“Every major watch company in the world has had at least one successful model; very few of them have had two. We had eleven!” Wunderman said.
The first Gucci watch under the new license was another classic style called Model 2000, which Wunderman sold in collaboration with American Express in an unprecedented direct-mail campaign. Overnight, sales of the Gucci watches soared from some 5,000 units to 200,000. That watch even made it into The Guinness Book of Records for selling more than 1 million units in two years. A women’s watch, which came to be known as the ring watch, soon followed. The watch face was set in a gold bracelet and came with changeable colored rings that clipped around it. The business was a bonanza overnight—both for Wunderman and for Gucci, which had secured a lucrative 15 percent royalty, considered high even today.
“If you went to Oshkosh, Wisconsin, and mentioned Gucci,” Wunderman said, “people would say, ‘Oh yes, they also make shoes!’”
Wunderman, who had translated his from-the-gut intelligence into business acumen, was soon chartering private jets between his London offices and his Swiss production facilities to make the most of his workdays. And though he may have become the bête noir of the conservative Swiss watchmaking community, doors opened quickly for him in the best restaurants and hotels around the world, which had learned to offer extra-special service in exchange for Wunderman’s generous tips.
Wunderman would hold the Gucci watch license—the first and only watch license Gucci ever issued—for twenty-nine years. By the late 1990s, the Gucci watch business commanded sales of some $200 million a year and generated a royalty to the tune of some $30 million—providing key income to the Gucci company in its times of greatest need. Wunderman, meanwhile, had made his own fortune, establishing sumptuous homes in California, London, Paris, and New York and later buying his very own château in the south of France.
During the 1970s, one event dramatically changed Gucci’s ownership structure: Vasco died of lung cancer on May 31, 1974, at the age of sixty-seven. Under Italian inheritance law, his one-third stake in the company passed to his widow, Maria. They had no children. Aldo and Rodolfo proposed to pay her for the shares in order to keep the ownership of the company in the family, and to their relief, she agreed. Aldo and Rodolfo became the sole controlling shareholders of the Gucci empire, with 50 percent each—a shareholding ratio that would profoundly condition Gucci’s future. Rodolfo, still stubbornly pursuing his confrontation with Maurizio, refused to consider sharing company ownership with him, but Aldo felt it was time to bring his boys into the Gucci mother company. He split 10 percent of his shares between his three sons, giving 3.3 percent each to Giorgio, Paolo, and Roberto. He acted as a generous and fair father, not concerned that he had given away his power to command. Any one of his sons could now ally with Rodolfo to create a 53.3 percent majority at the family board meetings. At the same time, the two senior brothers created a series of offshore holding companies in which they deposited their Gucci shares. Panama-based Vanguard International Manufacturing became Aldo’s; Anglo American was Rodolfo’s.
While the watch business took off almost immediately, Gucci’s initial effort to start a perfume business on its own stumbled—the costs and the expertise required were beyond the reach of the family. Reluctant to give up, Aldo reconsolidated the venture as Gucci Parfums SpA in 1975, and issued Gucci’s first license to Mennen to develop and distribute the first Gucci fragrance. Ownership of the new company was divided equally among Aldo, Rodolfo, and Aldo’s three sons, each with 20 percent.
Aldo secretly felt, as his sons did, that Rodolfo’s 50 percent stake in Guccio Gucci was disproportionate to his contribution to the family business. He planned to steer more and more of the company profits into Gucci Parfums by developing a new business under its umbrella. To do so, Aldo retained the right to develop and distribute a new line of bags and accessories for sale in perfumeries as well as in Gucci stores. He also wanted to give a hand to his son Roberto, who had a family of six to maintain, and so named him president of Gucci Parfums. The new line was called the Gucci Accessories Collection, or GAC. Roberto Gucci oversaw the business from Florence, while Aldo supervised its development in New York. The new line consisted of cosmetic cases, tote bags, and similar items made out of a treated canvas printed with the double G monogram and trimmed with Gucci’s signature pigskin in brown or dark blue, with coordinating striped webbing. The collection was known either as GAC or as the “canvas” collection. Cheaper to produce than Gucci’s handcrafted leather bags and accessories, the GAC was designed to bring the Gucci name to a wider range of consumers. The idea was to sell the Gucci cosmetic cases and totes, among other products, in perfumeries and department stores alongside the Gucci fragrances.
