Powering up the "digital speedboat" at Hugo Boss

Getting digital transformation right in the retail sector is inevitably a challenge for certain ‘traditional’ brands and perhaps no more so than at the high end of the market, as we’ve noted in the past.

Sometimes it’s a case of having to accept that you’re not going to get it right all at once, which has been the case at fashion retailer Hugo Boss, where the launch of a new website in 2016 failed to deliver the goods in terms of sales and performance. CEO Mark Langer recalls:

The re-launch had clearly elevated brand experience through a better product presentation and the improved linking of content in commerce. However, the design and navigation changes negatively affected the site's usability. In addition, the merchandizing was not in sync with the needs of our online consumer.

But the firm acknowledges that it needs an omni-channel foundation for growth and as such has continued to invest in order to get it right. Last year it spent over €30 million on digitization programs, particularly around omni-channel integration and the digitization of the group's own retail activity.

This ranges from e-commerce functionality through to introducing digitally-revamped offline stores. It’s also been about getting the website in better shape, says Langer:

We brought together the relevant business and IT functions with a brief to solve these [website] issues, a cross-functional approach that we have institutionalized in the meantime. Just mentioning a few measures out of a long list, we shortened the page loading times, changed the size layout and navigation to make it more intuitive for users and better balance the mix of our offering. As a result, online sales return to growth in the second quarter increased by more than 40% in the final three months of 2017.

Digital proficiency is particularly important around the firm’s HUGO brand, which is more fashion-trend focused and needs to be more responsive to changing customer needs and desires. Langer describes it as the firm’s “digital speedboat”, explaining:

Customer research has clearly documented the far greater online affinity of the HUGO customer. So it's only logically to make the brand the group's digital speedboat, in terms of product development and also distribution. A strong digital platform that supplements the brand's physical touch-points will ensure that we cause a deep understanding of our customers and to act with them on equal footing.

HUGO

Langer adds that the HUGO brand serves an important purpose that goes beyond its commercial and financial contribution:

[HUGO] is doing pioneer work in fields where we have not been active before. In doing so, it is benefiting from its relatively small scale in organizational independence of the far larger BOSS brand, which allows greater flexibility and speed. We are using agile management techniques built on the principles of co-creation, iteration, distribution of - distributed authority as part of the HUGO transformation. Every success achieved with the application will have increased the openness of the rest of the organization to embrace these changes.

One such example in collection development is the first digitally-designed HUGO capsule collection, consisting of 29 styles across various product groups and casual wear. Langer says:

HUGO started to make use of virtual prototyping some seasons ago. We intend to make such capsule collection a regular part of the HUGO offering. Thanks to much shorter lead-times compared to regular collection development process, they ensure constant-units, the key competitive advantage in contemporary fashion.

It's only logical to sell such a collection primarily online. This is even true for the HUGO wholesale business, where we are rolling out the digital showroom launch in Metzingen in 2017 across Europe. In a few weeks from now, wholesale partners in London and Paris will be able to order the new HUGO collection fully digital too.

For the end of 2018 we will then make the first steps to adapt the device also to the needs of the BOSS brand.

The firm’s digital plans may result in discontinuation of products on multi-brand third party sites, although the likes of HUGO have very successful presence on sites such as ASOS. It’s all about determining how best to maintain or attract customer loyalty and where to build new relationships, says Langer:

There is the customer who in the physical world who has found BOSS as her or his prime source for all wearing occasions. These customers will probably also in the e-commerce world use our enhanced and improved e-commerce performance. So that's one customer group.

The ones who are not as brand loyal yet, we need to introduce them to the superior offer that we think we can offer both on HUGO and BOSS via multi-brand sites. These need to be the right ones in terms of content that we provide. Many of these partners ask us, please provide us with your picture material, your storytelling, you have such a great story to tell with all the sponsorship activities that you have. We are willing to share these in an efficient way with our partners like we do it again also in the physical world of the department stores to grow this business.

We believe now with our build competencies, operating e-commerce at least in the U.S. and the European market, it could be now also an opportunity to go into digital concession agreements, where we basically just tap into the traffic of these partners and operate the business.

2018

Looking ahead, increased personalization of end-to-end customer journey is one priority, says Langer:

This starts with communication, where we are now increasing the personalized email newsletter to customers based on their purchasing history and personal preferences. This is also true now for our hugoboss.com website, which is now adept to the user's navigation history, for example, when it comes to the selection of key styles on the landing page.

There will also be a rollout of omni-channel services across all European markets by mid-year, he adds:

These services include click-and-collect and order from store. That means online ordering in-store and return in-store. They all tie in with the implementation of the new store concept, which features a digital table that allows the store assistant to browse the online offering together with the customer.

In the U.S., all stores offer collect already and the full range of omni-channel services will be available by the end. Obviously, we also want to carry the momentum that we build in our online business at the end of last year in 2018.

Next week, the firm rolls out a new hugoboss.com website that is intended to reflect the corporate focus on two brands - BOSS and HUGO. Langer explains:

Changes in the site structure and layout will create two distinct brand worlds. As a result, in particular, HUGO will be formal visible than today, in terms of its product offering as well as relevant editorial content. Consumers with a key brand preference will arrive directly at either the BOSS or the HUGO landing page following the boss.com or the hugo.com link that we highlight in our print advertisement. However, we also want to make sure that consumers without a clear brand preference may browse the entire offer by product group, independent of the single brand and can easily change back and forth between the two brands.

The important thing is, this time the website is going work.

My take

If at first you don’t succeed etc etc. Langer has done a lot of work in bringing the Hugo Boss operating model up to a more modern level and the tech commitment underlying this is impressive. One third of total Capex currently goes on IT. The CEO’s contract was extended this week to the end of 2021, which is as good a vote of confidence as you can get.