admin Esprit is originally an American brand, but its heritage of ‘California cool’ has almost been lost over the years. After thoroughly reshaping the company over the past three years, the brand is going for a major relaunch this autumn. In the brand’s European office in Amsterdam, CEO William Pak spoke about the company’s journey and what to expect from the new Esprit.
As part of the new strategy, the European headquarters has recently been relocated to Amsterdam, in the relatively new industrial area of De Houthavens. From the windows, one looks at the river IJ. In one of the meeting rooms, top executive William Pak settled down for an interview with FashionUnited.
How did you end up here?
The brand transformation has three components: restructuring, rebranding and repositioning. The restructuring took about a year and a half and then we were deciding to go global again and in doing so, Amsterdam was our first choice as a European headquarters. We looked around for a good spot, but we already had this space. It was a wholesale office with a showroom, but we decided to use it as a regular office. As you can see it’s overcrowded now, so we’re going to expand it to this building next door. We are adding space.
The German office in Ratingen used to be the global headquarters. What will happen there? Is that still an office or does it have a different function now?
The short answer is that it’s been the global headquarters for about 22 years. They moved there from Düsseldorf. In fact, all global headquarters have moved there. What happened is, things started getting very provincial and localised and then design and creativity became very localised. So over time the whole world closed up shop and everyone just moved to Germany.
When we started the rebranding part of the business, one of the three big things we got to do is go global again. In doing so, we decided to move the European headquarters here to Amsterdam. The office in Ratingen is still there because of a long-term lease, but it’s more German-market specific – so, DACH region, Germany, Austria, Switzerland. Everything else in Europe is here in Amsterdam. We have a huge expansion of our technology team in Amsterdam and a denim innovation centre.
At the beginning of this year we moved the global brand headquarters to New York City. So the brand – meaning the drawing, sketches, designs, creative marketing – all of that’s in New York. Hong Kong is the stock market and sourcing operations centre, and also the factories are in that region. So the purchasing, the centre of operations, is there. That’s the new structure. We were calling it Futura Hub last year. That’s how we were rolling out the ideas.
Esprit announced a new strategic plan, with a lot of different topics and focus points, including North America and Asia Pacific as focus markets. Why is there such potential there?
This brand transformation is in its third year now. At the very beginning of the three-year transformation, Esprit was in the middle of the PSP (Protective Shield Proceeding) in Germany. So when we inherited that procedure, we continued to finish that plan, but it was right near the end of it. The next step was to do the restructuring, which puts the product first.
In our pursuit of product excellence and heightened quality standards, we undertook a strategic review of our vendor base, originally comprising over 200 factories. This initiative aimed to optimise our collaboration with our top partners and unlock their maximum potential. To further enhance our supply chain, we enlisted the expertise of two sourcing agents, enabling us to access superior factories and streamline our operational efficiency. As a result, we have successfully re-focused our vendor network to better leverage our partners with around half of the overall production going to our top 10 vendors.
This led to our first productivity bump. Partly because of this, in 2021 we had our first net profit as a company in almost ten years. A large part was the production location.
In 2022 it was time to decide what to do with the company. So we rebranded it. We did a survey internally and externally asking basic questions like “What are we selling?”, and almost everyone had a different answer as the brand no longer had a core identity.
We started the rebranding last summer. It takes about a year almost to do a rebrand launch and we’re now one year in. We’re going to launch the new Esprit in September. It’s the new Esprit because it’s the new updated modernised version of Esprit, based on the brand pillars: playful, modern, cool.
We started digging through the brand’s archives from 1968 onwards. Two of those years were missing, nobody could find them, but they were finally uncovered in a warehouse. We started digitising these archives and drawing inspiration from it. Our heritage is good quality clothing and good design. In the 1980s, we were at the forefront of sustainability. We had the first programme for organic cotton. These are all things that people have forgotten, but this is what made the brand so unique in the 80s.
So we draw inspiration and create new things. It takes one year to go from a new design to roll out, which will begin in the fall. We are now building up noise to show people we’re back. The big launch will come in the fall.
What’s next on the agenda?
We are now in the repositioning phase and that means that the consumer will see the brand in relation to other brands, as a lifestyle brand or as a higher quality clothing brand. This will happen in the coming quarters.
Esprit is lucky in the US. The brand left the US two decades ago, so people have not experienced the past twenty years of degradation. They only remember the good Esprit from the 80s and 90s.
