In conversation with Gildo Zegna, Chairman & CEO of the Ermenegildo Zegna Group.
Gildo Zegna, Chairman and CEO of the Ermenegildo Zegna Group and Jonannes Neubacher,WWD China Co-Founder and Vice President of WWD China. COURTESY IMAGE.
In the wake of his second trip to China this year, Gildo Zegna, Chairman and CEO of Ermenegildo Zegna Group, shared opinions about the changes in the past three years regarding brand IPOs, acquisitions, sustainability, and other related topics with WWD China.
The fashion industry is experiencing a resurgence in mainland China following the country’s reopening. One company that has taken advantage of this opportunity is ZEGNA. Although the global epidemic has impacted ZEGNA’s brand development over the past three years, they have persevered through their strategic approach of doing the right thing at the right place and time.
As a result, the company successfully evolved from a family brand to a global luxury Group. With its innovative initiatives and adaptability, ZEGNA is poised to continue its growth in the ever-evolving fashion industry.
Italian luxury brand ZEGNA, with a rich history spanning 113 years, faces the challenge of striking a balance between heritage and innovation in order to remain competitive in the luxury men’s clothing market. Known for its “Made in Italy” production and vertically integrated industrial supply chain “from sheep to shop,” ZEGNA has been widely praised in the industry for its exceptional quality and attention to details.
In recent years, Ermenegildo Zegna Group has sought to maintain its competitive edge by strengthening its control over the fabric supply chain through strategic acquisitions such as boutique weaving mill Tessitura Ubertino (in 2021), jersey fabric manufacturer Dondi (2019), hattery Cappellificio Cervo (2018), and textile manufacturer Bonotto (2016), which it says enables it to work towards a “largely vertically integrated business model.” Additionally, the Group joined forces with Prada to acquire together a majority stake in Italian cashmere manufacturer Filati Biagioli Modesto.
Today the Zegna Group ‘Made in Italy’ Luxury Textile Laboratory is a one-of-a-kind platform created with the aim of producing the highest quality fabrics, while safeguarding the uniqueness of the Italian supply chain in the name of craftsmanship in a constant quest for creativity, innovation and quality.
These acquisitions have not only allowed Zegna Group to bolster its supply chain system, but also increase efficiency, with the brand now able to deliver their prestigious Made-To-Measure products within just two weeks. Furthermore, they have opened up new opportunities for cooperation and acquisition, further cementing ZEGNA’s brand position as a key player in the luxury men’s clothing market. As the brand continues to navigate the ever-evolving fashion industry, its dedication to both tradition and innovation will be vital to its continued success.
ZEGNA ShenZhen Mixcity Store.
IPOs and acquisitions have become the key to expanding Ermenegildo Zegna Group’s external influence. “Being public also means we are accountable to a larger number of stakeholders, internal and external. It has raised the bar, setting ambitious targets and elevating the execution,” said Gildo.
Ermenegildo Zegna, an Italian luxury group, has embraced acquisitions to increase competitiveness and seize opportunities in the consolidated luxury market. Its acquisition of Thom Browne in 2018 was a win-win situation, with the brand benefiting from Zegna Group’s efficient supply chain system, while the Group gained brand creativity and a digital mentality and operations. During the pandemic, sales of the Thom Browne brand rose by 64% compared to 2019. Zegna Group announced that it has signed an agreement to enter a long-term license for TOM FORD fashion with The Estée Lauder Companies (“ELC”). This license is contingent upon the closing of the acquisition of TOM FORD by ELC, which is expected to occur by mid 2023.
ZEGNA’s unwavering commitment to sustainability is deeply ingrained in the brand’s core values. From the restoration of the environment around its woolen mill to the establishment of a responsible supply chain, ZEGNA has been a pioneer in sustainable fashion, aiming to achieve the ultimate environmental goal of zero waste. The brand’s Oasi Project, launched in the 1930s, was just the beginning. Oasi Zegna is a nature reserve that stretches 100 km from Trivero to the peaks of the Biella Alps in Northern Italy.
ZEGNA’s sustainable efforts culminated in the launch of the #UseTheExisting project, which debuted during the 2019 Winter Fashion Week. The project focused on utilizing waste from fabric production to create new products, such as recycled denim made from waste fibers and threads. Through innovative processes, ZEGNA has successfully recycled fibers, threads, and fabrics from the production process to produce high-quality, sustainable fabrics.
