Morphing From Mossimo to Mass-imo
After 14 years in the clothing business and nearly as many incarnations, designer Mossimo Giannulli is reinventing his company once again. Having tried a little of everything--surf wear, swimwear, trendy street wear and, for a brief time, designer collections all marketed under the Mossimo name--the 36-year-old is trading class for mass with his new line for the Target discount chain.
The clothes--striped T-shirts, ribbed sweaters and polka-dot raincoats--are stylish and affordable at $30 or less and have the status-conscious fashion world snickering about his abrupt change in strategy, but Giannulli may just have the last laugh.
If he succeeds with the multimillion-dollar licensing deal--a crucial lifeline for his ailing sportswear firm--other mid-tier brands may be emboldened to seek alliances with discount stores as a refuge from traditional department stores. The wisdom of the Target agreement will be much clearer in about a year, said one of Giannulli’s surf wear colleagues, Richard Baker, chief executive officer of Irvine’s Ocean Pacific Apparel Co. He called the deal “a brilliant move,” because it may show in a big way that sophisticated fashion doesn’t have to cost a lot. “Historically, lower price meant lower taste,” he said. “That’s not the case anymore.”
Still, selling $30 jackets and $20 shirts alongside aisles of diapers and plastic dishware doesn’t pack cachet--even if it pays millions in royalties. In some quarters, signing with Target is seen as an act of surrender and desperation--and an about-face for the once high-flying designer.
“It’s funny; someone said, ‘Oh, you’re mass [marketed]. Is that a concern?’ ” Giannulli said in an interview in his new Santa Monica office. “Tommy Hilfiger is not mass? Ralph Lauren is not mass? Who are we kidding? I think if you are Gucci or Yves Saint Laurent, or Dolce & Gabbana or Prada, you are dealing with rarefied air.”
Giannulli insists that his customers still value his name, but some disagree. “They have moved on. He is old news,” said Irma Zandl, president of the New York trends research firm the Zandl Group. “People who see him now might have some vague recollection, but I doubt that.”
Selling to the mass market often comes with creative constraints, but Giannulli might actually have found his appropriate level, she said. “He should kiss the ground that Target walks on,” Zandl said. “Obviously, he wasn’t so great to start with, otherwise he wouldn’t be in this predicament. I have a feeling that he might actually learn some good things from this connection.”
Southern California’s once-golden surf rebel still exudes the telegenic looks, charm and confidence that shot him to the top of the fashion industry and ushered his company onto Wall Street in 1996, making him one of the youngest CEOs on the New York Stock Exchange. Though he took his active-wear business from a garage operation to a $100-million enterprise in about a decade, Giannulli found himself unprepared for the transition into the tailored-clothing business, a move that came on the heels of going public.
Giannulli has long dreamed of conquering more prestigious markets, though his clothes never caught fire with hip shoppers at department stores. In 1998, amid mounting operating problems, he enlisted a string of fashion industry experts and turnaround artists who were poised to make him the California version of Lauren, Hilfiger or Calvin Klein. But time ran out.
His downsizing from a manufacturer with a sprawling Orange County complex and nearly 300 employees to a modest design and licensing firm with 10 employees has been far from easy. But the designer doesn’t see the move to Target as a defeat.
“I would rather go to this other level of business and be the best we can be there, and be the leader on it--before everyone else realizes there is a new way of doing business,” he said.
His defense may sound like a rationalization. The designer, who has lived in Bel-Air since selling his substantial Orange County real estate holdings, is having to swallow his pride to save the company. “Is it an ego issue because I went from one level of distribution to another? It is so not about that for me. It’s totally about the product,” he said. “I’m having fun again; that’s really key. The work environment is great, and I don’t worry about the other stuff. That’s got a good value for me.”
Indeed, Giannulli’s three-year licensing deal guarantees royalties of about $27.8 million and puts his clothing and accessories into nearly 1,000 stores, some of which are already receiving the collection of surf-inspired Red Label and the more contemporary Black Label sweaters and coats. His company is still untangling itself from legal and financial hurdles, however. The company’s former Orange County warehouse landlord, the Irvine Co., is suing for about $4.5 million in rent, and a group of retailers is demanding nearly $3.5 million in disputed markdown reimbursements.
Target, with a group of factories across the world, is busily attending to the nuts and bolts of manufacturing Mossimo men’s, women’s and children’s clothing, as well as shoes, hosiery, eye wear and even a body products collection.
The Mossimo brand could be the fashion equivalent of the funky housewares that Target sells from architect Michael Graves and interior designer Philippe Starck. By adding a designer name to the product lineup, the chain is cleverly taking a cue from department stores and competing with image, not just price, said Jeff Stinson, a research analyst with Midwest Research who covers Target.
Discount stores don’t carry the same stigma as they did a decade, or even five years, ago. Witness Martha Stewart’s successful linen and housewares deal with Kmart. Giannulli’s customers are young and likely to replace their clothes when the next new trend comes along. But he says his new Target audience comes with a practiced eye.
“To assume that the Target customer is less sophisticated than [a department store] consumer, that would be stupid,” he said. “It’s not as if they aren’t drawing an affluent customer who doesn’t know what a Fendi bag is.”
If Target and Giannulli succeed, they might establish a new model of business that can reverse a pattern of ill-fated licensing arrangements with designers. When Halston launched a clothing and home furnishings line in JCPenney stores in 1982, higher-end stores resented the association, dropped his designer line and started the decline of his company. And in July of last year, Sears, Roebuck & Co. launched an exclusive Benetton USA collection in 450 Sears stores that was canceled seven months later over disappointing sales and controversial Benetton ads.
Though the Mossimo brand doesn’t have the recognition of Halston or Benetton, the designer is steadfast in his belief that this time, he’s got the deal down right.
“I’m such a believer in fate. Maybe this was our path ultimately and we had to experience some bumps and bruises to get here,” Giannulli said. “I think everyone wrote us off for dead a while ago. I’m just not going to fold up. It’s not in my nature. It’s just not going to happen. It won’t happen for my own self-esteem, for my family or for my shareholders.”