When I say ‘good’, I mean better quality design. Now we can enter what I would say is an affordable, premium luxury segment. This is very important in the US because it was originally an American brand 50 years ago and people need to understand the connection. We’re opening the stores in Soho, in Flatiron, Midtown, in Los Angeles near Beverly Hills. We’re doing this on good streets with appropriately sized stores and they’re all omnichannel.
We are doing a similar thing in Asia, which is a growth market. We’re not focused on rolling that out this year because we want to make sure the brand is coming out strong in the US, and in New York in particular because of the new brand’s headquarters.
In Europe, the brand has been on the decline for 25 years. The main reasons for this were the wrong store locations, the wrong size of the stores, the wrong market segmentation and the wrong product quality. So in developing our plan, we had to set three priorities. While there are a hundred different priorities to fix the brand, there are three main priorities. Among which there are many others.
What are these?
Number one is design and quality, because in the end it is a lifestyle clothing company. As I said before, the quality is now great. The design is done by a brand new team that joined us over a year ago. Tom Cawson joined us two years ago from Helmut Lang. Our denim innovation centre also launched in July 2022, so the new denim campaign will be released in August.
So design, quality and fit. The fits hadn’t been updated for nearly 20 years. So that’s really why people weren’t repeat customers, why there were returns. So we fixed that, updated all fits. So that’s number one: the product design.
Number two is to put the consumer first. The consumer is everything. This includes technology, delivering products to consumers when and how they want it, online or in-store, connecting them to the e-commerce and online community that we’re creating.
This gives them access to the brand. We don’t just want to be a brand that only sells clothes online, or has shops with only clothes. We want people to come back to the brand and feel connected to it. The brand has power and it’s about the people with and in the brand. It’s not just clothes.
The third big thing is operating on a global scale again. And this is important on many levels. You can open stores in the US and Asia, but that’s “only” opening stores in a global fashion. The creative mind, which had been trapped in Ratingen for 25 years, had to become global. We had to make a big change and move the creative hub to New York City. So the brain of the design is New York City. We built a design centre and a denim innovation centre in Amsterdam, but it’s all connected to New York.
Those are three big things that we’re prioritising and everything flows from that. Number one is product quality and design. From there come the different regional designs. Amsterdam for European design, Ratingen for even more specific German design. There is an Asian hub in Korea and Hong Kong for design and New York of course for the rest of the world.
You mentioned the consumer-centric model. Can you elaborate on this?
We have the online space, we’ve got a loyalty programme, but we also have the stores.
We’ve got five senses that we’re pushing in our new stores. Touch, which is the fabric quality. Sound, because Esprit was known for music back then, and we want to bring that back. And of course sight is the look of the store and collection with great colours and design.
Smell is another one. We hired this company to have this specific scent in our stores. Not the kind of fragrance where you smell too much, but just something that connects you to the brand. And then taste – at our Green Street pop-up in New York we have community events. We don’t just sell clothes. Once a month we want to organise events. A month ago we had an editor’s dinner, which gathered a number of editors from different fashion magazines in Soho. Another night is DJ night, another night is yoga, or sustainability night. That’s the new concept we’re doing.
Will it solely be pop-ups for now? Or is it also more focused towards own physical monobrand stores?
This repositioning takes about a year. You roll out pop-ups much faster than physical stores. So we started in LA, New York and Korea – all major cities.
For the permanent stores, we started negotiating leases last August. Now we’re rolling out permanent stores in New York and LA this fall. Vancouver is this winter. And then come Miami, Chicago, Toronto and Texas in the first quarter of next year. In Asia, we’re going to wait until the US really picks up steam before Esprit opens doors there, but we’re in talks with partners.
We have partner stores in Southeast Asia, approximately 20, and in Latin America, approximately 50. In Europe, we have more than 160 of our own retail stores and approximately 400 franchise stores. We also currently operate two pop-up stores in the US, in LA and New York City.
In Europe, these stores have been around for 23 years. It’s the kind of store where it’s not what Esprit really is now. They are very large with rack after rack full of clothes. We’re changing that model, but it’s going to take a few quarters because we first have to internally educate our staff and the media and also customers that we’re now going to be the new Esprit. The new stores then have to be moved to a different location with a better size, better quality and a different look.
I imagine the stores have to change because the way consumers shop now is so different. They are trained before entering the store, so the whole purpose of the store is completely different than it used to be.
In the press release for the pop-up, we read that the look and feel of the brand will steer back towards this cool Californian aesthetic again. Can you tell us more about that? What can we expect from the collection?
We feel that having many labels (such as EDC and the White and Black label, etc.) dilutes the brand itself, because ultimately the customers, especially the loyal ones, come back because they love Esprit and trust the brand. So we came up with just ‘Esprit’ as a new brand. There is no second, third or fourth level. The only difference in the store might be the colour of the label, but it’s not a different label with a different name.
