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Can Versace Grow a Business as Big as Its Brand?

CEO Jonathan Akeroyd is betting that a new signature print and marble-clad store concept will speed the Italian fashion house’s recovery from the pandemic and help scale its business.
Versace is counting on a new signature print to reinvigorate sales after the pandemic. Courtesy.
Versace is counting on a new signature print to reinvigorate sales after the pandemic. Versace.

At first glance, it isn’t obvious why Versace would need another signature print.

Entering the brand’s newly-opened flagship on Paris’ Rue du Faubourg Saint Honoré, bags adorned with its iconic Medusa medallions and “Barocco” V-shaped hardware already line the shelves, alongside mini-bags fashioned from the season’s flamboyant silks (patterns which, despite changing every season, remain almost as easy to spot as any luxury logo). A Grecian key motif — the same one that appears on the waistbands of selfie-loving Versace underwear fans — is inlaid in the marble floor.

Still, the Italian brand is rolling out a new signature print which it hopes will help jumpstart sales after the coronavirus crisis stalled progress under new owner Capri Holdings, which also owns Michael Kors.

The pattern — a trompe-l’œil, 3-D twist on its signature Grecian key, with Versace’s name sprinkled throughout — will hit stores in the autumn, and is the latest effort by Versace to more consistently monetise its brand after struggling for decades to grow its business in line with the brand awareness generated by its runway, red carpet dressing and the memory of its legendary founder, Gianni.

The lack of a monogrammed line is, at present, a key point of distinction between Versace and larger rivals like Louis Vuitton, Dior and Gucci: for those titans of European fashion, monogrammed canvas lines have boosted visibility and generated spectacular margins. Operating profitability is estimated to be around 45 percent for Vuitton, whereas Versace’s margin hovered in the single-digits even before the pandemic.

In a market that’s being driven by scarves, bags and belts bearing Chanel Cs, Fendi Fs and Hermès Hs as well, it’s easy to see why Versace, whose business has been focused on less-profitable (albeit aspirational) ready-to-wear, would want to get in on the action with monogrammed accessories.

Set to be accompanied by a major marketing push later this year, the new print is supposed to “significantly change the trajectory of Versace’s revenues,” its parent company told investors in February.

“Versace has many items that are clearly identifiable. We have the archive prints, but we haven’t had a signature code for things like accessories,” chief executive Jonathan Akeroyd told BoF, speaking ahead of Versace’s Mar. 5 fashion show (which, due to the pandemic, will take place online).

Akeroyd said he hopes the brand’s new accessories strategy will help grow the category’s share from 35 percent to more than half of sales. The monogrammed line, along with “La Medusa” bags featuring the snake-haired medallion and “Virtus” bags featuring baroque V hardware, will be the brand’s three main bag lines going forward.

“The signals are good that this could be a very significant part of our business,” Akeroyd said of the print.

To be sure, imposing a signature pattern on consumers (rather than letting it grow into an icon organically, as a result of demand) has not always worked.

Burberry invested massively in the roll-out of designer Riccardo Tisci’s “TB” monogram across everything from storefronts and billboards to belt bags, scarves and puffer coats since 2017. The monogram blitz helped announce Tisci’s arrival to the market, but steep markdowns on many items bearing the pattern indicated a muted reception among consumers. Recent seasons have seen the British brand using the print sparingly. Ferragamo, too, talked up the transformative potential of a horseshoe print that failed to reinvigorate sales.

Still, Capri is counting on the monogram push to spark a new era for Versace’s business after paying nearly three times the brands’ annual turnover and 22 years worth of EBITDA to acquire the label in 2018.

The brand’s central place in pop culture had been reinforced in recent years by media moments including reuniting top models of the ’90s for a tribute to Gianni and Jennifer Lopez strutting out once more in her jungle-print Versace dress, as well as an unauthorised TV series inspired by Gianni’s murder.