ZEGNA’s commitment to sustainability extends beyond just its products. The brand’s 2020 digital show was based on sustainable thinking, and the 2023 summer collection fashion show was held in an old mansion in the Oasi Zegna. For ZEGNA, sustainability is not just a slogan, but a unique value of harmonious coexistence between people and the environment, passed down through the family’s inheritance.
Oasi Zegna in Bielmonte, Italy.
ZEGNA has adapted to the changing fashion landscape brought on by the pandemic by strategically expanding its product line without compromising its commitment to superior quality. Responding to the surge in demand for luxury casual wear, the brand has enriched its offerings while remaining steadfast in its pursuit of excellence. In 2021, ZEGNA unveiled its inaugural Outdoor Collection, partnering with La Sportiva to create hiking boots and running shoes. The brand’s approach to attracting a younger demographic is not to blindly chase youthfulness, but rather to create premium products, that seamlessly integrates into the lifestyle of its users.
ZEGNA x The Elder Statesman Preview Event in Paris.
ZEGNA’s entrance into mainland China as the first luxury menswear brand has brought a unique significance to the brand. The Chinese customers are known for “sophisticated, discerning, digitally savvy, and very eco-conscious.” Thus, for ZEGNA, the brand’s focus is to enhance digital operations in China. During the pandemic, ZEGNA hosted a digital fashion show and established an exclusive live broadcast in China, which linked the WeChat official applet and Tmall flagship store to improve online communication channels. In September 2022, the brand appointed Leo Wu, a young actor from mainland China, as its new ambassador, aiming to expand the brand’s reach among younger generations through high-profile celebrity endorsements.
Gildo Zegna, spoke exclusively with WWD about the Group and the fashion brand’s global strategic operations, particularly in mainland China, where the fashion market is bouncing back following its reopening. Despite the challenges of the past three years, including the impact of the pandemic, ZEGNA has adapted and is focused on the future. Mr. Zegna shared insights into the brand’s strategy, both globally and in China, as well as future prospects.
Gildo Zegna, Chairman & CEO of the Ermenegildo Zegna Group.
Q&A:
WWD China: Speaking of the core of the brand, what is at the heart of ZEGNA?
The ZEGNA brand is characterized by using the highest quality fabrics and textiles, made from the highest quality materials, to create products that meet the needs of the modern man.
We are also defined by our 113-year history and the values that my grandfather, the founder of our company and brand, instilled from the very first day. I think you can get a perfect glimpse of these values when visiting our headquarters, a peaceful location, surrounded by hydrangeas, rhododendrons, half-a-million pine trees planted by founder Ermenegildo Zegna starting in the 1930s, and stunning views of the Alps, from the Monviso mountain to the Monte Rosa massif, the best place to create sustainable fashion, you can say my grandfather already created a sustainable business, before the term sustainability became a thing in our industry.
Most importantly, he believed that the best garments can only come from the best natural resources, and that these resources need to be cared for. He also believed that the best companies are created by caring for the communities they operate in and the people around them.
Taking our traceable cashmere for example, we are the only company to implement full traceability from sheep to shop, showing our commitment to trace supply chain.
ZEGNA Wool Yarn. COURTESY IMAGE.
Oasi Cashmere project marks one of the first initiatives as part of our pledge to make the entire textile offering traceable by 2030.
In times when everybody is talking about circularity, For us at the center has to be a product of excellence manufactured in an environmentally friendly, sustainable, natural way and made in Italy. For us fashion is more than fancy shows and entertainment business, we want to go our own way and make sure that our story is unique to us and inherent with our values, our authenticity.
Also, if we talk about diversity and inclusion, to be honest with you is this new for us? No, did we communicate in the past？ Not enough. This also shows our understanding of the fashion industry. These values are still at the heart of everything we do today, from how we run the company to how we make every product.
WWD China: Over a year ago, Zegna Group, a traditional family business, went public at the New York Stock Exchange, being the first Italian luxury fashion Group to be listed there. What has changed for you since then?
I just celebrated 20 years of running Zegna, and my 40 years of working in this industry. But I have to say that the past two years were quite unique and probably the most intense and the most rewarding for me and for the business. I did reflect upon what we did, where we were and what we have to do in order to keep up。
These years were also important for us to define what we have to change and what we have to do differently. Menswear can be totally casual but very chic, using the most premium materials and at the same way being very comfortable. And this could be bespoke, this could be made to order. And I think that if we got this message very successfully across to our ZEGNA customers. Covid has helped us get lighter in cost and to come out with a new strategy for ZEGNA which is moving our perception of the brand from a power suit luxury brand to a luxury leisurewear brand.