This refined version of Esprit has a pyramid-shaped range. The pyramid consists of ‘hero, collection and foundation’. For example, Hero could be a sheepskin item or a sequin dress. The materials are more refined, but it will only be a smaller percentage of the entire range. It’s aspirational, it’s for styling. It’s in our flagship stores to make people think, “Oh, I can wear that with something else I already own.” So mix and match. That’s “hero” at the top of the pyramid.
And then there’s collection and foundation which is the bulk of the merchandise.
When we say ‘California cool’, we’re going back to what feels right. The fabrics, the colours and the beautiful fit, with a particular focus on denim. The fit of denim is, as many people say, the hardest thing to do. And once someone finds the right denim, they always go back to it. So we really focused on that.
So ‘California cool’ in the sense of sustainable materials, better quality product and colour. But each region has a specific part of the collection, because what works in warm weather is different than in cold weather. So small variations, but the largest part is this pyramid.
So the biggest part of the collection are the standout pieces that you can combine with anything in your closet basically?
Yes, or at least aspire to.
Who’s the target group of this new Esprit?
Many people ask this and there is not one specific answer as the brand has transcended so many generations that it has become a household name in its own right. So we did an investigation. There is a customer classification called ‘firebrand’ and ‘minimalist’. We’re going to spend some time connecting these two customer profiles. Firebrand is someone who wants to be themselves, going against the status quo to really feel good and mix and match. This is more Gen Z, I’d say.
But the group that has a strong affinity with the brand is also minimalist. And that’s someone who likes casual and elevated luxury, but chic and something understated. That’s the minimalist. It’s a little bit more Gen X overall. So that’s the market segment we’re going for.
You also mentioned Futura Hubs earlier.
This was the third part of what we’re focusing on, which is moving towards a global scale again. And instead of just opening stores all over the world, we also had to change the company culture from the inside out to go ‘global’. That’s why we opened Futura, and that is why we have chosen Amsterdam, New York and London as Futura Hubs. And these are design centres, thinking centres and customer connection centres.
And they also all have different focuses as well? Because Amsterdam is more focused on innovation and denim?
Amsterdam is denim innovation, but also serves as a European headquarters on the corporate side. It has two hats. The first is innovation, denim, technology and the second is the European headquarters. New York is the global brand headquarters. Everything runs through New York in terms of brand, sales channels, technology and logistics.
The brand mentioned the direct-to-consumer opportunities in Europe, but also the partnerships that it wants to enhance. With the partnerships, who is the retailer that Esprit is looking for? Are they department stores, independent retailers?
It depends on the region. In North America, the franchise model doesn’t really exist for retail. It’s more the department stores you work with. In Asia and South America, the franchise model is the dominant distribution model. I mean, there are so many countries in those regions that it just makes economic sense to do it with a partner because they cover more than one country. There are different languages, different export and import taxes. With all these limitations, it’s easier to do it with partners.
In Europe it is a mix of everything. It’s a mix of upgrading our warehouse mix. We want to take ourselves to the next level. I have met many shopkeepers in the region. For example, I spoke with De Bijenkorf. We are not yet at that level, but they are also in a repositioning process. So it’s good to talk to them until we’re ready.
And in the franchise world, a lot has actually spread very successfully across Europe. We’re on an upward trend here as well. It’s a mix of franchise, department stores and retail. They actually all work together. I don’t want to see them separately, because before they didn’t work completely the same way. That has only changed since May – everything is aligned. Since May, we have seen an increase in e-commerce and in retail and also with wholesale partners.
I think it’s a long-term conversation that we’re having with them because a lot of wholesale partners in Europe are still suffering from inflation and things like that, but we’re seeing signs of a turnaround.
The latest financial report mentioned inflation and the effect of the war in Ukraine on Esprit’s results. You just said you have seen an uptick in the results. Can you also say a bit more about what you’re expecting for this financial year?
Last year was when we decided to rebrand, and we did a major liquidation. I think you’ve seen that report from the old inventory of the previous generation. With all the new marketing campaigns being released, we don’t want our old inventory to come into contact with them. That just doesn’t make sense. It’s confusing for the customer.
The new stores and website will launch on September 1 in the US and shortly thereafter in Europe. So stores, websites, marketing, branding and clothing come together this fall.
