Hugo Boss boss sees digital fashion design on trend as online sales top €100 million

Yesterday’s look at the progress made in the luxury retail market by e-commerce platform Farfetch included a telling comment from CEO José Neves:

Luxury still has very low online penetration, 10% as of the end of 2018…Over the next 10 years, online penetration of the $500 billion industry is expected to grow from 10% to 25%.

The importance of online to luxury brands is on the rise - despite a few of the more Luddite retailers trying to hold the line. But for more savvy firms there’s a realisation that an omni-channel future is clearly the direction of travel.

It’s a message that’s been taken on board at fashion house Hugo Boss, where CEO Mark Langer two years ago admitted that progress on digital had been too slow at that point and pledged to up the game. Today, while bricks-and-mortar stores remain “our most important distribution channel”, he can point to considerable progress, with digital sales in 2018 up 41% year-on-year to top €100 million, arguing:

This is proof positive that we successfully implemented improvements to the hugoboss.com website and that customers are responding very well to our online presence with its consistent alignment towards BOSS and HUGO.

There are plenty of examples of digital transformation across the company he adds:

We increasingly develop and distribute our collections using digital tools. This enables us to respond faster to changing market trends. This is particularly true for HUGO, our digital speedboat, where product development for certain parts of the collection is fully digitized already today.

For distribution for wholesalers, we rely more and more on the use of digital showrooms, which have been in operation for the HUGO brand since the end of 2017. Digital showrooms allow our wholesale customers to browse the entire HUGO collection and enable orders to be placed directly.

And in our physical stores, we provide customers with a high-quality and seamless shopping experience thanks to a large number of digital services across all our distribution channels. There's no doubt, the digitization of our business model, from beginning to end, is in full swing.

Digital design

The HUGO digital design angle is an interesting one where, according to Langer, it’s now possible to bring to market “a total look that is fully digital developed” and with considerably shorter lead times from concept to delivery. In the fast-moving fickle world of fashion, knocking five months off of the full production cycle is a big advantage in terms of keeping up with changing customer trends. Langer says that HUGO is becoming well-practiced here:

Now we see a fourth generation of digitally developed collection with HUGO. We have seen now for the first time, and I think it's animportant milestone, where a digitally developed collection has seen a slight outperformance in productivity, sell-through rates and global markdown than the traditional one. I think that's still early. We are just starting to grow the overall digital/develop part of our collection. But as this proves to be a structural advantage, I think it's a very strong sign that this is not only a far more cost efficient, but a superior way to operate in our industry.

He adds:

After successfully introducing the digital collection in 2018, this year will see a further extension of the digitally developed assortment. By year-end, we are targeting up to 10% of HUGO’s total collection to be developed digitally. This compares to 1% in 2018 and is consequently a major milestone towards commercial reality.

Front of house, there are also more digitally-focused initiatives to engage with the customer, says Langer:

It is important that we continue to listen carefully to what our customers have to say, be it through our physical stores, our own website, or the various digital channels. In doing so, we will create the best products in our industry, maximize customer satisfaction, and drive brand desirability.

Hugo Boss has also tapped into third party online marketplaces as a route to market, a choice from which many luxury brands instinctively recoil. But Hugo Boss has scaled up its partnership deal with Zalando, says Langer, and there's more to come:

While, for the first time, we added BOSS businesswear to the product range available through Zalando, importantly, from now on we will be offering this collection via the partner program platform by ourselves, from product presentation to pricing to fulfilment. I am convinced that we will be able to serve the needs of our customers even better in the future with this sort of cooperation.

Consequently, we have set ourselves the goal of entering into further cooperations in the online segment in the coming years, starting in 2019, with a strong focus on Asia/Pacific and Europe… In addition to our own website, in 2019 we will continue to expand the online concession business by adding new, leading online platforms to it. Some of them will be conversions from former wholesale models, some of them will be new partnerships we are about to enter.

Inevitably a lot of the ongoing digital transformation work is a work-in-progress. Langer explains:

Clearly, we are testing or we have developed for us some of the digital capabilities, be it a showroom, be it a fully digital development process with HUGO, but this is spreading quickly throughout the operation. So at times, people working on these efforts that are working across multiple brand lines….The teams, the designers, the technical developers have been also moved to a new digital tools…But this is now already a technique that is being spread out through the organization.

For 2019, there are some clear priorities ahead, including rolling out hugoboss.com to more international markets, with Ireland and Scandinavia first up. Langer adds:

Our initiatives will once again focus on driving personalization and speed to ultimately enhance the desirability of both BOSS and HUGO. This will be our guiding principle, no matter whether we define our action plan from a brand, distribution, or operations perspective.

My take

There’s definite progress being made, but still a long way to go. For example, even today hugoboss.com only operates in 12 countries. But the pragmatism articulated by Langer two years ago is being translated into practical reality which is a positive.