Department stores are stacked high with similarity - Levi's, Polo Ralph Lauren shirts and Tommy Hilfiger - and many items of clothing are becoming just commodities as prices continue to fall.
Even though Hilfiger is one of the world's most recognisable and top-selling clothing brands, a flagging apparel market is hitting its bottomline hard. However, re-energising flagging sales may not be that easy. The massive fashion movement that Hilfiger helped create - a casual country-club look mixed with street-smart appeal to met urban aspirations of upward mobility and suburbia's lust for hip-hop wear - has become all too mainstream.
Now, fresher urban labels have been gaining store space and are stealing market share from established brands like Hilfiger. Tastes have changed, yet Hilfiger has not, and analysts' say the mature brand has already peaked.
Disparaged by some as a triumph of merchandising rather than design, the 18-year-old Hilfiger's mass-marketing success fuelled expansion into women's wear, perfumes and baby gear. The brand may have been pushed to saturation point or diluted beyond recognition.
Ideas to revamp Hilfiger's image by gobbling up other fashion companies with new strategies took shape in March 2000 when it tried to acquire Calvin Klein. However, the contract stumbled over licensing deals and Klein's steep US$1 billion price tag at the time.
Brand acquisition is still seen as a way to bring the standalone giant back to good health. The Sweetface Fashion Co, the holding company that owns the J.Lo by Jennifer Lopez clothing line, is the most mentioned target.
Buying younger, fresher brands to stay competitive is not a new strategy.
Rival Ralph Lauren acquired youth-market Club Monaco to revitalise its sales.
A strong rival, Ralph Lauren's merchandising takes cues from the well-heeled world of tennis, polo, cricket and fencing. Hilfiger has already borrowed some ideas from Ralph with the upcoming launch of a more upscale line of clothing called 'H', but this may not be enough to turn the brand around.
VITAL SIGNS
2000 2001 2002
Sales (USdollars million) 1,977.20 1,880.90 1,876.70
Net income (dollars million) 172.40 131.00 134.50
Stock price - Financial Year high (dlrs) 41.06 17.25 16.06
Source: Hoover's Company Profiles
DIAGNOSIS
JANICE CHAN, MANAGING DIRECTOR, M&C SAATCHI, GREATER CHINA
Clothes are what you wear. Fashion is about who you are.
The reason designers like Tom Ford and Marc Jacobs are the darlings of the fashion industry is because they inject a soul into the brands they work on. They don't only design the clothes but they define the essence of brands like Gucci or Louis Vuitton; and project the brand image through its looks, its merchandise, store ambience, shows, models, advertising and publicity. It is the fashion image that people fall for. Tommy Hilfiger is not as fashionable today as it once was. When the hip-hop artists deserted the brand, it lost its lustre because it hadn't changed with the times.
What was once described as American preppy-chic with a modern twist, has faded into vague impressions of red, white and blue coloured clothes.
Not that classic style can't stay popular. Look no further than Ralph Lauren. His genius was to sell an image, not products, giving his brand consistency and a longevity in a market that is so often a slave to trends.
It has been rumoured that Hilfiger is in an acquisition mode to revive the company. Buying another brand and building weight on its company's books isn't necessarily the way to revamp an ailing business. Its core brand needs the commitment and resources to reinvigorate it. If Burberry can be turned around, why not Tommy Hilfiger?
COLIN BATES, FOUNDER AND DIRECTOR, BUILDINGBRANDS
I could never really get the appeal of Tommy Hilfiger. This is a brand created by an aging New York designer, with a preppy country-club look, made 'urban cool' by the hip-hop and rap stars of the early 90s. Where was the heart and soul of the brand? Who would want to wear such a jumble of mixed messages? Obviously I missed something, because by last year Tommy Hilfiger was selling almost US$2 billion of jeans and other items.
But despite this huge volume of sales, the brand is not profitable. Its sales volume has flattened; as a company Hilfiger faces all sorts of financial problems and as a brand, it has lost its edge.
The celebrity appeal of the brand has waned and Hilfiger is getting squeezed.
At the preppy end of the market buyers are returning to older and more trusted brands such as Polo Ralph Lauren. At the 'urban cool' end of the market more authentic urban labels such as Phat Farm, Sean John, Ecko and Jay-Z's Rocawear have emerged.
Add to this rumours of racism against Mr Hilfiger himself (currently being refuted on the company website), changing shopping habits (that are moving away from Hilfiger's department store distribution network) plus the growing dominance of discount brands in the US retail market, and this is a brand in big trouble.
TREATMENT
CHAN'S PRESCRIPTION
- Interrogate Hilfiger's brand equity and define its essence in a way that is still relevant to today's world.
- Hire a talented designer and business manager who can work together to create sparks and reinvigorate the brand and the business.
- Evolve with the market. People appear to be moving away from department stores, yet Hilfiger has generally been weak in its own store strategy.
The brand and business need continuous rethinking, refreshing, and reinvigorating.
BATES' REMEDY
- The brand is crying out for focus. Either take it upmarket as its existing consumers get older, or take it back into the urban jungle to new, younger buyers. It's doomed to die stuck in the middle.
- Build a complete 'brand world' designed to appeal to the selected brand audience. Central to this must be a new retail experience.
- Finally, create product lines to offer a range of different price points, so the brand can win a greater 'share of wallet' without sacrificing its new-found focus.