Hugo Boss plans retail drive

6 December 2012

BERLIN: Hugo Boss, the German luxury group, is seeking to expand its branded retail network across the globe, a move it believes will deliver varied benefits from better consumer insights to higher margins.

The company opened 169 retail sites in net terms during the first nine months of this year, including 121 "shop-in-shops" and 57 directly operated freestanding stores, taking its total to 791.

"The ability to see every day what consumers feel about the brand has helped us to become much more accomplished and much more to the point about developing and delivering collections," Claus-Dietrich Lahrs, CEO of Hugo Boss, told the Financial Times.

By contrast, he added, the firm's customers were previously just a "greyish mass of people who eventually would buy a product in a retail outlet authorised by us."

Alongside an absence of suitably "qualified" wholesalers, Lahrs suggested the challenging trading climate in Europe and need to tap growing markets like China had driven this approach.

"The increased control of what happens with our brand – be it in free-standing stores or former wholesale or franchise situations – is our answer to the current situation," he said.

In an indication of this strategy's success, a 45.4% share of the organisation's value sales were drawn from its retail business between January and September 2012, versus 40.4% a year earlier.

Overall, the company's sales hit €2bn in 2011, with the goal of boosting this figure to €3bn by 2015. The firm anticipates that retail will yield at least 55% of returns by this date, and possibly more.

"I would not be surprised if we would move in that direction a little faster," said Lahrs. "There will certainly be a moment when we will do 75% in own retail and 25% in wholesale."

"Wherever we get the opportunity ….. we tend to improve the situation in terms of sales per square metre. This is something which will gain momentum."

Looking at the international picture, India will be one key target market, building on a base of ten stores already trading in the country. China is also a main area of focus, even as economic growth slows.

"We will stick to what we have put in place and our decision to develop China with our own retail stores, with bigger and better-equipped stores. We will stick to our plan to invest heavily," said Lahrs. "Our willingness and readiness to invest in greater China and Asia as a whole is unchanged."

Other aspects of the "Drive" rejuvenation scheme launched by Lahrs upon taking up his post four years ago have been moving from two to four collections a year, cutting lead times and constructing a highly efficient automated warehouse, costing €100m.

Data sourced from Financial Times; additional content by Warc staff