Fall of the House of Versace
John Davidson
All is clearly not well at Versace. Revenues at this house once renowned for its chutzpah and swaggering bravado have declined sharply, plunging the business into a succession of ever-worsening losses. The marketing budget has been slashed, and Versace stores are being closed or down-sized. Once again this season, no Versace couture show has been staged in Paris during haute-couture week, and Liz Hurley, the woman whose celebrity status was created by wearing a certain Versace evening gown, is thinking of restocking her wardrobe at Christian Dior. The 18-year old woman, Allegra Versace, who now controls 50% of the business harbours career ambitions as an actress rather than a fashion czar. And, as if all this wasn’t bad enough, the designer-in-chief has just gone into rehab.
Ironically for a fashion house that has always trumpeted the glories of high octane colour, these are times of gloom and doom. The term "ailing" is now routinely applied to this once-fiesty marque. Speculation continues over who might now buy the business or (and this remains the Versace family’s preferred option) take a minority stake in it.
Six months ago there were rumours of involvement or outright acquisition by Tom Ford and Domenico de Sole, the architects of Gucci’s spectacular revival. Now, it appears, there’s a distinct possibility that Istithmar, a Dubai-based investor, will take a sizeable equity stake. But, with net losses last year reaching Euro26.5 million, the future remains a mass of uncertainties. Seven years after his murder, it appears that Gianni Versace is sorely missed. And his surviving siblings, Santo and Donatella, can no longer hide their problems behind the Medusa mask that has long served as the iconic symbol of Versace.
Six weeks ago, Donatella Versace, Gianni’s sister and successor at the design helm, invited a select band of fashion insiders to a supper party in her private apartments at the Versace palazzo in central Milan. In the shadows, as ever, stood Santo, the elder brother who used his accountancy skills to help Gianni establish his business and who remains chairman today. Yet, even though Donatella had less far to travel than any of her guests, the fashion world’s most famous perma-tanned blonde was almost the last person to arrive.
She looked fabulous, of course - even if, I noted, unusually hesitant and very much slimmer than ever before. Her hair had been twisted into perfectly sculptured curls that looked positively Titian in all but colour; her make-up was immaculate. Yet, while I’d allow that it takes time to put on quite such a brave face, desserts had been served before our hostess materialised.
Runway footage playing on a giant plasma screen reminded us that, just three hours previously, Donatella had presented her colourful menswear collection for spring-summer 2005 downstairs in the palazzo’s garden courtyard. Photographers had swooped on Catherine Zeta-Jones, indisputably the occasion’s numero uno front row guest. Keith Flint, former frontman of the Prodigy, had performed a live set during the show. But, in truth, the celebrity count had been unusually low by all previous Versace standards. Which rather suggested that this fashion house, once characterised by its unbridled excess, had been forced to make stringent economies that precluded the vast expense of air-lifting into Milan the once customary celebrity headcount.
The Versace palazzo was purchased (and spectacularly decorated) in more buoyant times to provide a potent symbol of the house’s power and influence. Recently, it very nearly followed the Miami mansion, two dozen Picassos, and a host of other museum-quality art treasures - all of which have been sold off in a cost-cutting and rationalisation exercise that reads very much like a fire sale.
Gone, already, are a clutch of those palatial Versace flagships, each launched in a blaze of flash-bulbs, a red carpet celebrity pile up, and a veritable flood of fine champagne. The more impressive of the two stores that once operated on Milan’s Via Montenapoleone has been ceded to Louis Vuitton, while London’s Old Bond Street store has become home to Gucci. Now, Starbucks is rumoured to be the candidate most likely to occupy the space recently vacated by down-sizing the Glasgow boutique.
The problem is that Versace has slipped out of fashion
Santo Versace has already described the period since the murder of his brother as the family’s "seven years of woes". And he was speaking before the world heard that his sister had sought treatment for her cocaine addiction. This has certainly been a period during which many of this wily number-cruncher’s best laid plans seem to have awry. For, until Gianni met his end, the house was poised for an IPO (Initial Public Offering) which would have transformed it from a tightly controlled and essentially private concern into a modern, publicly-quoted corporate business.
As the latest phase in a concerted programme of business development, this would have funded further expansion. Instead, however, blighted by the loss of its creative dynamo, and thereafter rather more susceptible than some rival luxury goods marques to the impact of economic downturn in the far east and the 11 September terrorist attacks, the house of Versace would be forced into retrenchment.
Outwardly, of course, Gianni’s surviving siblings strove to maintain the impression of business-as-usual. Donatella’s first endeavours at the design helm were politely received. And, in 2000, Vogue magazine heralded her spectacular green palm-print evening gown (worn on the runway by Amber Valletta and, memorably, on a red carpet by Jennifer Lopez) as the dress of the season. In an astonishingly short space of time, Donatella seemed to have hit her stride, asserting herself as a credible designer in her own right.
All the while this dynamic little woman was forging powerful new friendships, engendering extraordinary endorsements, and becoming a major celebrity in her own right. Anyone might wonder how a chain-smoking peroxide blonde from Reggio Calabria in the poverty-stricken Italian south could just as readily hold her own in Princes Charles’s Highgrove set as with hip hop divas and Hollywood superstars. Unless, that is, they’ve met her. Face to face she is engagingly funny and gloriously self-deprecating.
I remember hearing her explain that she’d arranged for huge sparkling crystals to be embedded in the soles of biker boots for her debut collection, shown in October 1997, because, rather like Lorelei in Gentlemen Prefer Blondes, she loved finding new places to wear diamonds.
