17 March 2015
By Permira’s Head of Consumer, Cheryl Potter
Global expansion is the objective of many successful consumer brands today. After all, if you are prospering in your home market, why not build on that? But many companies have invested huge sums into rapid expansion only to come unstuck with their international strategy. So what’s the secret to successful global growth?
Pemira have helped brands as diverse as Hugo Boss, New Look and Dr. Martens expand internationally over the years and share below some of their experience in helping brands seeking growth abroad.
Rule No. 1: Establish and stick to a focused strategy.
With outlets in 63 markets, Dr. Martens was already an international player when the Permira funds invested, but when sales were audited, it was found that the mix was far from ideal, with almost half the sales being derived from two key markets alone. With the funds’ support, a new management team reviewed the company’s international approach and helped set new targets for each region. They researched the best way to achieve their new sales objectives by reviewing the benefits of the own-store model versus the franchise model, as well as establishing the optimal number and location of the stores. Today it is all about sticking to this chosen strategy and executing it with precision.
Similarly, Hugo Boss was already a global brand at acquisition by the Permira funds, back in 2007. However, its wholesale-led distribution strategy constrained the potential of the brand globally as the business was not able to exert the level of control it wanted on its brand image, nor did it get the feedback from customers it needed. Supported by the Permira funds, a new management team led by Claus-Dietrich Lahrs decided to transform the business model into a fashion-led, retail-led one to give it maximum control when expanding further into international markets, especially in Asia. As a result the company more than tripled the number of directly-operated high-margins retail stores it operates and is active in over 130 countries today.
New Look was in a very different situation when the Permira funds invested, as a predominantly UK business with a small somewhat scattered presence in a number of other markets. Under the new leadership of Anders Kristiansen who has extensive experience of retail expansion in China, the business decided to refocus its international effort on key markets which presented good prospects for a value-led fashion brand like New Look. For the company, expansion wasn’t critical to maintain competitive advantage but made sense in markets where high returns on investment was achievable. This meant retreating from some markets altogether and focusing its efforts on four new territories where real scale was achievable, including China.
In each of these cases, Permira’s global consumer team were on hand to support, but also interrogate the initial plan, and then back all three companies with determination…which brings us onto the second point.
Rule No. 2: Create a strong brand identity.
When Permira first invested in Hugo Boss, the company had too many brands and an over-complicated brand hierarchy which the consumer found increasingly difficult to read. Its wholesale strategy also meant that the brand and collections were not displayed consistently around the world which damaged its standing as a global brand. The new team started working on this immediately to reduce the number of brands and ensure each of them had a clear, consistent and immediately recognisable global signature. By taking charge of its brand and consumer’s access to it, Hugo Boss became one of the tenth most valuable fashion brands in the world.
In contrast, Dr. Martens has always had a unique brand character. They are an iconic name, with a strong UK history, associated with music and rebelliousness. However, as product lines and markets grew, some of this heritage was lost. So they are now focusing on returning to their core values and develop products fully consistent with their heritage.
Similarly, New Look is a household UK-based brand with strong fashion heritage, but had lost some of its focus as it expanded. They needed to reclaim their great-value, fashion-forward identity. This was achieved through the roll-out of a single logo, single set of labels and a premium in-store experience which ensured a clearer more consistent brand image in all its markets.
Rule No. 3: Ensure you have a good product.
Having a well-designed, appropriately-priced product that appeals to their core customers is paramount to all three brands, whether they are high-end like Hugo Boss or great-value like New Look. Being able to get the latest fashion trends into the stores fast and replenish best-sellers quickly is a challenge of modern brands. All three brands spend a considerable amount of time profiling and segmenting their customers to understand what they want from the brand and how they want it delivered to them. They also use the customers’ feedback they get in store and online to improve and extend product lines and create must-have looks and collections for them. They are all very aware of the delicate balance they need to strike in delivering excellent products that are true to the brand yet stay abreast of trends. They also understand that they need to be flexible enough to meet local market needs and preferences.
Rule No. 4: Get the right team in place.
Success can only come from marrying the right brand to the right talent and empowering them to deliver on their growth strategy. From the outset, our consumer team recognised that new talent needed to be added to the teams at Dr. Martens, Hugo Boss and New Look, to address a number of key challenges including marketing and branding in a digital world, e-commerce, global supply chain management and international expansion. In all three business, additional talent was recruited to complement the skills of the existing team, including at the most senior levels of each company. All three companies needed and recruited experts with large-scale supply-chain experience and local management with prior experience, particularly in Asia. Most recently at Dr. Martens, the Permira funds identified a need for digital specialists to join the existing marketing team and this was actioned quickly.
Despite the fact that they operate in very different segments of the fashion market and are at different stages of internationalisation, all three companies are seeing clear signs of success as they continue to expand. importantly they have all closely followed the four steps above with the committed support of our global consumer team and the broader experience of the permira consumer network.
Despite the fact that they operate in very different segments of the fashion market and are at different stages of internationalisation, all three companies are seeing clear signs of success as they continue to expand. Importantly they have all closely followed the four steps above with the committed support of our global consumer team and the broader experience of the Permira consumer network.
Dr. Martens CEO, Steve Murray said, “The benefit of working with Permira is that they don’t mind sharing. The CEOs work closely together and are open to sharing expertise.”
In fact, we thoroughly enjoy it. Backing successful global brands is in our blood.