So let me briefly clarify one point: we took Ermenegildo Zegna Group public. The Group includes our brands ZEGNA and Thom Browne, our Made in Italy Luxury Textile Platform, and our third-party production partnerships for other luxury brands. Taking the Company public and becoming the first Italian fashion group to list on the New York Stock Exchange has been one of the milestones of my career and of the Group’s history.
The Ermenegildo Zegna Group Opening Bell Ceremony at the New York Stock Exchange, December 2021. NYSE
Becoming a public company underscored the success of our strategy of continuously focusing on the Group’s brand equity while also continuing to build on our heritage, our ethos of sustainability, and the unique craftsmanship that has made our name synonymous with quality and luxury around the world.
Being public also means we are accountable to a larger number of stakeholders, internal and external. It has raised the bar setting ambitious targets and elevating the execution.
It has improved our visibility and also our attractiveness as a brand, business and employer.
WWD China: Zegna has been very active in acquisitions, first was in the supply chain — (from Achillfarm in 2014 to the more recent investments in Tessitura Ubertino and Filati Biagioli Modesto Prada Group), how key is that to the success strategically to the Group?
I think that fabrics are crucial, like the engine in a car. I think the engine of men’s fashion is the fabric and so for us the focus is in broadening the range of the fabrics from wool to silk, to cashmere to jersey to Jacquard.
At Zegna Group, we have always believed that the best products come from the best materials. This has guided our strategy of building a supply chain of materials producers that meet our very high standards of quality.
Our nearly fully vertically integrated business model allows us to be responsible and accountable for our products, from start to finish. In addition to giving us a large level of oversight related to the quality of the materials we use, our acquisitions have allowed us to leverage the textile and manufacturing platform to create opportunities for greater integration and efficiency, providing a cost advantage for our own brands and greater control over our supply timelines and processes.
ZEGNA x The Elder Statesman Preview Event in Paris— Natural Cashmere Material Display Area.
As a proud Italian company, we are also very proud that our textile platform brings together some of the very finest Italian materials producers in our one-of-a-kind Made in Italy Luxury Textile Platform. The platform is highly scalable, and we have been intentional about how to grow it. Besides supplying our own brands, ZEGNA and Thom Browne, through the platform, we also provide top-quality textiles to some of the world’s major luxury players.
WWD China: Other than the supply chain, ZEGNA has been also very active in acquiring new brands or setting up new brand collaborations. Apart from the very successful Thom Browne business, a hot topic in the industry is your new venture with the Tom Ford brand. What can we expect, and what impact will the supply chain investments have in this new venture?
Well, let me start with Thom Browne which we acquired in 2018 before going public. Scale is very important to us, it’s our agenda, and we have to stay competitive as a group. Although our priority is organic growth more than acquisitions. We will talk about integrations which follow our values and our DNA. So, we felt that Thom Browne was the right company to acquire, we acquired ninety percent while Thom still owns 10 percent, which is very important.
WWD China: And why Thom Browne? Because I think it’s an extremely iconic and extremely creative brand.
Tom Ford and ZEGNA have a long and positive history together, and we are looking forward to working with The Estée Lauder Companies to build on the great work Thom has done and position TOM FORD as one of the most iconic and distinctive ultra-luxury brands in the world.
Ermenegildo Zegna Group Headquarter in Milan, Italy
This partnership also further strengthens our platform by bringing a perfectly complementary mix of customers, product categories, and geographies to our platform alongside ZEGNA and Thom Browne. There are a few formal steps that still need to be completed before the transaction closes, which we expect to happen in the first half of this year. I will be able to tell you more about our strategy for TOM FORD then.
We have three luxury brands, which complement each other. This is also an important step for us, transforming ourselves from a single luxury brand into a luxury group.
WWD China: How important is the Made in Italy concept for ZEGNA’s strategy?
Made in Italy is one of the strongest brands worldwide. I am a firm believer that nothing in the world compares to Italian craftsmanship and quality, and our goal is to create and have access to the best fabrics, textiles and other materials through our platform.
As a company that started as an Italian wool mill over 113 years ago, creating the world’s highest-quality textiles has always been a particular point of pride for us, as well as a strategic imperative, and Italy is unparalleled in producing these textiles. Our largely vertically integrated business model means that we closely oversee our products from raw material selection to finishing, ensuring they meet our exacting standards related to quality and sustainability.
Not only does it provide ZEGNA customers with the highest quality of Made in Italy luxury products, but it also provides other brands with the best textiles and materials Italy has to offer.
