MILAN, Italy — I’m told that even on an average day, Gildo Zegna is a livewire. But on the day that we meet — the day of Stefano Pilati’s first fashion show for the brand started by Mr Zegna’s grandfather, Ermenegildo Zegna, in the small town of Trivero in the Biella Alps — the chief executive is positively bursting with energy.
Mr Zegna is a veritable sponge, constantly soaking up information from everything and everyone around him. Just outside his office at Zegna’s Antonio Citterio-designed headquarters in Milan, a large table is completely covered with fashion, culture, business and lifestyle magazines from all over the world. And when I am welcomed into his modern office, he is deeply immersed in his iPad.
An hour earlier, he was backstage, speaking to the world’s fashion press and gauging their reactions to Stefano Pilati’s widely anticipated debut ‘Zegna Couture’ collection, the latest move in Mr Zegna’s mission to build upon the brand’s leading position in luxury menswear. In 2012, the Ermenegildo Zegna Group turned over more than €1.2 billion (about $1.6 billion at current exchange rates), an increase of almost 12 percent over the year before, making it, by far, the largest luxury menswear brand in the world, with over 500 monobrand stores.
The Zegna business did not begin in fashion or retail, but rather in the design and manufacture of branded, luxury textiles. Then, in the decades that followed, the business was slowly extended by subsequent generations of the Zegna family further down the fashion value chain into apparel, accessories and retail. While most fashion businesses tend to be heavily skewed towards leather goods, Zegna is an exception. Indeed, today, leather goods make up only 15 percent of the Zegna business. The company’s textile business, which supplies brands including Tom Ford and Gucci, now constitutes about 10 percent of overall revenues. Ready-to-wear, with a strong emphasis on tailoring, counts for almost 75 percent of the overall business.
Speaking to BoF backstage after his first show, Stefano Pilati said that his new Zegna adventure is “a privilege and a beautiful conversation that I’ve had,” with a brand “that really knows how to make a jacket.” Indeed, his debut collection was filled with sumptuous, languid tailoring that struck a note-perfect balance between heritage and modernity. “It belongs a bit to also to my personality,” added Mr Pilati, “I’m a person who has always found a balance between the extremes.”
This was the ideal moment to take stock of the incredible growth of the Ermenegildo Zegna business and to talk to Mr Zegna about his plans for the future, starting with the brand’s first ever creative director. So, after Mr Zegna grilled me for my own thoughts on Mr Pilati’s collection, I asked my own questions about how this family-run business has become a luxury menswear benchmark for global success.
BoF: It’s your grandfather who started Ermenegildo Zegna. Tell me about how the business was started.
GZ: Angelo, my great-grandfather, had 11 kids. Gildo, my grandfather, was the youngest and, I think, the smartest. He had a dream. He wanted to create a brand. He wanted to emulate the quality of British clothes. In those days, [the British] were number one. He was a textile designer, so he knew how to create the structure of the fabric. He understood the raw materials. He was the first one who decided to buy superfine merino wool from Australia.
It was visionary because not only did he create a product, a fabric that was lighter in weight, a fabric that could perform, a fabric that had modern design, but he attached a brand to it. That’s genius, because there were no well-known British brands in fabrics. He started to go around the world in 1937. He opened Zegna USA with swatches and showing the collection to Italian tailors who immigrated to New York, and this is how he got started. Then Germany, Spain. It was later that we went to Asia.
BoF: Back then, who were the clients?
GZ: It was tailors. By bringing this brand that was probably the first true ‘Made in Italy’ brand in textiles, well before Armani, he already brought a bit of Italian fashion around the world. So his main customers were tailors. And then it was more recently it was in the late 1960s that my dad — seeing that tailors were diminishing — decided to move into ready-to-wear.
My dad created the first ready-to-wear factories from Biella to Novara, where they were more skilled in ready-to-wear, not 100 percent handmade, [but] still luxury clothing. He kept [the handmade] in the parts where it’s important: the shoulders, the collar, the finish in the buckles. But [wherever he could] utilise the machine to do it, he did.
