Why Is The Domestic Fashion Brand Esprit Bogged Down?

It used to be a fashion that needed some financial power to afford it.

It occupies the memory of youth.

The location is the first batch of fashion names that have the meaning of "middle class" in China.

However, the river is declining and the scenery is no longer. Today's Esprit has long been forgotten.

Not long ago, Hongkong fashion and leisure brand Esprit announced the fiscal year data. Data show that Esprit Holdings Ltd. (0330.HK) Si Jie Global Holdings Limited has achieved profitability after a long period of pformation efforts: net profit of HK $21 million, and net loss in the last fiscal year amounted to HK $3 billion 700 million.

But from the latest financial reports, we find that the loss of profits is mainly due to the "downsizing" of enterprises: the sale of Hongkong offices, the continuous closing of stores and layoffs, and other measures to achieve profits on the books.

The main business of the company is still in a state of continuous loss.

At the door of a family's shop, Esprit chose to "sell" to sustain life.

As a leading bellwether of domestic fashion brands, why is Esprit in deep mire?

No longer at its peak

Esprit was formerly a clothing company in San Francisco, USA, with Hongkong Esprit Far East Limited as purchasing agent. Xing Liyuan, the boss of the company, was once delighted because she was the husband of actress Brigitte Lin.

In 1980s, Esprit was one of the most popular clothing brands for teenagers in the United States.

Visionary Xing Liyuan began his Esprit wholesale business in Asia and opened retail stores in many Asian cities.

In 1993, Hongkong's Esprit Far East Limited's Asia launched in Hongkong. After 4 years, it bought Esprit Europe Business and changed its name to Si Jie Global Holdings Limited. The fashion empire of Esprit is gradually expanding in the global layout.

In 1997, Si Jie and Huarun group jointly formed Huarun Huarun, launched the retail business of Esprit brand clothing in mainland China, and achieved 58% growth in the first year. At the peak, there were hundreds of Direct stores and franchises in nearly 100 cities nationwide.

In mainland China, Esprit was the first initiator of the Western class aesthetic taste of the middle class.

At that time, ESPRIT had great appeal, and various shopping malls had offered various preferential policies in order to attract them to enter.

At the peak of Esprit, guests from all the stores were in an endless stream. Even stars such as Richie Ren and Fan Bingbing were seen shopping in Esprit.

In the first ten years of its entry into China, Esprit, which lacks competition, has been fortunate enough to gain a high position in the Chinese market, but the crisis is also increasing.

Since 2006, Xing Liyuan has resigned from the chairman of the board of directors of Esprit parent company Si Jie global group and CEO, and has continuously reduced shares to completely sell short in 2010.

What followed was the decline of Si Jie global, declining for several years.

In the 2009 fiscal year, Esprit's turnover declined by 7.4%, which contrasted with net profit plunging 27.4%, net interest rate fell to 13.8%, or 20.2%. In the same year, Esprit ended 15 years of double-digit high speed growth and entered the recession cycle.

After entering the recession cycle, Esprit is still expanding, regardless of its retail or wholesale sales area continues to grow.

But this expansion has brought negative effects to Esprit, either in sales or in profits. It not only failed to save the decline of Esprit, but accelerated the decline of Esprit.

In the 2011 fiscal year, Esprit had to cut its wrist. North America, the most competitive and relatively small (3-4%) market, retained the largest market in Europe and the Asia Pacific region where sales and profits continued to grow, while closing 80 unprofitable stores.

In the end, the "downsizing" initiative did not slow down the fall of Esprit, while Esprit's net profit was only HK $79 million, a sharp fall of 81%.

Fluctuations in performance eventually led to high-level personnel turbulence.

From February 2009 to March, Griffith, executive director and Esprit brand of North America, and Thomas Johannes Grote, executive director and Esprit brand president, resigned successively.

So far, including Xing Li and Gao Han Si's "withdrawal", the three founders of Si Jie all quit.

This wave of blood pfusion action ended in May 2009.

The brand development of Esprit is in a precarious situation.

In the "rising star" of China, Esprit's weakness gradually revealed itself.

