Giorgio Armani - the ultimate fashion brand

The Giorgio Armani brand owned and run by the founder designer Giorgio Armani has earned
the much hallowed space in the fashion industry through its superior design, relevant themes
and trends. It maintains the aura of a real luxury brand. Not only has Giorgio Armani become
one of the most respected and known brand names in the fashion and luxury brand industry, it
is also one of the most highly valued fashion companies in the world with a value of nearly 3
billion Euros.

The Giorgio Armani brand strategy

The mention of the Annual Academy Awards ceremony brings to mind the glittering ritual, the
red carpet, and the galaxy of Hollywood stars. The Academy awards have become as much an
event about films and awards as it has about the celebrities and their fashion statements. One of
the regulars at the Annual Academy Awards event along with the stars and the glamour has been
the ultra premium and exclusive fashion wear from the Giorgio Armani stable - the Armani suits
donned by the leading Hollywood men and the Armani evening gowns and other haute couture
dresses worn by the celestial Hollywood beauties.

The Giorgio Armani company owned and run by the founder designer Giorgio Armani has
earned the much hallowed space in the fashion industry through its superior design, relevant
themes and trends appealing to the current crop of customers and by maintaining the aura of a
real luxury brand.

Introduction

Giorgio Armani started the company of his namesake back in 1975. Being a designer himself, he
made apparel with his sense of aesthetics, beauty and luxury, a sense that appealed to the elite of
the society that today includes the royalty of Belgium, the royal families of many Asian countries
and even the opulent women from the Middle East and the high and mighty stars from
Hollywood among many other prominent customers. For almost 30 years now, Armani has been
a privately held company with the founder Giorgio Armani being the sole shareholder.

With many sub-brands designed under the parent umbrella brand of Giorgio Armani to cater to
the specific needs of different market segments, it has become one of the strongest fashion and
luxury brands in the world. Not only has Giorgio Armani become one of the most respected and
known brand names in the fashion industry, it is also one of the most highly valued fashion
companies in the world with a value of nearly 3 billion Euros.

Giorgio Armani is also very expansive in Asia Pacific with its multiple future growth markets for
luxury brands. For example, China is embracing premium fashion and luxury goods at an
increasing pace, and Giorgio Armani has been one of the forerunners to exploit the market
potential. There are approximately around 10-13 million Chinese luxury brand customers.
Giorgio Armani opened its Emporio Armani store next to Shanghai's historic "The Bund" in
2004 and plans on opening nearly 30 stores by the end of 2008.

The Brand Philosophy

Unlike the usual practices of branding that are normally seen in the consumer goods industry,
the branding philosophy in the fashion and luxury goods industry is quite unique and
personality based. Most of the famous fashion houses like Christian Dior, Yves Saint-Laurent,
Gucci, Versace, Giorgio Armani and many others were built on the personality of the founders.
As design is the most important ingredient of fashion and luxury apparel, the individual style of
these designers becomes crucial to creating and sustaining the fashion brand strategy. It is these
unique designs and patterns that reflect the personality of their creator that gives an identity to
the brand and helps to differentiate it from the crowd.

The Giorgio Armani fashion house, like many other fashion houses, has been built primarily on
the unique personality and identity of Giorgio Armani himself. The brand takes on the identity
of the founder through the designs created.

Though this aspect of the fashion industry provides fashion houses with a strong sense of
differentiation that can be conveyed in a tangible and visual form, it also poses a serious threat.
When an entire brand and fashion house are built on the basis of the founders' personality and
identity, it becomes a major challenge to keep the brand going after the demise of the founder,
something many of the fashion houses have realized in the recent past.

The Giorgio Armani Brand Architecture

Whenever a brand gains popularity and acceptance from its target customers in its core
business, the next obvious step for the brand is to charter a new course by venturing into
different product lines, different segments, and ever different markets. This phenomenon seems
common across industry sectors.

Giorgio Armani with its iconic popularity amongst the elite of the society and the fashion literate
segment of the market has followed similar steps by extending the brand. Today the Armani
brand architecture encompasses one corporate brand and five sub-brands, each catering to
different sets of target customers and at different price levels.