Once we got off the ground with the clothing, then we started expanding the collection, adding furnishings, the tie was the first one to be added, then the knitwear from Viella, to start creating a sort of a collection. But always without a designer, you know.
BoF: So, how did you first get involved in the family business?
GZ: My father was good to create international filiales, branches. I’m the one that started New York, in the late 1970s. That’s why I love America so much. [They have] really great merchants. I worked for Marvin Traub of Bloomingdales for almost two years, as an assistant buyer in the sportswear department. This is how I understood retail merchandising.
After that, the 1980s were the years of expansion in United States and Japan, and to new frontiers. Rather than opening new global stores we created corners within shops: Harrods, Nieman Marcus, and so on. That’s how the brand grew more friendly to the customer. So from textile, to ready-to-wear. From product-oriented to more marketing-oriented.
We were the first ones to move into China in 1981. We believed China could become a major market. In the mid-90s [we moved] into Russia, into Mexico, and many other emerging markets. In the meantime, we had expanded the range of our collection and started getting into licensing: fragrances with YSL Beauté, eyewear with De Rigo, lingerie and underwear.
So, what’s the common thread in all that? I would say quality is number one, that is really creating a filiera, it’s a common thread that comes from the sheep in Australia, to the customer service and the made-to-measure in the shop.
BoF: How has vertical integration contributed to the expansion and success of the Zegna business?
GZ: I consider the textiles a customer and supplier at the same time. Ready-to-wear is a customer of the textile [business], and the textile [business] is a supplier of ready-to-wear. We buy more than 50 percent of our own fibre. This is a good way to incentivise innovation, to keep production volume and to make sure that one works with the other. It’s a kind of [management system].
One of the fabrics that Stefano has developed is this old mohair that is incredible at performance. It’s rustic. [What] Zegna did yesterday, was more soft. So I think that by combining [what is] old with [what is] modern, between ready-to-wear and textile, we create an incredible machine that takes advantages that we cannot even anticipate.
So, I think it has to do with exclusivity. It has to do with innovation. It has to do with how quick you are. And I think it has to do with protecting the brand.
BoF: Ostensibly though, it’s also about profit right? According to business theory, at least, vertically integrated businesses are much more profitable because you don’t have any middlemen. It’s your textile business that’s serving your ready-to-wear business that’s serving your retail business, and you get to keep the profit at each stage.
GZ: Listen, it depends on how competitive you are. If you are good, you can be profitable. If you are bad, you can be in debt. So I think one [part of the business] keeps the other ones alert. Going back to Stefano, he’s going to make all of us more aware on how to create new ideas and how not to rest on our laurels.
So yes, when I was in business school, there were fully integrated models. The thinking was that [if you can] do it at home, you can do it better.
But then what about scale? Let’s put it this way, it makes sense at the high-end. If I was [operating] at the low-end, I would have to produce everything in Asia or Africa. We produce more than 50 percent in Italy, which is a lot.
So yes, provided you remain competitive. Provided you stay a day ahead. Provided you buy a lot [from the] inside. If you buy most of it outside, it wouldn‘t make sense to have it in the same process.
One of the biggest challenges I have, and it’s my job to do it, is create a team and have the team all [work] together.
BoF: Let’s talk about your womenswear brand Agnona for a moment. This is a brand which has been in your portfolio since 1999, but has remained pretty quiet. Why is this the right moment to make a big push?
GZ: We are not measured on the short term. This is the big advantage of being private. We are measured on the long term, and Agnona is a long-term project. With Zegna, it’s a no brainer. He’s a good guy, he produces a good collection, he gets the press behind, we put in the store and wait. With Agnona it’s a new baby.
BoF: How did you convince Mr Pilati come on board, and how did it happen?
GZ: I travel a lot, I read a lot, I see and listen a lot. And I’m very focused, passionate about the business. In that spring of 2012, I was in the mountains, because that’s when I always get my ideas, when I am skiing. We had just hit 1 billion euros in revenue, which is an important benchmark in the men’s luxury business.
