2023 OCTOBER ISSUE
CHALLENGES
OF THE
ITALIAN FASHION HOUSES
Written by Andrew Sia
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From the Desk of the Publisher
Here we are talking about company’s succession plan, engaging younger designers to rejuvenate the brands, attracting global investors, using artificial intelligence and entering e-commerce operations. More important is to team up with global multi-brand groups and use their financial resources to penetrate China and other foreign markets. Not to forget to have the presence in the prime retail spots in the international cities.
From what we have seen that the Italian fashion houses are being taken up by the French conglomerates. The way that the Italians operated in the 1980s and 1990s are no longer viable.
It was in the 1980s and 1990s the emerging of Italian top designers propelled to the world’s stage. Italy had a tradition of producing high-quality textiles and leather goods as small, independent, and mostly family-owned business. Its currency at the time, lira, was weak and was able to keep the production costs down. This also allowed a very healthy profit margin that helped to promote a generation of emerging designers with names like Giorgio Armani and Gianni Versace.
We may say that the Italian fashion empire is aged, and the era of those powerful designers are coming to a closing point. The Italian designers are no longer in their prime days and they have to navigate a fashion landscape which is dominated by conglomerates. Especially the French ones that have turned into global investors and take for the biggest chunk and turned them into French luxury conglomerates, LVMH Moët Hennessy Louis Vuitton, who has a market value more than 20 times the size of its closest publicly traded Italian rivals.
The smaller scale of Italian brands makes them easy preys for conglomerates like the Swiss Richemont, who owns Cartier, and recently bought the Italian shoemaker, Gianvito Rossi. Then the French group, Kering, that has long owned Gucci, bought a 30% stake in Italian couturier Valentino with an option to buy the entire brand in the next five years.
The list of Italian brands that have sold to the French is growing. LVMH now owns Bulgari, Fendi and Loro Piana. Kering owns Gucci as we know, and also Bottega Veneta, Brioni and jeweler Pomellato.
The Italian brands are troubled by succession as over the years they became cultural icons and unlike the French who hired outside designers as part of their culture, the Italians are struggling. This has also stopped the young designers to emerge.
Earlier on, we read about Prada, Miuccia Prada and her husband, Patrizio Bertelli, who have plan to step down and have hired a former LVMH executive, Andrea Guerra, as CEO and also helped to groom their eldest son, Lorenzo Bertelli to take over the company one day.
Prada chose Hong Kong’s stock exchange for its initial public offering in 2011, since then Hong Kong has been torn by tensions between China and the West as China reined in the city’s democracy and autonomy. Prada is now exploring for IPO in Milan.
Prada and Zegna have recently tried to form partnership. In June, they invested in Luigi Fedeli e Figlio, a producer of fine yarns and knitwear company. Early in 2021, they purchased the major shares in an Italian producer of cashmere.
It has been found that handing a brand over to the next generation is difficult. Too many family members may lead to dispute, and take for instance, Florence-based Ferragamo limited the number to three. Salvatore Ferragamo is known as the shoemaker of Marilyn Monroe in the movie, Some Like It Hot, and also other movie stars.
Tod’s Diego Della Valle, who just turned 70 this year. He turned the family-owned shoemaking company into a global business, and it is known for its Nuovo Gommino driving-shoes. Although he has a son and nephew working in the company, he hasn’t designated a successor. LVMH owns a 10% stake in Tod’s and Diego said that he would prefer to sell the whole company to LVMH one day.
At one time, Domenico Dolce and Stefano Gabbana, both are now in their 60s, said that they would sell their company when they are getting older. But lately they changed their mind and would want the Dolce family to take over one day.
Giorgio Armani who is now 89 years old and his succession plan is unclear. He said earlier on that he would leave it to his foundation, but he didn’t mention the successor for the foundation.
Succession is not the only problem. The fashion business model is under siege. The global multi-brand groups have engaged their finance to penetrate China and other foreign markets. Behind every brand, they have engaged young and talented designers to rejuvenate the brands. The Italian brands are still remaining fragmented and can easily be taken over.
Fighting over those retail space in the prime spot in the international cities, even the Milan-based private-equity giant Carlyle Group, who admitted that those French-owned brands simply overwhelmed the Italians in the fighting for retail space.
Not to forget that e-commerce operations and use of the artificial intelligence are also taking over the fashion business.
What do we see in the Italian fashion brands is that they are waiting to be devoured by the French. It is like David and Goliath and they will need to be able to outsmart those French conglomerates.