The signature Giorgio Armani line: This is the main collection of apparel that consists of
the signature Armani suits, Oscar gowns and so on, which are of the ultra-premium price points
and essentially targeting consumers in the 35-50 year old age group.

Armani Collezioni: This is Armani's venture into a slightly lower market segment. This
basically caters to the segment of people who aspire to wear Armani apparel but cannot afford
the ultimate signature line, or to those who crave to add extra products to their existing
portfolios. The Armani Collezioni brand, with a price point of almost 20% lower than the main
line, provides an excellent line of affordable fashion.

Emporio Armani: Targeted especially at the young professional segment in the 25-35 year old
age group, the Emporio Armani brand provides contemporary designs that are relevant to the
target customers.

Armani Jeans: This is the lowest range of Armani apparel. This is to the value segment what
the signature line is to the premium segment. Catering necessarily to the young adults in the 18
to 30 year old age group, the Armani Jeans collection provides a trendy yet fashionable and
luxurious line of apparel.

A/X Armani Exchange: This is the licensed brand of chain of retail outlets of Armani fashion
house. This serves as the ultimate testimony to the power of the brand. By providing the entire
range of its apparels and accessories, Armani Exchange provides customers with the complete
feel of the luxurious fashion of Giorgio Armani.

However, the Giorgio Armani brand architecture can be misinterpreted by the prospect. For
instance, the differences between Emporio Armani and Armani Collezioni are often quite
insignificant. Furthermore, in January 2005 the Armani group launched Armani Prive to stands
for its haute couture collection. Giorgio Armani and Armani Prive can cross borders creating
confusion in the mind of the buyer.

These sub-brands help Giorgio Armani to operate in many segments of the fashion apparel
market. But this is not all. Not only does Armani straddle many segments of the same product
category, but also many different product categories.

Leveraging its strong brand equity in the fashion apparel market, Giorgio Armani has ventured
into other related categories like eye wear, watches and cosmetics. These are made available in
each of the above-mentioned brand categories to ensure that it is available to the different
segments of the market. It is usually argued that eye wear, perfumes, watches and cosmetics are
strongly related to fashion and luxury and thus it is natural for fashion houses to extend their
brands into these categories. Giorgio Armani is a very strong example for this argument. By
leveraging its expert knowledge of the fashion and luxury industry, Armani has been able to
come up with winning concepts in the other product lines of cosmetics, watches, jewelry and eye
wear.

But Armani has not stopped at just these product categories: Armani has extended the brand
into multiple other categories such as Armani Casa (up-market furniture), Armani-branded
Dolci (confectionary), and Armani-branded Fiori (Flowers). And to add to this wide portfolio of
brands, Armani very recently struck a deal with a Dubai-based property group Emaar to come
up with a chain of 14 Armani branded hotels and resorts by 2011.
As is the trend in the fashion industry to operate in the entire spectrum from apparel, jewellery,
cosmetics, watches, perfumes and luxury hotels, Armani has been able to leverage its brand
equity to be present in most of these lucrative sectors.

Today, Armani group has a retail network of 60 Giorgio Armani boutiques, 11 Collezioni, 122
Emporio Armani, 94 A/X Armani exchange, 13 Armani Junior , 1 Giorgio Armani Accessori and
16 Armani casa spread over 37 different countries.

With so many things going on in the Armani stable, it might seem a pretty picture at the outset.
But this huge portfolio of brands and product lines creates a much bigger set of challenges to the
Giorgio Armani brand strategy in the future.

Giorgio Armani's future brand challenges

The founders' dilemma: This phenomenon is classic and occurs for any company that is
built on the basis of a strong and charismatic founder and leader. As the main competitive
advantage for the company is the founder/leader himself, neither the founder nor the company
would think of life after the founder. Moreover, whenever the companies' success and survival
depends very heavily on the existence of a single person, such companies and its leaders should
take proper action from an early stage so that proper leaders can be nurtured within the
organization.