In the 2010 and 2011 fiscal year, sales of Esprit in China increased by 227%, but the impact of fast fashion Zara, UNIQLO, H&M and other brands began to shrink since then.

In 2012, at the beginning of 2013 fiscal year, when the Si Jie world was about to fall below the turnover of HK $30 billion, it came to Inditex SA (ITX.MC), the parent company of Zara, formerly the director of distribution and operation of Spanish Company.

At the same time, when Esprit was completely surpassed by Zara and H&M, not only did the North American market have no place, but also the German headquarters and the location of the company, the Great China, also fell apart.

After joining Ma Hao Si, he introduced another three Indian textile executives Juan Chaparro, Elena Lazcanotegui and Jos Antonio Ramos, and the long four year pformation plan of Si Jie world officially opened.

UNIQLO and Zara were 6 years and Esprit years later than the Esprit before entering the Chinese market. But they and Swedish brand H&M are now becoming the fashion choice of Chinese young people.

Esprit lost its brand vitality and was gradually abandoned by young people.

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The "two days of ice and fire" in fashion circles

The old fashions of precarious fashion are not the only Esprit companies.

Also relying on "downsizing" to turn the tide is the cowboy giant Levi 's.

According to the recent earnings report, Levi Strauss & Co. Levi's's two quarter revenue still failed to grow, but after the reorganization, the profitability of the company has been greatly improved due to the reduction of corporate expenses.

Coincidentally, 00592.HK recently issued a profit warning for the first half of 2016. It is estimated that the profit attributable to shareholders of the group will be reduced by 75%-85% over the same period last year. Although the report shows that as at the end of June, the annual net profit of burgleong is 292 million yuan, an annual increase of 1.53 times, but if the sale of Macao property is excluded, the profit will be 25 million yuan, down by 78%.

Giordano, Baleno, and burger lion once called the three giants of fashion clothes. Nowadays, it is better to live without a brand.

The Hong Kong brand Giordano, founded in 1981, was listed in Hongkong in 1991 (Giordano international 00709.HK), and officially entered the mainland market in the following year, creating the first place of China's casual wear retail chain store.

In 2013, Giordano reached HK $5 billion 848 million and opened 2642 stores worldwide.

However, for a long time, Giordano's sales in recent three years have declined to varying degrees, and the inventory problem is worrying.

In 2015, the number of Giordano stores was reduced by 81, and its sub brand EULA also announced that it had stopped operating.

Today, Giordano has almost disappeared in the mainstream business circle of the first and second tier cities.

What is more tragic is that under the overall strike of fast fashion, some of the old fashions are being sold out.

Take Baleno as an example. Baleno is once a common fashion memory after 70.

Founded in the early 80s, Baleno was acquired by Hong Kong listed companies De Yongjia (0321.HK) in 1996 and became its Affiliated Companies and subsequently entered the mainland market.

With Andy Lau, Faye Wong, Maggie Cheung and many other famous stars as spokesmen, Baleno has more than 4000 stores at its peak.

But in recent years, the shadow of continuous losses and pformation failures has always shrouded in Baleno. In 2011-2015 years and four years, 617 stores were closed, averaging 12 monthly closure.

As of September 30, 2015, the total number of Baleno stores decreased to 2849.

At the beginning of this year, Baleno was sold off by the parent company Hongkong de Yongjia group. The paction price as low as 250 million yuan was a big surprise.

The fashion industry is undergoing a brutal reshuffle. Today, the market structure can be described as "ice and fire": on the other hand, the old fashions are faced with "closing shop tides", while the other side is fast fashion grabbing the half of the fashion industry.

Represented by Zara, its parent company Inditex SA (ITX.MC) grew by 11% in the first half of the year, defeating all its competitors. This achievement pushed the founder Amancio Ortega (Amancio Ortega) to the richest position in the world.

Among them, the group's core brand Zara gained 13% of its sales growth, accounting for 2/3 of its total sales.

Last year, Zara added 79 new stores, bringing the total number of stores to 2002.

The Inditex group has raised its global stores from 2692 to 7013.

Other fast fashion brands such as H&M and UNIQLO have also expanded rapidly in recent years, and they have swallowed up the old fashion market.

This is the best era for the clothing industry, and this is also the worst of times.

