Less than a decade ago, Tommy Hilfiger (the company) was selling billions of dollars a year in affordable fashions, cosmetics, and accessories, and Tommy Hilfiger, the designer, was successful enough to be recognized on a first name basis. Nonetheless, operating exclusively in U.S. markets left the company vulnerable to a turbulent retail industry and limited the company’s growth potential. With annual revenues of $1.9 billion domestically, Tommy Hilfiger began investigating growth opportunities in Europe and Asia. At the height of its U.S. popularity, Hilfiger opened a large store full of traditional Hilfiger apparel on Bond Street in London. Then very quickly, the company’s success dried up. Sales dropped to $1.1 billion only a few years after they had peaked, and then plummeted to a comparatively paltry $260 million. As a result of this astounding 86% drop in revenue, the company closed 30 Tommy Hilfiger stores in the United States and shut down its children’s wear and Tommy Jens’s divisions. Overseas, Tommy was sputtering. The Bond Street store closed the same year it opened, largely because of differing European fashion tastes. Slow growth rates were not the only reason for the dramatic change in the company’s performance. More damaging was the rapid consolidation of U.S. retail stores. Many of the major department and discount stores where Hilfiger items are sold have either closed or been purchased by large department store chains. Today a few retailers, like Macy’s and Kohl’s, account for more than a third of U.S. clothing sales, and those same retailers often sell their own private brands, too. To avoid stalling out completely, Tommy Hilfiger needed to figure out how to expand globally. The failure overseas of Tommy’s traditional U.S. look prompted the designer to adapt to cultural differences in Europe and Asia. The biggest change was the decision to start creating designs uniquely for the European consumer. Hilfiger opened a design center in Amsterdam, dedicated to designing clothes and accessories for consumers from different European cultures. For example, because Germans and Italians have different preferences for sweaters, Hilfiger has created a line of sweaters for Germans clients, which is different from what it designs for Italian clients. Those differences presented challenges; as managers soon discovered, the European market differed greatly from the U.S. market. CEO Fred Gehring said, “The fragmentation of dealing with all these little mom-and-pop stores is so alien to American businesses,” yet, “these stores are the backbone of every major brand” that sells in Europe. Further, because there are so few locations for new stores available (unlike in the U.S.), it makes more sense to work with existing retailers. To handle the fragmented market, Hilfiger opened 21 regional showrooms, featuring 25 clothing lines, each with several tailored to particular markets. Even though that led to higher operating costs, operating in that manner enabled the company to achieve much higher profit levels and to place its products in 4,500 boutique stores in 15 European countries. In addition to selling branded apparel in boutiques, Hilfiger opened 34 company-owned Hilfiger Denim stores throughout Europe. Designs and layouts of the stores and their merchandise are tailored to the cultural tastes of the countries where they are located. Hilfiger has a higher margin on products sold at its company-owned stores, as well as complete control over the facilities. The new strategy has been a success. Today, European sales now account for 37% of Hilfiger’s $1.78 billion in sales. The company is interested in expanding into the Indian market, probably because India offers the company: A. a limited infrastructure B. all of these C. the elimination of all political risks D. experienced marketplace metamorphosis
Less than a decade ago, Tommy Hilfiger (the company) was selling billions of dollars a year in affordable fashions, cosmetics, and accessories, and Tommy Hilfiger, the designer, was successful enough to be recognized on a first name basis. Nonetheless, operating exclusively in U.S. markets left the company vulnerable to a turbulent retail industry and limited the company’s growth potential. With annual revenues of $1.9 billion domestically, Tommy Hilfiger began investigating growth opportunities in Europe and Asia. At the height of its U.S. popularity, Hilfiger opened a large store full of traditional Hilfiger apparel on Bond Street in London.
Then very quickly, the company’s success dried up. Sales dropped to $1.1 billion only a few years after they had peaked, and then plummeted to a comparatively paltry $260 million. As a result of this astounding 86% drop in revenue, the company closed 30 Tommy Hilfiger stores in the United States and shut down its children’s wear and Tommy Jens’s divisions. Overseas, Tommy was sputtering. The Bond Street store closed the same year it opened, largely because of differing European fashion tastes.
Slow growth rates were not the only reason for the dramatic change in the company’s performance. More damaging was the rapid consolidation of U.S. retail stores. Many of the major department and discount stores where Hilfiger items are sold have either closed or been purchased by large department store chains. Today a few retailers, like Macy’s and Kohl’s, account for more than a third of U.S. clothing sales, and those same retailers often sell their own private brands, too.
To avoid stalling out completely, Tommy Hilfiger needed to figure out how to expand globally. The failure overseas of Tommy’s traditional U.S. look prompted the designer to adapt to cultural differences in Europe and Asia. The biggest change was the decision to start creating designs uniquely for the European consumer. Hilfiger opened a design center in Amsterdam, dedicated to designing clothes and accessories for consumers from different European cultures. For example, because Germans and Italians have different preferences for sweaters, Hilfiger has created a line of sweaters for Germans clients, which is different from what it designs for Italian clients.
Those differences presented challenges; as managers soon discovered, the European market differed greatly from the U.S. market. CEO Fred Gehring said, “The fragmentation of dealing with all these little mom-and-pop stores is so alien to American businesses,” yet, “these stores are the backbone of every major brand” that sells in Europe. Further, because there are so few locations for new stores available (unlike in the U.S.), it makes more sense to work with existing retailers. To handle the fragmented market, Hilfiger opened 21 regional showrooms, featuring 25 clothing lines, each with several tailored to particular markets. Even though that led to higher operating costs, operating in that manner enabled the company to achieve much higher profit levels and to place its products in 4,500 boutique stores in 15 European countries.
In addition to selling branded apparel in boutiques, Hilfiger opened 34 company-owned Hilfiger Denim stores throughout Europe. Designs and layouts of the stores and their merchandise are tailored to the cultural tastes of the countries where they are located. Hilfiger has a higher margin on products sold at its company-owned stores, as well as complete control over the facilities. The new strategy has been a success. Today, European sales now account for 37% of Hilfiger’s $1.78 billion in sales.
The company is interested in expanding into the Indian market, probably because India offers the company:
| A. |
a limited infrastructure |
|
| B. |
all of these |
|
| C. |
the elimination of all political risks |
|
| D. |
experienced marketplace metamorphosis |
|
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