The Giorgio Armani company is a classic case of founders' dilemma: Giorgio Armani, the CEO
and owner of the Armani brand is in his early 70s. However, the company seems not to have
made any plans for life after Giorgio Armani. In a recent interview, Giorgio Armani was quoted
as saying that the search for a corporate partner and a successor was "not for the today, not for
tomorrow but perhaps for after tomorrow". Though there have been cases where companies
after much effort have been able to stand up and live after the demise of their founders, those
are the rarities. Armani should formulate a structure in his company along with his key
management people to put in place a definite structure that identifies and nurtures future and
upcoming leaders who can carry on the business even after the demise of any single individual.
This aspect gains a bit more importance in the fashion industry as the personality, concept and
ideas of individual designers prove to be real competitive advantages. Keeping this in mind,
Giorgio Armani should tackle this challenge when there is still a considerable amount of leeway
to play with.

Brand dilution due to over-stretch: The primary objectives of businesses are to earn profits
and to enhance shareholder value by maximizing ROI. One of the main reasons that businesses
invest in branding and brand management is for the same reasons. Strong brands, as is well
known, provide companies with a very powerful tool to enter newer markets with limited
investments by leveraging their strong brand equity. It gives companies numerous revenue
streams. Given this simple but strong fact, it is not a surprise that most of the strong brands in
the world have leveraged their brand equity and extended their brands into newer product
categories, newer markets and even newer market segments.

Armani, when analyzed in this light, has extended its strong brand equity a bit too far. Though
the core business of Armani is in fashion apparel business, it has extended its brand into
categories as different as luxury hotels and even confectionaries. The examples that immediately
come to mind are those of Calvin Klein and Pierre Cardin. One of the many reasons that these
brands diluted their brand equity was because they used their brand names on a very wide range
of products. One of the main factors that make fashion houses and their products premium are
their exclusivity. By franchising their brand names to literally everything, these brands lost a
significant portion of their strong brand equity.

Though Armani might have extended its brand to hotels because luxury travel is catching up fast
as a fad with elite travelers, managing the brand along these different dimensions could be a
massive challenge.

Managing brand architecture: Given Armani's portfolio of brands within the fashion
segment, as in many of the other markets that it operates in, effectively managing this portfolio
of brands will prove to be the biggest challenge in the future. As the brand moves into different
territories, interacts with different sets of customers, and represents different personalities, it
becomes quite a task for maintaining consistency across all of its marketing communications
and other activities. Though Armani has been using the corporate brand name in all its sub-
brands, and across all its offerings, it is indeed a double-edged sword. On one hand, this gives
Armani a great opportunity to build a very strong corporate brand but on the other, it gives rise
to a huge risk of diluting the brand equity. Given this strategic dilemma, Armani has to tread
carefully in the future. Armani should also realize that its existence is mainly due to its strength
in the fashion apparel business. As the brand extends through different landscapes, Armani
should not lose focus as new pressures on resources build up.

Maintaining financial independence: Armani is a rarity from a financial perspective as

well. Giorgio Armani has been the only shareholder of the company from its inception till now.
Armani has not taken any bank loans either. It has been one of those rare companies which has
managed to have very healthy operating profits and ploughed back almost 700 million Euros
into the business since 1999. Having this financial independence has helped Armani immensely
as the company tests newer territories. With no pressures from shareholders and without having
to bother about meeting quarterly targets, Armani has been able to operate quite successfully.
As is commonly known in the fashion industry, it takes a considerable time for the concept and
products to take root in the market. For any company to sustain this gestation period, it needs to
operate in an environment where there are no day-to-day financial pressures. Having this kind
of financial independence to operate in has been one of the key success factors for Armani.

But to continue as a one man company in the future could be quite difficult. With consolidation
happening in many industries, it might just be a matter of time that it catches up with the
fashion industry as well. When such a thing happens, it could pose a big challenge to the
working style of Armani and its continued success. In this light, Armani might want to think of
other options when it has a choice and before something is thrust upon it.

Sustaining consistent brand personality: One of the main aspects of a fashion brand is its
personality and its identity in the marketplace. Building and sustaining a personality that is
relevant and one that resonates with the customer base is one of the most difficult aspects of
building a strong brand. Armani, with its presence in diverse markets, a very wide brand
portfolio, and interacting with diverse set of customers, faces this huge challenge of building a
relevant and resonant personality. With the ever growing competition in the fashion industry
and ever growing brand portfolio, building and nurturing this personality will prove to be a very
big challenge for Armani in the future.