NEW DELHI — This has been another milestone year for Gildo Zegna, since he is marking two decades as Ermenegildo Zegna’s chief executive officer.
In addition, 2017 represents 10 years since the Italian men’s wear brand entered the Indian market, which Zegna described on a visit here as of “key strategic importance” while surveying the country’s changing retail landscape and speaking to students at the Indian Institute of Management, Ahmedabad, about the challenges of a family-owned business.
The ceo has begun to institute a new brand strategy over the last year; changed design direction under creative director Alessandro Sartori, who joined in June 2016; is excited about innovations like tech-merino and pelle tesuto, and has a continued focus on bringing in Millennials to the brand.
This year, close to 50 percent of the Zegna group’s turnover will come from the Asian market.
In an exclusive interview with WWD, Zegna talked about the allure of Asian markets while adding both prophecy and insight to his 20 years at the helm.
WWD: This year you mark 20 years as a chief executive officer of the Ermenegildo Zegna Group. Do you feel invigorated by the milestone? Or burnt out?
Gildo Zegna: I have lasted long. Usually a chief executive officer lasts between five and eight years. It’s like a private equity fund, you know — they move in and they move out. But being family, probably I’m an exception (he smiles).
You have to be very flexible to change and to be able to anticipate the future, especially now because the decisions you made yesterday are no longer the decisions you make tomorrow. This disruption of the world economy and the different market trends led by global market changes have surely made my job different.
Now you also have to operate with a team that is capable of responding to these changes with you and respond to the market much faster. You have to make immediate decisions about what to do with information systems that are felt across the world. People are more informed; they gain information much quicker.
I would say this is the biggest challenge — to respond to this quick change according to your strategy and still maintain what your brand and company stand for.
WWD: So has the global versus local debate intensified at all levels, or has it evened out with markets opening up all over the world?
G.Z.: I think it was global versus local from the beginning. In some period, global was better than local, and vice versa at another. I think today we are getting more local than ever before. The strategy has to be global, but the approach has to be more local because of these quick changes taking place and because of the way the consumer travels around the world.
Today, when we look at China, or at the U.S., you have to count them not as a country but as a population, so the question is what percentage does the Chinese business represent to you — not so much the business done with China, but the business done with Chinese. With that perspective, you go much more on a global scale.
When you deal with retail in the country itself, you have to understand the nitty gritty of a country so it becomes a local approach.
I think this is the biggest change, working on a local base in order to understand how the local market is changing and how the consumer is reacting to the changes, and then how they are traveling globally.
Today we have the Millennial customer — to some brands Millennials represent 50 percent of the business (not for us), which is an incredible number. It is a disruption in some ways. You cannot stay out of this reality, and you have to be able to transform your brand accordingly. It means applying your DNA to the new reality, otherwise you will find yourself wiped out of the market in a couple of years.
WWD: Has the fashion industry itself changed at that same speed, and is that true in Asia as well?
G.Z.: There was an interesting article by consulting firm McKinsey in the early 2000s comparing the fashion industry to the computer industry, which said they have something in common — that the speed of change is so high, that there is a very high obsolescence rate. I think that idea is very true about the fashion industry today.
Even though the computer industry does not exist any longer — it is the mobile industry, the digital industry — I think what was true of the computer is true today with digital. I think fashion and digital go hand in hand and you have to be able to communicate with the new consumer in the right way.
There are many kinds of approaches to handle this, it is as true about the customers from China or Seoul or Johannesburg, who are traveling the world, and you have to make the best effort to reach them.
WWD: Does the changing retail platform help?
G.Z.: The channel distribution is another challenge. In the old days, it used to be: wholesale, retail, the department store, your store, period. There was no online; travel retail was about a few duty-free shops. But today there is a different reality. You work on at least five different lateral distribution platforms, so that makes it harder to manage countries in different ways, according to different models. All this means you have to use different formulas according to the reality of every market.
WWD: Asia represents a large chunk of your business at this time.
G.Z.: Yes, closer to 50 percent, maybe 48 percent, talking about 2017, and America is 20 percent and Europe is 30 percent.
