Case Study 2:

Hugo Boss

Bryan KaetzLXFM 745: Global Distribution

Professor Rabanal12 April 2020

Contents

GENERAL OVERVIEW

SECURED DISTRIBUTION

CHANNEL CONFLICTS

COMPANY-OWNED SUCCESS

REFERENCES

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6.

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OVERVIEW • Hugo Boss was founded in 1924, but truly began tosee success in the 1950s when the company started itsown first-series production under the leadership ofHugo Ferdinand Boss’ son-in-law, Eugen Holy.

• Hugo Boss utilizes a multi-brand strategy that theyhave seen success with. These brands include:• HUGO BOSS• BOSS Orange• BOSS Green• HUGO

• In 2014, Hugo Boss generated an annual sales volumeof 2.57 billion EUR, experiencing an increase of 6%,with an EBIT of 448.7 million EUR.

• The brand was valued at 4.1 billion USD, ranking 97th

most valuable brand.• The company has increasingly gained control of their

overall vertical distribution, taking over their previousfranchises and controlling their own stores.

HUGO BOSS inspires

people toward success.- HUGO BOSS mission statement

“

”

Reasons to Implement Secured

Distribution ActivitiesEXPERIENCE

SERVICE

CONTROL

DECISIONS

PRODUCT

MARKETING

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2.

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4.

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6.

1. EXPERIENCE

• Brands may start out expanding into other territories slowly by partnering with other brands or franchising out their business model and stores.

• As these brands gain experienceand develop, they may want to regain control of their entire image by repurchasing franchises or otherwise establishing a standardized brand personality to express across its entire retail range.

• The Hugo Boss Group has extensive experience as a long-establishedmanufacturer with various distribution activities.

• The brand has owned its own facilities since 1924, having expanded to 130 countries with over 1000 retail locations.

• They also have five factories located in Germany, Turkey, Poland, Italy, and the US.

• These factors all allow the company to ”protect crucial expertise and provide consistent development for subsequent industrial manufacturing.”

2. TO PROVIDE FIRST-CLASS RETAIL EXPERIENCE

• Hugo Boss slowly-but-surely regained control over a majority of their retaillocations. As of 2014, they controlled 57% of their business from sales, while wholesale & licenses account for 43% of their business.

• There were over 2000 retail locations, including 531 shop-in-shop stores and 388 directly-owned stores (or DOS). The group also operated online in 11 countries.

• The ability for Hugo Boss to train sales associates and control the overall environment in their stores led to direct increases in sales.

• As previously mentioned, brands may start out by franchising their stores or otherwise allowing others to control the experiences with their brand in various locations.

• A brand may decide that theywant more control over the experience that a customer receives when entering one of its stores – or even online and through other ECommerce channels.

3. TO MAINTAIN CONTROL OVER DISTRIBUTION CHANNELS

• Hugo Boss slowly-but-surely regained control over a majority of their retaillocations. As of 2014, they controlled 57% of their business from sales, while wholesale & licenses account for 43% of their business.

• There were over 2000 retail locations, including 531 shop-in-shop stores and 388 directly-owned stores (or DOS). The group also operated online in 11 countries.

• The ability for Hugo Boss to train sales associates and control the overall environment in their stores led to direct increases in sales.

• As previously mentioned, brands may start out by franchising their stores or otherwise allowing others to control the experiences with their brand in various locations.

• A brand may decide that theywant more control over the experience that a customer receives when entering one of its stores – or even online and through other ECommerce channels.

4. TO MAKE FLEXIBLE DECISIONS

• Hugo Boss desired to have decision-making power in store design and concept.

• With stores that all had the same visuallook and design, the brand becomes thegreatest appeal to a customer.

• Store design is of great importance to acustomer’s perception of the brand.Everything from mannequins, to clothingracks, and visual displays must speak to the same brand tone and voice, lest the brand itself become weakened.

• Directly-run retail stores allow a company to maintain greater control of their decision-making, especially in regard to store layout and design.

