Hubert Burda Media

Because The Boss Says So

With a new Omotesando flagship, a wunderkid at its design helm and a slew of global strategies, there is a growing and glowing confidence at Hugo Boss

Because The Boss Says So

It is hard to miss Omotesando's latest chic kid on the architectural block. Nestled among Tod's, Armani and Coach along Jingumae is a fresh-faced building akin to an elegant hanakaga (Japanese folk basketry) vessel abstracted down to the most basic weave.
It is Japan's first Boss Store, the brainchild of architect Norihiko Dan, an environmental idealist known for his sweeping forms. “The latest generation of store design is much lighter,” says Dr Gerrit Ruetzel, Hugo Boss's Asia-Pacific president and CEO. “So we're playing a little bit more.”
Inside, over 336sq m of space (which includes a private VIP room on the third floor, graphite tinted mirrors, bronzed glass, LED strips, Magnolia wood panels and high gloss fittings) is dedicated solely to the house's menswear division, the Boss and Hugo lines. And they are not stopping here. Later this year, Hugo Boss will be opening in another prime district in Osaka.
In a symbolic way, the menswear-only flagship seems a clarion reminder that its core menswear business has now reached a pinnacle and is now concentrating on the next phase of growth.
On the eve of Jason Wu's Hugo Boss womenswear — a relatively new product category for the 90-year-old house — debut at New York Fashion Week this month, Ruetzel reveals its various strategies which only go to show how the Boss will continue to be, well...the boss.
This building, or specifically the land on which it sits, actually belongs to the Shu Uemura family. So what convinced them to give the tenancy to Hugo Boss?
The owner said she wanted to do something special with it and as one of the few prominent spaces left in Tokyo, she was not about to put a building on it and commercialise it. Competition was quite fierce, with about 20 other brands (which had yet to have a retail presence in Aoyama) vying for it.
If you look at the Norihiko Dan-designed building, it's very iconic and so doesn't necessarily fit every brand. The fact that we are perceived as a modern international brand was certainly one of the criteria. We've been in the Japanese market for more than 25 years and it's always been perceived as an important luxury market (probably more for accessories than apparel) with a long history. So it's fantastic because the building is the talk of the town and we have our logo on it, which is certainly free PR and something we gladly accept (laughs).
Pardon us for pointing this out, but rental must be astronomical.
We're on the stock exchange, not privately owned. We have investors who follow very closely how we spend their money, so we definitely have to be very creative about how we spend. We have no interest in opening museums!
We take it to mean that the house is doing superiorly well.
Consider this: In 2012, we finished with over €2.3 billion globally (90 percent from menswear, 10 percent womenswear). Ten percent as a share doesn't sound much but it is €230 million and in terms of the turnover, it is actually quite significant and more than what the annual reports of similar women's speciality brands (let's say Escada, or Valentino) are reporting.
A couple of years from now, Jason Wu will help us reach percentages way above this 10 percent. I think it's fair that he doesn't have to turn everything around completely but he certainly will be a strong contributor to the growth of the company.
Wu's appointment: Is getting a hip young name a strategy to breathe excitement into a new apparel category for Hugo Boss, ie womenswear?
You cannot force a creative talent into a contract if he or she doesn't want it. We were not the first ones to approach him. The only difference is that other companies asked him to drop his line to work exclusively for them, which is something that we weren't going to take away from him.
Even we were surprised about the positive reaction we were getting. The reaction was quite overwhelming to a degree that I was thinking: “Oh my gosh, the poor guy...how can he sleep at night with all this pressure and expectations?”
He is appointed to look after womenswear only but his title is artistic director, which indicates that it goes beyond designing to include shoes and accessories (ie one of his big ideas was that there'd be no great womens' collection without an "it" bag). He will also exercise influence on campaign shoots, store design, retail and marketing.
Global retail strategy seems to be the buzzword here, especially when it involves worldwide consolidation and directly controlled operations.
Part of the strategy in creating this Hugo Boss image means that we need more flagship and free-standing stores. Japan is a very department store-driven market; department stores are important but not as important as they were years ago. In department stores where you are limited to 100-200sq m with segmented spaces, it's very difficult to create a world to show what kind of lifestyle your brand stands for; to create an impression on your consumer.
