Ermenegildo Zegna’s market diversification plan

“Recent turmoil in the financial markets may cause a serious crisis,” says the world leader in luxury men’s clothing.

Ermenegildo Zegna, chief executive officer of the family-owned, Italy-based Ermenegildo Zegna Group, added: “I’m rather optimistic, but we should be prepared also for such eventuality.” He told the Dziennik daily newspaper: “The best way to prepare is diversification, spreading investments around in many markets, not keeping it in one place. The positive performance of some investments will neutralize the negative performance of others.”

The U.S. is the Zegna Group’s main market and it generates about 25 percent of company revenue. Italy is the second biggest customer, Japan third and China fourth. Russia may be the biggest hope for future success.

Russia and China are BRIC countries. The BRIC name is taken from the first letters of four countries: the other two are Brazil and India. The economies of the BRICs are rapidly developing and by the year 2050 will eclipse most of the current richest countries of the world.

Poland is also on the list of Zegna customers, with one shop in Warsaw and one in Poznan, a city in west-central Poland. Another four shops are planned, said Zegna, but none will open earlier than September 2008. The key decision is to find the best store locations. The list of possible towns includes Krakow, as well as Wroclaw in south-western Poland on the Oder River, Gdansk on the southern Baltic Sea Coast and Lodz in the center of Poland.

It is four years now since the Ermenegildo Zegna Group began doing business in Poland. Revenue from Poland has not been disclosed, but Zegna said it has increased 20 percent every year, which is more than twice the world’s average.

When asked about the expensive price-tags on his clothing-line, Zegna explained: “Our offering is not for everybody; it is addressed not even to one percent of the population. It is maybe for one tenth of 1 percent in developing countries and for a small percentage even in highly developed places. We are focused on special clients. Apart from the well-known formal business suits, we have some products with a lower price, too, like sportswear. Its targeted customers are younger consumers. We open the world of luxury for the future wealthy men.”

The company’s consolidated revenues reached 779.4 mln euro in 2006. Continued growth has been possible through shrewd diversification of products, which now include accessories as well as clothing.

The success of Ermenegildo Zegna Group is made possible by the work of more than 6,000 people, half of whom work outside Italy. They are involved not only in production but also in distribution through 501 stores, of which 198 are directly operated.
 

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