• Nonbranded or franchised stores may not have the funding and similar vision that a group may have.

• Lack of funding would result insubpar displays, fixtures, and many other potential issues.

• Lack of similar vision creates afragmented visual brand image.

5. TO DETERMINE PRODUCT RANGE

• By purchasing franchises back, Hugo Boss is able to display their entire collections in the way they want to display them.

• This also allows for an entire product range to be available to the customers in every location. Or specific products that sell better depending on the global strategy.

• Also, with direct customer feedback, Hugo Boss can then focus its distribution systems and reduce costs in logistics for products that may not sell at a specific location anyway.

• This also provides production focuses as the brand will know directly what customers want.

• At franchised locations, the ownerof the franchise (depending upon agreement with the franchisor) may have great control over the product range that comes into their store – without displaying a brand’s full collection or seasonal stories.

• Customer feedback on products is also minimal and has to go through the franchisee back to the brand.

6. MARKETING

• Hugo Boss has a greater aptitude for their overall brand image via marketing efforts.

• Where a franchisee may be limited in marketing budget, the Hugo Boss group would have a much larger collective budget in order to create wider strategies to expand upon their brand perception in specific markets.

• In-store marketing and out-of-store marketing are of great importance to customer acquisition and retention.

• Marketing budgets within a large corporate group are also much bigger and can be utilized to the location’s needs.

Potential Channel Conflicts for a

Manufacturer Adding a New

ONE

TWO

THREE

Company-Owned Retail Channel

1. CHANNEL

CONFLICT

• CONFLICT: With Hugo Boss taking back control of franchises and other locations, general non-branded and wholesale sales experienced a larger decline.

• RESOLUTION: While wholesale revenue may decrease, Hugo Boss will continue toexperience gains from maintaining tight control over distribution and brand perception.

2. CHANNEL

CONFLICT

• CONFLICT: Expenses may go increase due to expansion and marketing needs.

• RESOLUTION: Expenses for distribution and taking over these locations will increase. Despite this, Hugo Boss can focus on increasing potential locations for factories and distribution centers – as they did when they opened their factory in the US for distribution in that country.

3. CHANNEL

CONFLICT

• CONFLICT: Challenges in new markets where Hugo Boss does not have experience.

• RESOLUTION: Continued focus on their strategy to “maximize operational strengths to retain control of all business-critical proceedings and ensure high performance processes to deliver excellent quality products” and capitalize on their increased brand image and perception.

Contribution of Hugo Boss’ Company-Owned Retail Activities

to Long-Term Success of the Company

QUANTITATIVE

QUALITATIVE

QUANTITATIVE

• HUGO BOSS EXPERIENCED PROVEN SALES INCREASES, INCLUDING THE FOLLOWING:

• Sales at Hog Boss’ DOSs increased by 12% to 976.4 million EUR

• These locations contributed 38% of sales to the group

• Online retail business increased by 10% to 67.8 million EUR

• Secured distribution contributes a 57% share of sales to the company’s total revenue.

QUALITATIVE

• FACTORS THAT CONTRIBUTE TO LONG-TERM SUCCESS FROM COMPANY-OWNED ACTIVITIES:

• Globally-consistent brand image• Exclusive setting with a wide

variety of products• Standard store designs and well-

trained personnel• Extensive brand perception• Reinforced brand equity

REFERENCES • “HUGO BOSS - FW 15 - INEZ AND VINOODH.” GE Projects, GE Projects, Inc., 2020, www.ge-projects.com/hugo-boss-fw-15-.

• “HUGO BOSS Group: Home.” HUGO BOSS Group: Home, Hugo Boss, 2020, group.hugoboss.com/.

• Zentes, Joachim, Dirk Morschett, and Hanna Schram-Klein, “Case Study: HUGO BOSS,” Strategic Retail Management: Text and International Cases (Springer Gabler, Germany: 2017): 128-137.