How far is it from fast fashion?

The time has come to make heroes, and the old fashions of the past have been over. Nowadays, these heroes have to face up to the problems they face.

The principle of "fast and unbroken" applies not only to Internet companies, but also to the fashion industry. Let's take a look at the fast fashion brand ZARA.

As a fast fashion brand, mature, fast and consumer oriented vertical integrated supply chain is the key to ZARA's success.

On the contrary, Esprit still stays in the wholesale and retail thinking in the early stage of brand building, and is mainly driven by closed doors, which is divorced from consumer demands. It is wishful thinking that it can lead the trend.

Fortunately, Esprit realized this problem early.

In 2014, Esprit came to the top of Zara, Ma Hao Si, and opened a long "Zara style" reform.

They claim to have introduced the Zara mode - shortening delivery time from 9~11 months to 3~4 months.

It has been written in the earnings report that "product design, quality and cost performance have been improved, and same store sales have increased by 8% year-on-year (in local currencies for each store)".

But in contrast, Esprit still has a huge gap with Zara in pattern building and product design.

ZARA uses, in fact, SPA (Specialty Retailer of Private Label Apparel, own brand clothing professional retailers) business model, is the enterprise from production to retail all hand control, in order to improve the speed of circulation and reduce the cost of operation.

The SPA model has been improved in three stages, from the prototype proposed by the American garment giant GAP in 1986, to the Japanese SPA model represented by the UNIQLO (uniqo) characterized by low price popularization and storage supermarket.

Finally, the SPA mode adopted by Zara emphasizes the integration of supply chain, based on the efficient production capacity and the rapid updating of products, and creates a new miracle in the clothing industry with "parity" and "fast fashion".

Specifically, every new fashion of Zara can be completed in the first 2 weeks from the designer's creativity, design, typing, making clothes and store shelves.

This unprecedented pace of promotion is inseparable from the credit of Zara's self built factories. Unlike other clothing companies, Zara has put most of its procurement and production in Europe, shortening the distance from the headquarters of Spain and maximally controlling its ability to control all production processes.

Once garment production is completed in all Zara factories in Europe, the labels will be sent to the distribution center immediately after inspection. Through the highly efficient distribution center, the newly produced clothing products are quickly distributed to Zara stores around the world.

It is reported that Europe only needs 24 hours to reach the shops, while the rest of the world only needs 36~72 hours. When the goods arrive at the shops, they will be directly on the shelves, so that the Zara shops will always refresh the consumers.

In contrast, Esprit, which relies on retail wholesalers, has always been the traditional "light assets" route of the clothing industry. The only job of the Brand Company is to design new products and hold an order meeting.

Specifically, after the new product design is completed, the company often needs to go through the fabric purchase period for two or three months before making the production by the factories. During this period, the order meeting will be held, and the production will be adjusted according to the orders and orders of the branches and agents, and finally the distribution and replenishment stages will be reached.

A batch of new products will take several months to complete from design to rack.

Zara the shortest time from design to putting clothes on the counter is 7 days, usually 12 days, and about 12 thousand fashions a year.

In contrast, although Esprit's orders will change from 2 times a year to 1 times a month, about 7000 fashion items will be launched in one year, and wholesale business will be the main mode of ordering. The proportion of orders destined for longer cycles will remain high.

The short supply chain makes Esprit unable to react quickly to market changes, and is unable to timely launch products that conform to the consumption trend.

In addition, because Esprit does not participate in the process of garment production and retail, the control of clothing production cost is also very weak.

According to the parties who were responsible for Esprit's business in China, Esprit's supply chain costs are about 30% more expensive than Korean clothing brands, not to mention competing with H&M, Zara and UNIQLO.

Although Esprit began to turn to "vertical mode", we strengthened cooperation with vertical retailers, increased sales channels such as "direct sale" and "monopoly", so as to improve product design, shipment and pricing.

But over the years, Esprit has formed a very close relationship with many dealers. The genes of wholesale and retail are difficult to eradicate. Following the Esprit of department stores, the ability to build and maintain the brand itself has become very weak.

From the Zara and Esprit stores, we can see the importance of this "control capability" to the brand.