But I saw the big boys, the big brands, were investing seriously in men’s. Menswear was growing faster than women’s. Rather than moving into children’s [clothing] or hotels, I thought, let’s focus on men’s.
We had finished a kind of circle in terms of innovation and innovating the cloth, but it wasn’t enough. We needed a serious creative director in order to be more attractive to new emerging clients and the younger generation.
I knew Stefano, and kept track of him because we [had] met at a couple of luxury fashion conferences. And after he left [YSL], I contacted him, and we had a private dinner at my home, and I said, ‘listen, are you ready?’
First I sold him Agnona, because that was the key. I started [with] Agnona, then I got to Zegna.
BoF: But Zegna was in your head right?
GZ: No, Zegna was at the back of my mind. Agnona was in front because with Agnona, either I turned it around or it would not be there. But in the back of my mind I knew what Pilati could do with Zegna. And it just clicked. He fell in love with Agnona, which he could run like his own brand. That’s how we clicked with Agnona. Then in knowing I wanted him exclusively, I played the second card [for Zegna].
We [officially] started working together on January 1st, but his brain started working on September 1st. He started traveling back and forth, visiting all the plants, the archives, meeting the designers. That’s how we got the ideas, all these incredible machines, let’s make use of that not only for the fabric’s sake but for the communication side.
Who has that in the world of luxury? Nobody. We got lucky. At least we got him and hopefully we will be successful on both sides. Surely Zegna is the one that we’ll see quicker results.
BoF: As you have described, you now have this incredible operation, a vertically integrated machine. Do you think by bringing in Mr. Pilati, you’re bringing in a real point of view on design which can turbo boost the well-oiled machine that you have in place?
GZ: Listen, this is the hope. This is the investment that we are [making]. Stefano is revolutionising the whole machine.
If you look at Italy, we have [had] ten years [with] no growth. In Japan, it’s more than that, so it’s more depression, whether you like it or not. I think now, you have to come out with new ideas or grow with new markets. You have to take market share from others. And unless you have new ideas or new projects, where do you go? You can create the best product in the world but without a brand where do you go? Nowhere.
[We have] the brand, the organisation, the operation, the resources, because you need a team. And, you need the genius, somebody that sees the big picture and knows how to put the different parts of the circle together. And this event, in 15 minutes he was able to take the best of Zegna to new heights. He really took the best of the DNA and made it — he brought our DNA to a different level.
With Agnona, we have to do it [slowly]. It’s little known, it’s very exclusive. It’s going to be daywear, luxury daywear. And where do you find daywear for women? I think what appeals to women with Agnona, [is that] it’s a luxury daywear look that is not too sportswear, as some are, and it’s not too eveningwear.
BoF: Another way to grow, as you said, is to take market share from competitors in your existing markets. Or you can grow in new markets. Tell me about the markets that are really exciting for you right now.
GZ: Going with Italian fabrics in the United States in 1937 was pretty bold. But [my grandfather] knew the customer. He said ‘I’m going to send to Italian tailors in New York.’ So he knew his customer.
When I went to Nigeria, I knew my customer. I didn’t say, okay, let’s go to Nigeria and see what happens. I knew how many Nigerians were shopping [at Zegna] and how deep their pockets were. So we went to our local partner who owns a good hotel business and he confirmed those guys that would be attracted by our brand. I checked our data in London, Lisbon, and Paris, and we said let’s attempt to go.
My aim in the next three years is to have six stores in Africa. We have one flagship in Casablanca, one in Nigeria, then we can do one in Angola, one in Mozambique. Two in South Africa, maybe. Maybe ten in the next five years. So it just keeps going.
So I think this pioneering spirit [is something] I inherited as part of the DNA of my grandpa, my father, and me. To me it’s being very entrepreneurial. An entrepreneur is a risk taker and a quick decision maker.
CEO Talk is BoF’s forum for in-depth discussions with the fashion industry’s global decision makers, conducted by founder and editor-in-chief Imran Amed. This interview has been edited and condensed.
Imran Amed travelled to Milan as a guest of Ermenegildo Zegna.