WWD: You said recently that “emerging markets have emerged now.” Have they really?
G.Z.: Some, yes. China — I cannot call it an emerging market; it’s a super-developed country. If you look at the infrastructure, at how quickly they have moved, it is incredible. The good thing about China is that the customer is the most open to change in the world. They take new for granted. If you don’t go to them with newness or with an innovative product, they’re not interested — the speed of change is so high. Every time we want to test something, we go to China. If it works there, we know it will be successful in other countries. It used to be the other way around.
In Russia, there has been a big evolution. The Putin effect is very strong on the market and there has been a big improvement in the infrastructure. There are big developments in São Paulo as well.
It’s hard to tell what has not emerged. And that is because of the way globalization has raised the bar in countries that could not afford it earlier, or couldn’t see this mutation of culture.
Going back to the question whether emerging markets have emerged, more and more of the important markets are becoming more predictable and transparent and navigable. It is becoming easier to do business and easier for consumers to consume. Certainly, global travel by people in those markets has helped set the style and demand.
WWD: This year your group will complete 10 years in India. Do you see it changing? Is it still underdeveloped for luxury?
G.Z.: Yes, for sure. I must say the question is — 10 years ago when we decided to be in India — knowing what has happened after 10 years would we have done the same? Probably, yes.
But we would have done it more gradually. I can make a similar example in Brazil, we made the same — I wouldn’t call it a mistake — the same assumption. We went too quickly to open stores.
In India, we opened six stores in a couple of years. They were too many. Today we have three. For the time being it’s quite enough. We brought in our brand so early with a lot of customization of approach. Something also has to do with the weather, with the culture, there is a local dress code that is stronger than some other countries, and you have some beautiful tailors in the local areas. In a way that is luxury, it is local luxury, not international luxury.
We see an increment of Indian business of Zegna outside the country. We have very good Indian customers in London, in Dubai, in particular.
I think it was not premature to enter India – maybe we entered it too fast but now more opportunities will come.
WWD: Three stores seems very little for a country the size of India. What would be the top areas you would like to see change for growth in India?
G.Z.: There are two areas we would like to see more development, more progress. One is in retail infrastructure, finding the right shopping centers, the right environment, the right developments is very challenging so the supply of environments in which we feel comfortable to do business is very limited.
The second — and this is the area in which we welcome the progress being made — the barriers, the cost to import were very high in the past. But as these barriers have been brought down and systematized with lower duties and singular tax system goods and service tax and so forth it becomes much more competitive internationally.
The supply of large-scale real estate project development is one of the key things.
WWD: Is the wedding market big in other countries in Asia, or is it only India?
G.Z: The wedding market is exceptional in India. There are a lot of opportunities in the wedding business, it could be huge for us because we are exceptionally skilled at customizing, to make individualized styles. The challenge is to be able to access that demand in the absence of platforms like shopping centers that are a good meeting point outside Delhi and Bombay. It’s an opportunity, but it’s hard to tap into that business.
Since we don’t have great shopping environments spread around the country, the way we are approaching it today is to bring service to the door, going into cities where we don’t have doors and catering to clients on a very personalized basis.
WWD: You’ve had two years of recovery and turned around the business in China.
G.Z.: Yes, I will say so. We have had two years of recovery. In China, we are consolidating, we have made some changes and we have a very strong organization there. It is not only the biggest in terms of population, but a very strong one. We have acted in a very positive way to the slowdown in the luxury business and are very strong and now on a roll. The slowdown was particularly strong in Hong Kong, and in addressing all of this we have some new evolution in the store, we have a new brand strategy. So, in China, we are back to a nice growth.
I have brought in as creative director Alessandro Sartori, who is doing a great job on the new part of the brand, on the customization and personalization. He has been with us for more than one year and we have seen the fact for the first time this fall season, the traction being driven to the market to a new customer. And now the challenge is to reach this Millennial crowd, which is very important.
WWD: Your brand is 117 years old. Does history ensure success?
G.Z.: History can tell you there are many opportunities in luxury; it is just a question of taking advantage of them and anticipating some trends. You know you can’t be right 100 percent of the time, but we can test it and go in more intense.