Growing the Group's own retail business
Business model aligned towards own retail business
Over the past few years, HUGO BOSS has comprehensively realigned its business model with the requirements of the Group's own retail business. The Group is thus responding to growing consumer demand for mono-brand sales formats and this sales channel's attractive profitability profile. In light of new openings, productivity gains and takeovers, the Group anticipates that the share of sales contributed by its own retail business will climb to at least 60% by 2015 (2013: 54%). A significantly higher share is expected in the long term.
Wholesale remains an important distribution channel
Based on its customer relationships in the premium and luxury apparel segment, which it has forged over decades, and its brand attractiveness, the Group is confident it can also offer its wholesale partners a convincing product offering, best-in-class service and a high level of supply reliability, and increase its market share in the process. However, the growth potential of the wholesale business is limited by the moderate growth reported by many business partners, a slow expansion of sales floor space, growing competition from mono-brand and online sales formats together with the market exit of many small owner-run stores, particularly in Western Europe and North America. As a consequence, the Group expects the share to total Group sales of this distribution channel to decline.
Sales by distribution channel (in %)
Improved business processes further enhance retail competence
Over the past few years, HUGO BOSS has trimmed and increased the flexibility of critical business processes to enable it to respond faster to market developments and the changing needs of its customers. Drawing on the experience gained in the interim, the measures taken and, in turn, the Company's retail competences are being optimized further. Initiatives to emphasize the spring and fall collections as part of the four-collection cycle cater specifically to the needs of the American and Asian markets. Earlier deliveries also help improve the availability of new collections at the start of the season and, in turn, the full-price sell-through rate. In addition, brand and creative management are to receive support in the development of the next collection through better analyses of the results of the reference season. Finally, follow-up measures were taken to couple up production and sourcing activities more closely to actual demand.
Close integration of online and offline channels
With the expansion of its online retail activities, HUGO BOSS is responding to the increasing acceptance of this sales channel and is taking the opportunity to reach out to new buyer strata. Apart from opening new stores in markets that had not been tapped online so far, the focus is on optimizing existing stores as regards user-friendliness, product range and presentation as well as services. Moreover, greater attention is being paid to the increased integration of online activities, both as regards digital brand communication as well as the combination of bricks-and-mortar and mobile retail, to offer consumers a seamless, integrated brand and shopping experience. This allows the Group to continually improve its ability to fulfill the expectations of consumers with a preference for multi-channel solutions.
Cross-channel customer relationship management
In a closely related move, the Group has strengthened its efforts in customer relationship management across all retail channels. HUGO BOSS increasingly engages with its existing and new customers in more personal ways through mailings and email newsletters about relevant and interesting information and special offers in order to provide them an attractive brand experience. For instance, consumers have the option of registering in HUGO BOSS' own stores and receive invitations to exclusive events for the unveiling of collections or special store events.
Expanding and optimizing the store network
The Group sees good opportunities for increasing its global market penetration through the opening of about 50 new stores and shop-in-shops each year. In addition to opening new stores, the Group considers the takeover of stores operated by franchise partners, depending on the attractiveness and growth prospects of each market in question. Independent management of shop-in-shops previously run by wholesale partners is another means of enhancing the attractiveness of the brand presentation and tapping additional sales and earnings potential. The Group sees levers for significantly increasing the sales productivity of the stores it takes over, through autonomous selection of the assortment, by using the Group's own sales personnel with special training and by taking charge of replenishment. In addition, the Group invests in the renovation of existing stores to increase the consistency of global brand image and store productivity.