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Hugo Boss: '80s Excess Raises Envy and Eyebrows
Written by: Nelson Mui
Photo by: Petre Buzoianu-FWD
New York, Aug 3, 2000/FWD/ --- At the official opening party last Thursday for the new, palatial
Hugo Boss showroom, there was much oohing and aahing among the several hundred guests in
attendance.
Pilgrims making the trek out to the nether regions of far west Chelsea swigged champagne in a
main hall lined with an enfilade of mannequins displaying the latest Hugo Boss styles.
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To both sides were the showroom spaces, all equipped with state of the art computers and scanners,
poised to ring up more merchandise than K-Mart.
It was quite simply, impressive.
"I guess they're planning to do a lot of business," said one guest, eyeing the vast space -
with its lounge areas and neat rows of selling tables - with amazement.
The new showroom and recently announced plans for a three-story Fifth Avenue flagship are
emblematic of the era of a high-flying Hugo Boss, reflecting the brand's rapid expansion and
the aspirations of the ebullient Hugo Boss USA CEO, Marty Staff.
"Men get bored in .04 seconds and don't like to shop," Staff told FWD.
"Retailers don't live to shop either, and that's why we have beautiful interns escort them
around our showroom, which becomes club rooms, which becomes a bar. People don't want to leave."
In the three years since he took over at the helm of Hugo Boss, Staff has generated much
excitement in a men's industry that is comparable to a morgue in terms of glamour or buzz.
And there's a lot of buzz about the brand, from its sponsorship of the Sundance Festival and
film premieres to lavish cocktails and helicopters flying people to the New York showroom during
market weeks.
Staff has made life a big party over at Hugo Boss, and buyers want in.
According to the 1999 annual report, Hugo Boss USA sales increased 11 percent to 253 million DEM,
or approximately $118 million by today's exchange rate, with net income increasing 13.5 percent.
But the splashy showroom, the glitz and glamour, and the free-flowing champagne have raised
questions and eyebrows.
What - industry observers are now asking - is the real future of the Hugo Boss brand?
With such aggressive expansion on all levels - launch of the Hugo Brand, a women's line, a
retail roll-out, and lavish marketing and advertising promotions - how will all this eventually
be paid for?
At the minimum, if all this '80s consumption is coming out of revenue generated by sales of this
huge product line, then its distribution, cachet and brand coherence could be in jeopardy.
Put simply, where is all the product going to end up?
If distribution balloons - and insiders say it will have to, in order to make the marketing pay
for itself - then it will include more mid- and mass-retailers, causing problems for Boss's
upscale customers Saks Fifth Avenue and Neiman Marcus.
"I, too, am very worried about the growth," said Staff.
"I think our business is very solid. We expect a lot of the growth to come from our existing
accounts. We're doing tons more in the doors we sell. As for our retail expansion, all the stores
I spoke with understood, and in one case - Bloomingdale's - they felt it helped the brand equity."
According to Staff, only 30 percent of Hugo Boss's USA distribution comes from department stores
such as Saks, Neiman's and Dayton Hudson's.
The remaining 70 percent of Boss clients are independent retailers that carry Hugo Boss and
for whom an increase in commitment to one brand would be risky - the equivalent of putting all
your eggs in one basket.
What if Boss has a bad season and their designs don't sell? Does the retailer close shop?
"We have very high integrity in our product and design," said Staff. "It's no longer about the
old days where a designer can just say this is how we do it. I feel we have an obligation to
work with retailers in accepting back product."
That should alleviate retailer worries, but in a so-so season or in a slightly less ebullient
economy, taking back a lot of product could be a huge hardship on Hugo Boss.
Several industry insiders have expressed skepticism about the recent "at-all-cost" rise of
Hugo Boss.
"There definitely seems to be some gambling going on over there," said a fashion executive who
asked not to be named. "He's [Staff] got so much goods coming out, and so many projects, that
some day the bill's going to come in, like in any Ponzi scheme. The mentality is very much
like a dot.commer - grab market share at all costs, and then figure out the profitability later."
Critics also question the product offering's consistency. What exactly does it mean to be a Hugo
Boss man today?
"Hugo Boss seems to cover everything, they're trying to be everything to be everybody," said one
men's fashion editor who did not want to be identified.
"It used to stand for suits, and now they're trying to translate a suit brand into sportswear
by offering thousands of pieces. It could lose its image in the process."
"I don't get that," Staff said, rejecting the claims.
"The clothing has a distinct look, and up until recently, sportswear in America has been like
McDonald's - cheap and functional. The concept is new to the market. I think our formula is
more difficult than Ralph Lauren's, it's more than a couple of Shetland sweaters tied with
some belts. I would say Hugo Boss is about a sophisticated color palette, European inspiration
with a relaxed attitude."
Some industry insiders say the recent direction of Hugo Boss is consistent with Staff's
reputation for big-spending and expansion, which was cemented during his time at Calvin Klein.
"Not only did Staff not make Calvin a dime, he cost him a lot of money," said the fashion
executive close to the situation.
Staff dismissed those suggestions.
"I ran Calvin's licensing, and the revenue went crazy," said Staff.
"I set up the Warnaco deal, the Arnie Simon deal. I helped the licensing revenue, and when I
left it was profitable. I hear they're [Calvin Klein men's wear] not doing very well, but that's
from the last few years."
Despite the naysayers, many retailers are optimistic about Hugo Boss, most notably Saks Fifth
Avenue, one of the German company's largest accounts.
"As a retailer, we're always concerned when people grow quickly," said Dan McCampbell, men's
fashion director for Saks Fifth Avenue, which will be increasing its commitment by adding the
younger Hugo line this fall.
"Hugo Boss has made great strides, and they're a much more powerful brand in America," said
McCampbell. "They've established themselves as a well-rounded brand."
"One can choose to spend money in a variety of ways," said Staff. "What could be perceived as
expensive may not necessarily be expensive. Take the helicopter rides - the total cost we
anticipate will end up less than a page of advertising in a magazine."
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