Armani Pioneering Luxury Designer Entry Into Fast Fashion

Originally published May 21, 2014 here.

Fashionista reports that Armani has purchased from his licensing partners the remaining 50% of his AX Armani Exchange venture and intends to revamp it to compete against the major fast fashion players. While Armani, like most other established designers, has multiple diffusion lines, this is the first time a lux designer is entering the fast fashion space at this magnitude vs testing waters through collaborations. Armani has a war chest of $924M in cash and a healthy, growing base business. AX Armani Exchange has 270 stores globally. The ammunition for a successful entry exists.

Key considerations as Armani embarks on this journey are the following:

Design change necessary: AX Armani Exchange used to be a bit more edgy, closer to Diesel than J Crew. But recently, that edginess has dissipated and the merchandise has become bland, even though hints of the old aesthetic remain due to the sharp styling. The window dressing may mildly beckon, but the energy in store doesn’t seem to be the same as ten years ago. Armani himself does not design for any of his diffusion brands except Emporio Armani, but deeper involvement from him in revamping the design at Exchange would be a welcome change.

Operational re-haul must be executed flawlessly: One of the biggest challenges in entering the fast fashion segment is retooling sourcing, production, and distribution to meet expedited speed to market. Would be smart to bring on operations leaders from Inditex or other competitors to ensure the disciplined processes that are put in place deliver against the new brand promise, especially if growth in number of stores is planned.

New brand promise means communication is critical: By entering into fast fashion, Exchange is departing from current consumer expectations. When the merchandise changes, the brand changes which can cause confusion in the marketplace. Active, thoughtful communication and creative will need to be developed to ensure that confusion is avoided. It also affords an opportunity to make new news for the brand which is a great way to potentially capture new consumers and reinvigorate loyals.

Value equation must be right: Even among current fast fashion players, the value equation varies and it is one of the key differentiators among them. Zara, Asos, and Topshop have higher price points than H&M and Forever 21. Zara quality is arguably a step above Topshop, ASOS, H&M and Forever 21. Topshop and ASOS own a look that is slightly more risk-taking than Zara. Armani’s due diligence should reveal where the market opportunity is and whether it aligns with the Exchange brand. A good option would be to aim for a price point similar to Zara/Topshop, produce with good quality and construction, and elevate Exchange to a higher end workwear option; essentially, a less upscale and lower quality version of the contemporary Emporio Armani brand offered at a lower price point. It would mean competing with Zara directly, and the non-fast fashion set of J. Crew and Banana Republic.

Zara, Asos, Topshop, H&M, and Forever 21 are highly competitive entrenched players with strong mindshare among their respective targets. However, as H&M is finding with COS, there is still room to grow in fast fashion, and consumers globally will benefit.

Originally published at https://www.tumblr.com.