What’s happened to high-end fashion retailer Hugo Boss over the past few months makes for what is by now familiar pandemic reading. With physical stores shuttered due to COVID-19, retail sales fell by 58% year-on-year in its most recent quarter, but at the same time online sales shot up - 74% in the case of Hugo Boss - and the past few months have seen the strongest e-commerce performance for nearly 3 years.
That caused Chief Financial Officer Yves Müller to comment:
Digitization has proven to be more important than ever before as COVID-19 has further accelerated the ongoing consumer shift from offline to online. The digital transformation of our business model, together with a strong push of our own online business, has been an integral part of our strategy for several years. As the industry continues to face an unprecedented situation and consumer behavior changes towards online, we will further accelerate our digital push in the years to come to ultimately tap the full potential of digitization.
Remarkably, the strong online growth was not only driven by returning customers, but also by a strong increase in first-time customers...While this confirms the increasing shift in consumer behavior from offline to online, it is particularly encouraging that Millennials belong to the fastest-growing customer group, clearly indicating that our web offerings resonate particularly well with younger customers.
So that’s the good(ish) news. Less upbeat is the issue of what it is that Hugo Boss actually sells and the harsh reality that for a locked-in-the-house or working from home consumer, high end formalwear, the firm’s core business DNA, isn’t in high demand. There needs then to be a shift towards casual wear without losing the essential ’Hugo Boss-ness’ of the retailer’s offerings. Or as Müller pitches it:
Casual wear has successfully proven its ability to be more resilient in the current environment as it directly captures the trend towards a more relaxed clothing style, and many consumers’ desire to dress in the sporty style without compromising on value or quality. Now, casualization is a phenomenon that has been around for almost a decade and enjoyed strong momentum for many years…We expect COVID-19 to accelerate the trend towards a more casual lifestyle even further. We will continue to focus relentlessly on driving the further casualization of our business model across all types of wearing occasions.
That could be easier said than done, but it’s a challenge that Timo Ebert, Head of Brand Strategy and CX at the firm, highlighted in a session at Qualtrics’ Work Different event this week:
We had to change our organization and make it ready for the pandemic situation. We wanted to change quite a lot, but we had one thing in our mind - we said it needs to be guaranteed that our customers and our employees feel safe. So what we did is we closed almost all of our stores globally. We sent home our employees and we enabled them to work from home. We equipped them with all the technical stuff they needed. We changed the way employees communicate with leadership. They do that now more frequently, almost on a daily basis, which helps everyone to build that trust that you need to work from home and to also change the way of the culture and to enable people to be more flexible on their jobs.
What we also did was we really focused our project portfolio. For example, we said, ‘Hey, during these times, no-one is wearing a suit, so we should come up with our casual offer and bring it to the top of our online store to make it easier for people to browse through our website and find what they need'. We changed how we promote these products and said, ‘Hey, this is the right look for working from home, this is how you look cool when you're at home and have to do your job’.
We said we want to produce less suits in these days because no-one is demanding suits, no-one is wearing them. We changed our production lines to produce face masks to protect our employees...Now this is actually also part of our business. We say, ‘OK, let's not only make some face masks for protection, but this could also be a fashion accessory for the future’. And it's part of our core business right now.
It’s all part of a wider process of adaptation to the crisis climate that COVID-19 has brought worldwide. According to Ebert there’s a clear need here:
We want to adapt our customer experience to the current situation. This means for us that during these challenging times we have to keep our business running as well as possible. We’ve said we have to [change] the way we communicate with our customers [given] the circumstances we have now. We need to change that in a more personal, more emotional and more sensitive way.
So we said we cannot spread the message and say, ‘Hey, look at our new collection, this is what you can buy!’. Right now this would have been nonsense. So we stopped everything that had been planned on social media and every other communication channel. Also our CEO sent out a personal note to all our customers. This is something actually that was highly appreciated by customers, because it was completely new for us that our CEO gets into direct interaction with our customers. He said that he wanted to thank all these customers for their loyalty, that we are doing everything to make them feel safe and that we hope that they get through the situation in the best way they can.
The firm also turned to its brand ambassadors on social media to make what Ebert calls “make more emotional, more engaging statements about how they get through the situation”, a practice that has resulted in some of the highest engagement rates the retailer has seen: .
So, for example, we use Anthony Joshua, the world boxing champion, to really present what his day looks like during the pandemic situation and to engage all the customers and tell them they can do it and that we are there for them. Then we produced a huge thank you video with employees from different hierarchies, different departments, to say thank you to not only customers, but to everyone who kept the country running, to all the public healthcare people, to all nurses, all doctors and so on. We produced that video which is running now in our stores, which has been running in public places, and so on and so on.
Overall, it’s been a shift in first principles of how to engage with the customer base:
We changed the way we communicate with our customers to a more personal, more emotional, more sensitive way, according to the current situation. It’s paid off in terms of people really said, ‘This is great stuff what you're doing, we feel better now’. And it also paid off in a business sense because we see that these people are really now really coming back to the stores and are loyal to the brand.
The critical thing now, as those stores are gradually re-opening (with caution) around the world, is to hang on to the learnings from the last few months. As Ebert puts it:
We were forced to adapt to the situation and we did it in a way where we are really proud of ourselves. I think we need to protect that feeling. We need to save that for future times, that we can do [things] and we can change quicker than we ever expected to. I really believe that this purpose-led brand communication is something which is also in the future [going to be] very, very important. Do not always put your products in the center of your communication, but really tell the people what you are there for and how you would make this world a better place.