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ZARA has opened more than 2020 stores in more than 60 countries, of which 90% are self owned shops, the rest are joint ventures and franchised stores.

In addition, the location of Zara is often located in the bustling business circle of big cities, and all of them are large stores. The super large experience space of 2000 square meters and constantly updated display of goods give consumers the pleasure of shopping experience while satisfying the consumption demand of one-stop shopping.

It is reported that the average number of customers entering Zara is 17 times a year, while other general brands are 3 to 4 times.

In contrast, due to the decline in performance, Esprit almost disappeared in all levels of business circle and retired to the two or three line business circle, but no matter where, the Esprit shop area in the mall has been shrinking, moving from the crowd to the edge position.

In addition, the display of Esprit stores is chaotic and immutable, and has been criticized for a long time.

In terms of product inventory, because the quantity of each fashion in Zara is generally not large, even if the selling style is controlled by quantity, the time that a garment stays in the shop does not exceed one month.

Esprit's order mode has brought high inventory and plunged into the mire of "high product prices and constant styles".

In addition, because of the larger inventory, Esprit retailers often have a "crazy discount" at will, which greatly damages the brand image.

Besides, the core of clothing brand can never be separated from products.

First of all, there is a natural difference between fast fashion and traditional clothing brands in the development of clothing products.

Unlike traditional clothing brand's "designer oriented" closed door product development, Zara's product design and development are entirely guided by consumer demand.

Every day, the Zara store manager will collect the consumer's purchase behavior and product feedback and so on to the headquarters in time to convey the customer's needs. At the same time, they will observe the sales situation on that day and redisplay the hot products, so as to maximize the sales.

In addition, Zara has a large number of young designers and buyers. It has been mixed up in the activity centers of major fashion centers all year round, drawing inspiration from top brand designers, capturing the most popular fashion elements, and timely feedback to designers of Zara.

In June 2001, Madonna held a concert in Barcelona, Spain, and the 3 day performance was still in progress. The audience had already worn the "same money" worn by Madonna at the concert. After that, a fashion of Madonna fashion was rapidly launched on the streets of Spain, all of which came from the local Zara.

It can be seen that Zara's new product design and the speed of supply chain are unprecedented.

Secondly, the location of Esprit is still chaotic when the new product is not dominant.

In 2002, the German Czech High German Hans rose to be the chief executive officer. He targeted the consumer group to be 20 years old -40 years old. Esprit was split into Esprit, Esprit Collection and EDC three sub brands. Esprit took the classic route, retained the original style, Esprit Collection took the career path, and EDC walked the green spring fashion route.

Seemingly subdivided clothing brands can help consumers make more suitable choices. However, although the design departments of Esprit three sub brands are separated from each other, they still belong to the design center of Dusseldorf, Germany.

The result in the market is the swing of the brand positioning. Taking a basic T-shirt as an example, the difference between the different brands is three hundred or four hundred yuan, the lowest price is 99 yuan, the highest is 500 yuan.

Finally, the high price plus frequent discount sales, Esprit's image decline in recent years, has long been reduced to the basic brand that consumers will only buy during the discount period.

At the beginning, a group of customers who had the most consumption power and consumption desire have been gradually away from this brand.

Thinking about how to get young again is the top priority of Esprit.

In the image reform, Esprit invited the Korean pop star Song Hye Kyo, who was popular in the first half of the year, to be the new fashion spokesperson in 2016.

Earlier, Song Hye Kyo's "descendants of the sun" created various kinds of ratings records in China and in Asia, which has a high reputation and status in the minds of young people.

Esprit early this month and the Opening Ceremony jointly launched by chao chao brand and buyer's shop are an exploration to fashion.

But it will take a long time for the tide brand to radiate the entire Esprit product line.

Deng Yongyong, chief financial officer of Sijie global, proposed that Esprit's measures to deal with challenges in the Asia Pacific region include developing franchising and concentrating on the development of e-commerce business.

In addition, Esprit will save HK $1 billion in the next two years. Specific measures include continuing to reduce poorly managed shops, reduce wholesale size and reduce structural overlap.

If consumers lose interest in Esprit, however, turning the sales channel from offline to online can not save it from fate.