As we, now more than ever, consider ourselves a lifestyle brand (and not as a menswear brand compared to 10, 20 years ago), it's very important to create this kind of symbiotic and comprehensive presentation (ie a better shopping experience and a full product assortment) with ample display space and so we are shifting away from department stores — by trimming down the number of points-of-sales and keeping only the good ones in terms of image, shopping experience and profitability — to more free-standing stores.
We feel your love here in Asia, but we hope it's not at the expense of your European and American markets.
As an international brand, we definitely strive to be balanced across all three regions. If you have any local crisis (eg last year, China has slowed down to two percent in GDP growth, as compared to six percent in Southeast Asia), at least you can compensate with strong sales in Europe, the US or the other Asian markets.
From the point of view of a global company, we always stress that putting all our eggs in one basket might not always be the right strategy. Yes, Europe takes the biggest share of our sales but the US is our strongest performing market in the world; number two is Germany and number three is Greater China. So within the top consumer regions, we have a market — there are not many brands that have that kind of balance.
We would like to grow over-proportionally in Asia-Pacific (as compared to the Americas and Europe) and so we're investing heavily across Asia (nine stores were opened in Indonesia last year) and not just in China. In the past 10 years, China stole the limelight from all the other markets, overshadowing everything such that it gave the impression that Asia only consists of one country.
If you're not strong in Asia, it will sooner or later impact your performance in the rest of the world.
Last year, you told the Hong Kong media that the Asian market will eventually make up as much as 20 percent of the Hugo Boss business by 2015. Besides using retail, what other strategies are you adopting to achieve this?
There are markets and distribution channels where we still rely on wholesale. Our duty-free business is growing at double-digits and will continue to do so. This is something where the wholesale part is much more important. So this year, we've opened eight stores in different airports across the Asia-Pacific region. We're also looking into opportunities in operating stores at airports ourselves. Having said that, as long as the partner is willing to invest in our brand, protect our brand image and equity is not sacrificing us at the expense of commercial targets and has mid- and long-term perspectives, we're happy to selectively grow and enter into new partnerships in the wholesale channel.
And finally, it is well-known by now that Hugo Boss caused a shake-up when it took back direct control of the Singapore stores from Kwang Sia. What motivated that decision?
It's really a matter of Singapore being of strategic importance for us. When we enter a market that we don't know or understand, it is all about finding the right franchise partner who understand the market's shopping behaviour and where to open stores. We choose people based on who we believe can grow the business and protect the brand. Sometimes you have a great market but you don't find the right operator. So there are a lot of things to consider. When we talk about a good franchise partner, we eventually look at partnerships for a very long time. We have been working with Kwang Sia for 25 years. We have no interest in engaging in a partner for only five years.
However, as a company, we're the leader in terms of directly operated stores. On a global level the share of retail and wholesale is split about 50-50. In Asia, we have close to 80 directly operated stores (retail only) and that number is going to increase. This is because we are going for consistency in creating this brand experience. It doesn't matter if you shop in Shanghai, London, or New York, it has to be consistent. In order to protect the significant investments we've made in China, Hong Kong and Japan, we have to make sure that the shopping experience is the same in different markets. Singapore is a travel hub in the region, which attracts a high number of Asian travellers. It is very important for us to make sure that the way the Chinese experience Hugo Boss is consistent with what they see in Shanghai or Hong Kong. In the case of Singapore, existing stores also need to be renovated and expanded (eg we want to have a bigger store in Marina Bay Sands to include womenswear). And that's when you ask: “Is it fair to ask my franchise partner to make such investments or should I do it myself?”, while knowing that at some point, the shift towards retail cannot be stopped.
It certainly had nothing to do with us not being happy with the partner. Our [former] partner in Singapore is still our [current] partner in Thailand — I think that speaks for itself.
For videos of the opening party, visit our
Instagram account @PrestigeSG, hashtagged #Prestige_HugoBoss_Tokyo
Boss Store Omotesando
5-1-3 Jingumae, Shibuya-ku, Tokyo