An apparently well-intentioned and well-thought-out move that seemed in step with the times when introduced in 1979, the Gucci Accessories Collection ultimately turned into a destabilizing force in the business and family alike. Its launch represented the moment Gucci lost control over the “quality” factor in the business. Roberto inserted more and more products under the GAC umbrella—including notions such as lighters and pens—and the fragrance subsidiary soon started reaping higher profits than the mother company. At the time, most of the Gucci business was done through directly owned stores or franchises. In agreement with Aldo, a businesswoman named Maria Manetti Farrow, who had run Gucci’s franchise shops in Joseph Magnin, began a wholesale distribution operation for GAC directed at a wider range of retailers. Also of Florentine origin, Manetti Farrow had a flair for business and zeal for success and soon became well known in U.S. retail for her management of the GAC wholesale business. Already familiar with both production and retail operations, she took the GAC business from zero to $45 million wholesale in just a few years, buying the canvas bags directly from the mother company in Florence and selling them to department and specialty stores across the United States. She started with eighty points of sale. By the time Gucci wrested the business back from her in 1986, Maria Manetti Farrow was selling some 600,000 pieces a year, of which some 30,000 canvas duffel bags, best-sellers at $180 each, sold in more than 200 cities across the United States. She sold the GAC to more than three hundred accounts for retail sales of more than $100 million. By the end of the decade, Gucci’s canvas bags were sold in more than one thousand stores across the country.
“I was reaching the person who didn’t travel so much, people who were too intimidated to go into the shop,” she explained.
By the end of the 1980s, the GAC would be the product—massively distributed through department stores and cosmetic counters—that professional buyers associated with Gucci’s “drugstore image.”
The GAC also intensified another phenomenon—counterfeiting. It was much easier to copy the cheaper canvas bags than the painstakingly handcrafted leather bags; poor-quality fakes soon flooded the market. Wallets with GG initials and bags with red and green trims jammed the shops and markets of Florence and cheap accessories shops in leading U.S. cities. Aldo knew that fakes could destroy his business.
“Why should a woman see an expensive handbag she has just purchased copied all over three months later?” Aldo observed in New York magazine.
Gucci fought a long and determined legal battle against counterfeiting. In 1977 alone, Gucci started thirty-four lawsuits in six months, including a suit to halt the manufacture of Gucci toilet paper. The precedent for that had come several years earlier when Gucci brought suit against Federated Department Stores for inscribing loaves of bread with the words “Gucci Gucci Goo.” Aldo didn’t pursue the manufacturer of a canvas shopping bag inscribed “Goochy,” because he thought it was funny. But mock-Gucci shoes from Venezuela, Gucci T-shirts in Miami, and a pseudo Gucci store in Mexico City didn’t amuse him.
“Prominent bargain hunters,” Roberto Gucci told the New York Times in 1978, “including the wife of a former president of Mexico, have tried to have defective goods purchased from the so-called Gucci in Mexico City repa
ired at the New York store, only to be told they don’t have the real thing.”
In the first half of 1978 alone, Gucci’s legal efforts caused the confiscation of some two thousand handbags and the liquidation of fourteen Italian manufacturers of counterfeits. As the Guccis fought off threats to their name, they overlooked the greatest threat of all festering within their own ranks. Creative and eccentric Paolo, frustrated by his failure to secure a larger role within the company, had begun to butt heads with his uncle Rodolfo, to whom he reported, over the creative direction of the company, as well as its business strategies. Rodolfo, who saw himself as the creative leader of the business, didn’t welcome Paolo’s suggestions or criticisms. Although Aldo’s gift of 3.3 percent in the company placated Paolo for a while, he began using his shareholder status during the family board meetings to put his ideas about design, production, and marketing on the table.