Now Versace is under pressure to live up to the potential of its name. Delivering on Capri’s plan to grow the house’s revenues to $2 billion (compared with $850 at the time of acquisition) is crucial for the group as a slow market for high-heels squeezes luxury stablemate Jimmy Choo, and as flagship brand Michael Kors navigates difficulties at US department stores and malls.

Jonathan Akeroyd has been CEO of Versace since 2016.

For Akeroyd, accelerating out of the pandemic with a monogrammed accessories boom would make for a convincing third act at the brand: since taking the helm in 2016, he has worked with creative designer and then-controlling shareholder Donatella Versace to overhaul the house’s merchandising and collections, making sure most every item in Versace’s boutiques had a clear connection to either the season’s runway inspirations or iconic elements from the brand’s archive. That work helped return Versace to profitability, and, along with a blitz of viral runway and media moments conceived by Donatella, fuelled a blockbuster sale of the brand to Capri.

Since then, with investment from the new owners, Akeroyd has worked on upscaling Versace’s boutiques with a focus on accessories, while phasing out two of its three lower-priced lines, Versus and Collection.

“The diffusion lines weren’t reaching the younger customer — it was confusing them,” Akeroyd said. “Now there’s a real clarity about who we are.”

Going into the pandemic, that clarity seemed to be paying off: a new generation of clients flocked to the main line, fuelling fast-growing sales of entry-level items like costume jewellery, underwear and sandals that helped to plug the gap from lost diffusion revenues.

For the 3 months ending February 2020 Versace’s sales grew 55 percent.

But the coronavirus sent retail foot traffic, as well as interest in signature party garb like Versace’s flamboyant silk ensembles, slinky black party dresses and kinky zipper stilettos, plummeting. Now, rather than racing ahead on its streamlined foundation, Versace is still behind where it was at the time of Capri’s acquisition. The brand reported sales of $696 million for the twelve months ending November 2020.

Still, there are signs that Versace could bounce back quickly as its directly-controlled business regains momentum. Capri says the brand’s retail sales returned to year-on-year growth as early as last summer, and accelerated to a double-digit pace for the quarter ending in November. Online sales more than doubled last year, Akeroyd said.

But it remains to be seen whether the signature print and other recent launches like $1,700 Medusa bags will manage to bridge the gap between Versace’s runway vision and the $75 boxer shorts and $300 pool slides that have been flying off shelves.

“Currently, the brand has two different clients — there’s the couture client who really wants to make to make a statement, then you have the Gen-Z and Millennials who just want access to the brand at an accessible price,” Sebastian Manes, buying and merchandising director at London department store Selfridge’s said.

“It’s great that they’ve managed to seduce this young clientele, but the question after that is how can they up-sell?” he added. “That’s the opportunity for them.”

Handbags are given first priority at Versace's new Paris flagship, opened in December. Courtesy.

For Akeroyd, the ingredients for success are now all in place: Donatella, Versace’s creative director and iconic spokesperson, remains a driving force for the company.

Forty percent of its stores have been converted to the new concept, including flagships in Miami’s Bal Harbour, London’s Bond Street and the new Paris store opened in December.

The brand enjoys a robust, active following on social media that’s allowed it to regularly top rankings for online popularity. Launchmetrics’ quarterly list ranked its media impact eighth among luxury brands at the end of 2020, ahead of larger fashion brands like Burberry, Moncler and Hermès; while shopping aggregator Lyst said Versace was in the top-10 most searched-for brands on the internet every quarter last year.

“Most of the heavy lifting is in the rearview” at Versace, Wells Fargo analyst Ike Boruchow said in a note to clients.

As for the new pattern, Akeroyd says it will become “a new house code” applied “across categories,” and the brand is planning a “360 degree” marketing onslaught to make sure its arrival doesn’t go unnoticed.

Now shoppers just have to like it.

Related Articles:

Versace’s New Owner Plans to Build America’s Answer to LVMH. It Has a Long Way to Go.

Game On: Michael Kors Acquires Versace for $2.1 Billion

Versace Bets Future on New Signature Pattern to Revive Brand

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