Clothing chain Esprit aims to regain role as a retail fashion leader

Clothing chain is looking to regain leading role in the retail fashion market by reinvesting in its brand and rethinking the way it does business

PUBLISHED : Monday, 10 September, 2012, 12:00am
UPDATED : Monday, 10 September, 2012, 3:32am

When Esprit last month announced it had hired a senior executive from rival Inditex - the company behind Zara - many took it as a sign the fashion retailer wanted to emulate its successful Spanish competitor as a way of revitalising its own brand.

But new chief executive Jose Manuel Martinez Gutierrez has other ambitions.

"His mission is not to make Esprit a Zara," said Ronald Van der Vis, the outgoing chief executive of Esprit, in an interview with the Post at the company's offices in Dusseldorf, Germany.

Van der Vis has been the mastermind behind Esprit's HK$18 billion transformation plan launched in 2010 to restore the brand image and save its plunging market share. The Dutchman resigned for family reasons in mid-June.

Van der Vis said the company has positioned Esprit in a different market segment from rivals like Zara, H&M and Mango. The "Esprit woman", as he describes his typical customer, should be in their 30s and care more about the quality and value of a product than its price. Most other "fast fashion" retailers are more price-driven and target mainly youngsters aged from 15 to 20, he said.

Another major difference between Esprit and Zara is their respective business models. Esprit now has around half of its sales revenue coming from wholesale, while Zara adopts a vertical business and takes control of the sales of all its products, he said.

Despite the differences, there are always elements Esprit can learn from Zara, Van der Vis said. One thing it has learned is how to deliver products faster to the market.

For part of its collections since June, Esprit has shortened the time needed to delivering new product lines to stores from the original six months to a period of eight to 12 weeks. The key to achieving this is to cancel the lead time for wholesalers to make selections and orders but ask them to reserve part of their budget for what the clothier will offer them.

Founded in San Francisco in 1968, Esprit was once the fastest-growing fashion brand in the world. Its Asian distribution business was listed in Hong Kong in 1993, with its share price hitting a record high of HK$133 in October 2007.

However, Esprit was slow to react to fashion trends and market changes. In recent years, the brand has been losing appeal to consumers amid increasingly stiff competition. Adding to the pressure is the deteriorating European market, which accounts for 80 per cent of its total revenue.

Esprit recorded a 98 per cent slump in profit for 2010/2011, the third consecutive year of decline. Its stock fell to less than HK$8 at the lowest point as investors lost confidence in the company.

"After years of fast expansion, we forgot to invest in our brand, our products and stores," Van der Vis said. "We became a safe brand, and even a slightly boring brand."

To bring the shine back to the brand, Esprit launched a massive transformation plan, recruited new managers, enhanced its design resources, upgraded the image of its shops, and streamlined supply and distribution chains.

It surveyed 10,000 customers globally, finding that people wanted products that were more feminine and fashionable. "For Asian consumers, our products became too 'German', which is a little bit heavy. They like to be a little bit more elegant, more light and sophisticated," he said.

To fine tune its products, Esprit established a trend division in London and a design centre for China. The first collections from these new initiatives have already hit the shop floor.

Van der Vis said the latest collections by the trend division were well received by wholesalers and consumers. And the sale-through rate, which measures how fast the products are sold out, has doubled the rest of the brand's collections.

The China design centre, located in Hong Kong, also had its first batch of collections well received by the market.

Shop refurbishment is another key measure to sharpen the brand image. So far, the brand has opened new concept "Lighthouse" stores in Cologne and Dusseldorf as well as Antwerp. The styles and key elements of these concept stores have been applied to stores in Mong Kok as well as its Beijing outlet to be opened next month.

Esprit intends to look for small spaces between 800 and 1,000 square metres to create a more boutique-like environment.

"The trend has changed. People are more willing to stay in a boutique-style shop, where they can relax and spend more time," Van der Vis added. As part of the transformation, all stores will be refurbished in four to five years.