Paolo, by then estranged from his wife and their two daughters, had found a new girlfriend, Jennifer Puddefoot, a plump, blond Englishwoman who wanted to be a singer. Jenny, who had a biting sense of humor, had also left her failed first marriage. The couple eloped to Haiti in 1978, where he became a resident in order to marry her because of the difficult, if not impossible, prospects of obtaining a divorce from Yvonne, whom he had married in the Roman Catholic church. Five years later, Paolo and Jenny had a daughter, Gemma.
After Vasco’s death in 1974, Paolo had taken over the supervision of the Scandicci factory outside Florence. From his glassed-in office he could see through to the order department, where large clocks on the walls showed what time it was in Gucci shops around the world. Through the other window he could see the purchasing staff who ordered textiles and precious skins: ostrich and crocodile skins from Indonesia and North Africa, boar and pigskin from Poland, cashmere from Scotland, and bolts of GG fabric from Toledo, Ohio, where the fabric was routinely sent to Firestone for a special waterproofing process. Across the hall, the design studio was a kaleidoscope of color wheels and textile samples pinned to the walls along with sketches of handbags, buckles, watches, table linens, and pieces of china. The idyllic view from Paolo’s window showed cabbage fields, rolling Tuscan countryside dotted with villas and cypress trees, and, in the distance, the dark rise and fall of the Apennine mountains.
Downstairs in the factory, sewing machines whirred and cutting machines thumped, all against the backdrop of buzzing fans used to aspirate the glue fumes. In one corner, artisans expertly passed the flames of gas torches over stiff lengths of bamboo, blackening and softening them into gently curving handles for Gucci’s famous bags. Buggies rolled back and forth filled with goods in various stages of production, some to be glued, others for stitching, cutting, or trimming or to have the hardware attached. With the exception of more modern leather cutting and pressing equipment, the artisans used the same techniques they had on Via delle Caldaie and Lungarno Guicciardini before that. After being inspected, each piece was slipped into a white flannel wrapper and prepared for shipping, as is still done today.
To the workers and salespeople who watched him dart back and forth from the store and offices in Via Tornabuoni to the factory in Scandicci, Paolo was an ebullient, likeable, and outlandish figure who became known for his outpouring of ideas and for dashing around in a pair of monogrammed Gucci slacks he had designed. His staff quickly learned that like his father, he could be alternately ecstatic and furious. After a successful presentation, he would turn to his design assistant and say, “They are applauding me, but I know you did it.” Yet if the same assistant contradicted him, he would throw a handful of sketches in her face and stalk out of the room.
Paolo’s absorbing, apparently serene life amid the rolling Tuscan hills merely masked the turbulence beneath the calm. He thought the company lacked vision and planning and disparaged his uncle Rodolfo for completely lacking organizational skills. His father, on the other hand, was a born leader, but poorly advised.
“My uncle was a good actor, but as a businessman he was rubbish,” Paolo once said. “He’d been smart enough to surround himself with good people, but he was no leader. My father, on the other hand, was exactly the reverse: a born leader but with rubbishy advisors.”
From Florence, he wrote daily letters of complaint to his uncle Rodolfo in Milan: Gucci should license and distribute cheaper products for the younger, more hip customer; Gucci should open a second string of stores, modeled after Giorgio’s successful shop in Rome. Beyond promoting his ideas—speedily rejected—about Gucci’s business development, Paolo used his position at family board meetings to ask uncomfortable questions about the company finances. Sales galloped around the world, the factories in Florence produced at full speed, Gucci employed hundreds of people worldwide, yet there never seemed to be any money in the company coffers. The year he and Jennifer married, Gucci Shops Inc. posted a record turnover of $48 million in the United States and no profit. How was it possible? Paolo wondered aloud. Furthermore, he felt the monthly stipend he and his brothers received was hardly enough to live on. Aldo kept his boys on tight salaries to keep them humble and in line. Every once in a while he would give them a bonus to keep them happy. “Let’s give the boys something to make them smile,” Aldo would say jovially, and slip something extra into their checks at the end of the month.