Any major brand must remain fiercely protective of its image. And, in addition to an impressively fleet-footed internal press office, Versace has always invested in the best PR support that money can buy. The resulting levels of product placement and press coverage have proved extraordinary and enduring. Versace routinely dressed more Hollywood actresses for recent Oscar nights than any other single fashion house.
A flair for public relations has always been a key factor in the success of Versace. Few fashion houses mirror the alacrity with which positive comment is acknowledged - invariably with a truck-load of flowers, and occasionally with choice pickings from the collection. Those responsible for negative or erroneous reports are accorded somewhat different treatment. Some have found themselves frozen out of the Versace glamour-loop - no longer invited to the shows or the parties. A tiny dare-devil elite has, as they say, heard from the Versace lawyers.
But hysterical and ill-informed gossip is just as enduring a feature of the fashion world as the fascination with the next big thing, the season’s must-have, or the question of who’s wearing what. And even groundless tittle tattle can prove deeply damaging to any house that finds itself the focus of such unwelcome attention. The flamboyant lifestyle of the Versace siblings always begged questions and generated envy. Which may explain why some fashion commentators sniffed around the Versace image of a monumentally successful, hugely profitable and glamorous brand - smelling what they imagined might be a rat.
Even level-headed commentators were uncomfortable about the haste with which the Miami police closed their investigation into Gianni’s murder. Within eight days, a nation-wide manhunt had located Andrew Cunanan, their only suspect, who rather inconveniently shot himself before officers reached his hide-out - thereby precluding any possibility of a proper police interview, let alone a courtroom cross-examination.
Yet, Gianni’s murder seemed so different in style from other homicides attributed to this, now notorious, serial killer. Cunanan specialised in grizzly, tortured slayings, whereas Gianni’s dispatch sounded very much more like an execution. And, although police reports suggested that the gun with which Cunanan had shot himself matched the weapon with which Gianni had been killed, no motive or link between the killer and his prey was ever established. Moreover, none of the eye-witness accounts positively identified Cunanan.
Subsequently, the surviving siblings concentrated on safeguarding their house’s reputation. They battled in the Florida courts to ensure that Gianni’s medical records were not made public - a move that gave rise to much speculation. They acted swiftly to block publication of a book by Frank Monte, a private investigator and former Versace employee who alleged links between the fashion house and Italy’s underworld of organised crime. His claims were based of the false premise that Gianni had disclosed information about a Mafia connection to this extremely junior member of staff. In respect of an editorial feature casting similar aspersions about the legitimacy of the Versace business, a full retraction (plus damages) was secured from the Independent on Sunday.
Yet, commentators remained mystified by those palatial flagship stores, in which you were almost as likely to spot a Giant Panda as any boda fide customer, and which absolutely could not possibly be profitable. Even Santo once admitted to Business Week that they existed to provide profile rather than profits. And there were always questions about the Versaces’ lifestyle. How could this family afford quite so many extravagantly decorated trophy homes, each stuffed with precious antiques and extraordinary artworks? Could the wealth which Gianni and his siblings so openly flaunted really be derived from a garment design business that, even at the peak of its success, enjoyed sales volumes nowhere near those of the mighty Giorgio Armani or Ralph Lauren?
It would be quite wrong, however, to suggest that the Versaces were either secretive about their business dealings or entirely fanciful in their boasts of commercial success. Indeed, they provided rather more hard facts than they needed to. Very unusually for any privately owned Italian dynastic house, they published fully audited accounts each year from 1986 onwards.
During the late 1980s and early 1990s, these painted a picture of a highly profitable business that was investing heavily in "growing" its brand. For, while the multi-million dollar marketing budgets certainly represented an unusually high percentage of total revenues, this expenditure allowed Versace to run lavish advertising campaigns in almost every major fashion glossy and stage runway shows unparalleled in scale and glamour.
Of course, only a moneyed elite could ever afford those fabulous sex-pot evening gowns that formed the main thrust of the Versace image. Still fewer were blessed with the pneumatic physique required to carry off such provocative frocks. But the real pay-off from this significant investment would eventually surface in the phenomenal success of secondary lines such as Versace Jeans Couture, launched in the early 1990s.
Perhaps everything worked better at Versace when Gianni was still alive, and each of the three siblings had a defined area of responsibility. Gianni was certainly an inspirational designer, heading up a very talented studio team. Donatella demonstrated a natural flair for creating and maintaining brand image, while Santo proved himself to be one of the fashion industry’s most talented number-crunchers, just as creative in negotiating lucrative revenue streams and license agreements as his younger brother was in dressing supermodels. As a business troika, with responsibilities divided according to their respective talents, these three seemed extremely effective.
But did they really get along? During his lifetime, Gianni agreed that their relationship was not without its problems. "We are the country of the Borgias," he once admitted, "so family businesses can have their negative side." And while Santo was preparing the house for its planned IPO, there were certainly rumours aplenty of clashes and power struggles. One entertaining, if utterly unsubstantiated, story doing the rounds during the spring of 1997 suggested that, in an effort to stem the extravagance of his younger siblings, Santo had all their credit cards cancelled .
Now that we have concrete evidence of decline, the question is whether it was a bad idea to fudge the succession issue and allow Donatella quite so much leeway and control. It’s certainly tempting to speculate just how well she has ever rubbed along with Santo. During recent seasons, customers have defected to other labels, with Gucci and Roberto Cavalli emerging as the foremost beneficiaries. Yet, at Versace, the colours are still hot, the craftsmanship remains exemplary; the groundless tittle-tattle about the family is as engaging as ever, and Donatella’s collections are most certainly not devoid of merit. Perhaps the real problem is that Versace - a brand which addressed the mood of a moment - has for the moment slipped a little out of fashion. This season, it seems, we will mostly be wearing something else.
The latest ad campaign is so disgusting.
