GERMANY: German Industries - Pushing The Fashion Appeal

The wholesale buyers for Saks Fifth Avenue and Neimann Marcus, the two upmarket New York department stores, are in for a big surprise.

The next time they want to visit the design centre of the new Boss Woman collection, they will not be jetting into Milan. Instead, they will be taking the local train to the sleepy little town of Metzingen, in the hills of Germany's southern Swabian Alps.

It could not be more ironic. When Hugo Boss, Germany's upmarket fashion company, decided to set up an independent women's line in 1999, it chose the Italian city as its location for its haute couture appeal and proximity to international fashion shows.

Two disastrous years later, and after losing tens of millions of euros, the Boss management has pulled back the entire women's collection to Metzingen, where it is now re-integrating the division into headquarters, including its design centre. If everything goes well, Boss Woman should be writing black numbers in 2004.

"It was not that we wanted to hide the Germany factor. It was rather that we wanted to profit from the glamour in Milan," says Bruno Salzer, the Hugo Boss chief executive-designate, somewhat sheepishly.

The journey back home for Hugo Boss's ailing women's line is a small victory for a German industry in retreat. Hugo Boss is the last big icon of Germany's once booming textile and clothing industry.

The rag trade was, until after the second world war, Germany's largest industry, but it has shrunk significantly in recent decades. Between 1991 and 2001, jobs in the German textile and clothing industry dwindled from about 500,000 to 175,000 now. Hardly a day goes by without a German clothing manufacturer going bankrupt.

"With a few exceptions, the German clothing industry lies in shambles," says Peter Virsik at Roland Berger, the German consultancy. He says only selected German clothing manufacturers have survived the onslaught from cheaper producers in south-east Asia, eastern Europe and, most recently, northern Africa.

"The secret of the survivors lies in their success in establishing a real lifestyle brand, defining a very particular customer group and marketing it through their own shops," says Mr Virsik.

This reads exactly like the story of Hugo Boss. Founded in 1923 by Hugo Boss in one of the centres of Germany's textile industry in the Swabian Alps, the company initially produced workwear and uniforms - with the Nazi elite among its customers.

It was only when Hugo Boss's grandchildren, Uwe and Jochen Holy, entered the business that Boss started focusing on men's suits and marketed itself as a brand. In 1985, the company went public and Marzotto, an Italian fashion group, now holds a 51 per cent stake in the company.

Success came fast. But it was only in recent years that Boss started to expand geographically and add new product lines. "If you want to sell fashion on an international level, you need a minimum size," says Mr Salzer. He likes to see Boss grouped alongside LVMH, Gucci and Richemont, although Boss is smaller and less luxury-oriented.

Mr Salzer will take over from Werner Baldessarini, the company's chief designer-turned-chief executive, later this month. It was following a period of stagnation between 1989 and 1995, that Mr Salzer became a board member responsible for marketing and distribution. Looking back to 1995, he calls Boss a "bit sleepy".

Since then, he has relentlessly pushed for size and more than doubled its sales to Euros 1.1bn last year.

Now, Mr Salzer wants to harvest the fruit of the past years. The globetrotter - he has just returned from a new shop opening trip in Tokyo's trendy Aoyama district before jetting on to New York - eventually wants to add new luxury brands to Boss's portfolio. He says he wants to transfer the Boss brand and its core competency in business suits to as many other areas as possible. (Boss sells one of every six men's suits worldwide and one in every two suits in Russia.)

But first, he must ensure that Boss becomes a significant player in women's clothing, a market that has twice the potential of menswear. Second, he wants to move more into leisure wear, which has higher growth rates. Third, he wants to add more Boss accessories - there are already Boss sunglasses, underwear, shoes and fragrances. Finally, he wants to boost the trendier Hugo and the more upmarket Baldessarini brands.

Apart from diversifying the product mix, Mr Salzer is also looking to becoming more international, focusing on growth in the US and Asia. He is particularly excited about China, where he plans to open seven outlets this year.

Mr Salzer, who sold skin care products and shampoos at Beierersdorf and Schwarzkopf, two German consumer products makers, before joining Boss, speaks glowingly about Boss's brand image. "Selling a Boss suit is much like selling Coca-Cola - you are selling pure emotion."

With that kind of self-assuredness, Mr Salzer may even be proud to welcome wholesale buyers for Boss Woman in Metzingen. "The advantage of Metzingen is that you never think that you are actually at the centre of the universe. Instead, you remain humble and you are forced to go to the fashion hot spots to sell your products," he says.

May 17, 2002

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Added: May 17, 2002
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