The lack of visible profits began to cause wider consternation within the family. Rodolfo blamed the poor result on Aldo’s hunger for expansion. The launch of Gucci Parfums had been expensive and, owning only 20 percent, Rodolfo saw only a fraction of the profits, 80 percent of which went to Aldo and his sons. In turn, Paolo and his brothers resented Rodolfo’s 50 percent stake in the mother company, which they felt had been built up by Aldo. As the written complaints from Paolo piled up on his desk in Milan, Rodolfo lost his patience.
One small episode in the late 1970s that Gucci employees hardly considered unusual reportedly triggered the beginning of major conflict. One day, after arriving at the store in Via Tornabuoni, Paolo had one of Rodolfo’s favorite handbags removed from the display window because he, Paolo, had not been consulted about its design. When Rodolfo learned of the change, he demanded to know who had dared to tamper with his window display. When he was told, he exploded. Shortly thereafter, at a press presentation Rodolfo publicly upbraided Paolo, who stalked out. At another meeting in the Florence design office, handbags flew, some sailing through the open window and landing on the lawn below. The episode became part of Gucci lore after the following morning the custodian found the bags outside on the ground upon opening the plant and called the police—thinking there had been a theft.
“This was business as usual,” recalled a former employee, referring to the flying bags. “That kind of thing happened all the time.”
But Paolo’s critical letters and insolent behavior had become too much for Rodolfo. He confronted his nephew angrily on the telephone, summoning him to his office in Milan. When Paolo was shown into Rodolfo’s office over the Via Monte Napoleone, Rodolfo wasted little time.
“I have had enough of your insolence!” he shouted. “I am finished with you. If you can’t make it in Italy, then you had better go work for your father in New York!”
Paolo counterattacked—demanding to see the company’s books. “I am a Gucci director and shareholder,” he shot back. “I have a right to know what is going on in this company! What is happening to all the millions of dollars that are pouring in here?”
Paolo called his father and claimed Rodolfo was obstructing his rights within the company, undercutting his role as design director, initiating things without consulting him. Aldo, ever the peacemaker, waved the problem aside and invited Paolo to come work for him in New York.
“You need a break, Paolo,” Aldo said benevolently on the other end of the telephone. “America is a wonderful place to live and work—you can take charge of accessories and design here. Jenny will like it too—perhaps she can advance her singing career.” Paolo and Jenny were thrilled. Aldo gave Paolo
and Jenny an apartment less than five minutes by foot from the Fifth Avenue store and made him vice president of marketing and managing director of Gucci Shops Inc. and Gucci Parfums of America, with an executive salary to go with the position. An ecstatic Paolo brimmed over with new ideas to exploit the seemingly unlimited potential of the U.S. marketplace. It was 1978.
In 1980, Aldo opened a glamorous new store across Fifty-fourth Street at 685 Fifth Avenue in the former Columbia Pictures Building, which he bought in 1977. Workmen hollowed out the first four floors of the sixteen-story building while maintaining elevators and other services for tenants on the floors above. It cost $1.8 million alone to install new steel and concrete girders in the opened space to keep the building supported. By the time it was finished, the store featured a spacious atrium in which the huge tapestry The Judgment of Paris, woven in 1583 for the Grand Duke Francesco de’ Medici, hung between a pair of glass-walled elevators. The first three floors, again designed by New York architects Weisberg and Castro, were finished in glass, travertine marble, and statuary bronze. The first floor showcased handbags and accessories, the second, men’s products, and the third, women’s. This store remained with essentially the same decor until it was closed for renovations under Gucci’s current management in 1999.
Aldo invested more than $12 million in the venture, including $6 million alone in an art collection that he hung on the fourth floor of the shop, the “Gucci Galleria,” designed by Giulio Savio of Rome. For years, marrying art with commerce, he had organized impromptu spaghetti dinners for friends after concerts by the Italian tenor Luciano Pavarotti, also a friend. Gradually these events evolved from informal gatherings to gala benefits, such as the 1978 first night of Don Pasquale with Beverly Sills. Gucci contributed to the evening by sponsoring a gala dinner and Gucci fashion show after the performance.
The House of Gucci Page 10