantra for quality, “We are very proud of our made in Zegna [promise] that guarantees our quality.”
He also said Zegna has no plans to expand beyond its men’s wear offerings. “We’re the only luxury brand that offers men’s only,” he said. “That’s a plus for us, not a minus.”
The company offers a variety of options, ranging from sartorial suits and luxury sportswear to Zegna Sport, targeted to a younger customer.
To celebrate its 100th anniversary, the company partnered with the Sowind Group, which owns the Girard-Perregaux and JeanRichard brands, for a limited edition Centennial watch. That led to the signing of a long-term partnership between the companies for a collection of signature watches that will launch next year. Zegna said those watches will be sold in Ermenegildo Zegna stores only.
Another growth opportunity is the launch of a virtual store, slated to go live in December.
“These are all good [vehicles] for growth,” he said.
Whether growing through the Internet or in emerging countries, the key is to be surrounded by skilled executives, Zegna said: “I’m managing complexity. Organization is key to survival, and the search for talent will be key.”