Ermenegildo Zegna Group Headquarter in Milan, Italy
WWD China: Where do you see the main drivers of growth in luxury? New markets, new consumers? When talking about markets, which ones are the most exciting for you now?
Luxury leisurewear has been a consistent engine of growth for the industry over the last few years, and the COVID pandemic has only accelerated that trend. However, while day-to-day and work attire is becoming more casual, we are seeing an increase in made-to-measure as men move to more formal clothing for special occasions.
As luxury is becoming more polarized, sophistication and customization is a key driver. Our MTM competences and skills and mentality are a strong pillar for us to capitalize on this trend.
In terms of markets, we have seen faster growth in the Middle East and the U.S., where younger consumers are gravitating towards luxury brands as they discover their individual sense of style. Also, Europe and the U.S. were performing well. After my trip to China a few months ago, I am particularly optimistic to see the reopening of the Chinese market, which is incredibly important for us and the luxury industry at large.
WWD China: How do you see the future of luxury and premium shopping experiences?
We must continue to offer incredible service and an impeccable experience to our customers around the world, both online and offline. Think about our Made-to-Measure & Bespoke service: we’re able to create garments that respond to our customers’ lifestyles and deliver them to clients in a few weeks. Each finished piece is a true personal expression realized through the passion, knowledge, and skill of our teams.
Customization and a relationship business model guide represent strong competitive strengths.
We also have been improving our in-store experiences, we moved several store from mega size store to more regular size store making them more open, bright and colorful. At ZEGNA we often have three generations of consumers, and we provide this experience for all three, I think that this has been an incredible transformation.
WWD China: Where do you see the biggest challenges for the luxury industry globally?
Generally speaking, the current global landscape is changing more rapidly than ever before, which presents new challenges — challenges we must tackle to turn into opportunities.
The rapidly shifting environment in which we operate is the reason why we must remain flexible. Yet the luxury sector continues to prove its resilience even in the face of a tough macro backdrop. As I said, China’s reopening is a very important driver for the industry in 2023 and beyond. Demands for sustainable and traceable products present new challenges for companies.
WWD China: What have you understood from China’s reactions toward COVID-19 and its effect on local economics?
Since China’s re-opening, our operations have normalized and returned to more predictable activities. We expected a challenging first quarter in China, but on the contrary, from what I am seeing in China so far, I am optimistic about the long-term prospects of China’s economy as we are witnessing a rebound in our business and the industry at large.
WWD China: What are the behavior differences in luxury retail before and post COVID-19 in China?
Chinese consumers are sophisticated, discerning, digitally savvy, and very eco-conscious. They are also increasingly turning to innovative products and culturally relevant experiences.
In response to this, and given Chinese consumers were not able to travel abroad during COVID, we can see luxury brands doubling up their efforts and investment in China to strengthen the emotional and cultural connection and resonance with Chinese consumers. This was achieved through holding art exhibitions, launching limited- edition and custom-made products exclusive to the China market, products in partnership with local designers and artists and products with lower environmental impact.
This is already my second trip to China. In January I went to Hong Kong and Macau, and now to Shanghai.
We also see more fashion retailers adopting a social-first approach focused on elevating consumer experience by blending the physical and digital environments, integrating e-commerce, entertainment and even gaming.
WWD China: Retail in China has been quite not easy in the last few years. What is ZEGNA’s plan for fast recovery?
We will remain flexible to proactively face external challenges while continuing to strengthen our brands, execute on Our Road strategy, and deliver on our mid-term targets. We have the right set up to embrace the reopening and serve the needs of the Chinese consumers at home, and abroad should they start to travel.
WWD China: How important is it for ZEGNA to stay innovative? Is collaborating with The Elder Statesman and acquiring Norda a strategic decision and hope to bring these two brands to China?
Innovation is incredibly important to us as a company that aims to meet our customers’ changing needs. Our collaboration with The Elder Statesman, which will be available later this year, has been two years in the making, and we’re very excited to partner with one of the world’s top cashmere brands. To clarify, we have not acquired Norda Run. We acquired a minority stake in the Canadian technical trail-running shoe company.
The luxury outdoor space and shoes both continue to be areas of focus for us. Norda Run, which uses the finest materials to produce the world’s best-performing all-weather footwear, aligns perfectly with ZEGNA’s values of creating the best products from the best materials.
https://wwd.com/business-news/business-features/chinamind-evolution-for-zegna-1235588025/