In order to do that, we liquidated. When you do a major liquidation, you always take a hit on the margins. But we had to do this in order to do the rebranding. Each rebrand takes three to four quarters of pain. I call it a ‘pain period’. Many brands can’t get through this pain period because of the short-term expectations of ownership, management and KPIs. But you have to bridge that gap with the plan and the dream. We went through that and we’re going to launch in a few weeks.
So to answer your question, we’re launching all of this in the fall, so we expect to be able to pick up speed by the end of the year. And as the US market grows for us, we need to diversify more.
This is another reason why we need to operate bigger. We went global with our business last year and this year, and we’re going global with our stores this year and next year. As a result, we diversify our economies. The US is in a bull market. When the US grows, the whole world grows for us. And Europe will benefit from this.
Looking towards the future, say three or five years from now, what is the ideal point for Esprit?
I think it’s a few things. Regionally, in three to five years we should have a balance in the three major regions of Europe, Asia and the US. Asia will probably be our third region that we’re going to really tackle because we want to make sure that North America has a solid foundation.
In terms of store mix: All of our new stores are omnichannel stores, so that means a lot of technology is integrated into them. So whether you tap your phone to pay, or have a coffee bar in the store without a cashier. We’re not going for hundreds of stores like before, but every store is very technical, very attractive, very connected to our e-commerce and our partners.
I’ve talked to our partners and many of them want to join us on our technology journey rather than go it alone. I don’t think many brands are doing it with their partners on the technology front.
How will that work exactly?
The loyalty programme has already been merged across channels and we operate the same omnichannel services across most of our franchises. I think a sale to an Esprit customer, whether through a franchisee or not, is the same thing. The customer must have the same experience.
Because otherwise a franchiser would have to invest in a loyalty programme themself?
Or the wholesale division will fight for their sale and retail loses out as a result.
The customer can therefore expect the ‘Californian cool’ look, more experience in the stores, and affordable luxury. Does that mean the price point will also slightly change?
The price depends on where you are and where you shop. At the top of the pyramid is “hero.” That is a significant price increase. So it is about 300 to 1,500 euros for a piece of clothing. But like I said, it’s a small percentage. If you’re in a flagship store in London or New York, or if we’re doing an upgrade here in Kalverstraat (Amsterdam), part of that collection would hang there. But in other regions we exhibited less of that collection or only exhibited it.
The ‘collection and foundation’ will go up slightly in price, in line with the market. But not by much. People will still find what they want.
People will still find Esprit at a reasonable price point similar to its price point in the past?
To do this, we had to revamp our product planning and merchandising divisions. We have changed quality so drastically that it is no longer just about price.
Is there anything else that is important for Esprit right now?
As I mentioned at the beginning, the company had forgotten something in the past, which is the product. That must be good, we must be proud of what we sell. And the company hasn’t been proud of it. It was just ticking boxes every year and that has finally stopped.
We launched our new collection outside of Ratingen for the first time in 23 years this summer, in Dusseldorf. We took one floor of our flagship store and turned it into a showroom. We left the ground floor of the store open so that customers could come and see the atmosphere. It was a moment when design and fit came together for the first time and our whole team was very proud and motivated.
The all-new Esprit will be on display from the first quarter of next year. The Q3 and Q4 collections have already been upgraded as much as possible, but they are based on what we inherited when we took over the company. The new Esprit will definitely already be on display in Q3 and Q4, but the really good items will come in Q1.
So Esprit has a completely new design?
It’s a very strong collection. But you’ll see that a lot of Q3 and Q4 pieces already align with our brand values.
A lot of media say, “Oh Esprit, are they leaving Germany? What’s going on?” But actually we are upgrading, we are optimising. That’s why we’re trying to open newer stores in better locations, with better partners, with better innovation, better visual merchandising and a better assortment.
There is also going to be a pop-up in New York. Is that store concept an example of what we can expect for the permanent stores?
Oh no. The pop-ups already started before the launch of the new Esprit, which will only take place this fall. So we did the pop-ups to generate some noise and attention.
The pop-ups in LA and New York are based on the design concept of Memphis Design from the 1980s and 1990s. The Terrazzo floors, the sharp shapes of triangles and circles. That is Memphis design, which Ettore Sottsass pioneered in the 1980s with Esprit. It’s a piece of nostalgia that everyone remembers from the 80s.
So with the nostalgia, you hit the US market the right way with the comeback.
Yes. The clothing also has many nostalgic elements such as vintage and varsity. Then we will continue with the relaunch in the US market, which will have a refined look and feel and an improved range. It’s a multi-chapter journey.
So it’s about creating noise, the new collection and the new stores?
And bringing back nostalgia.
We’ll have to wait and see what the stores will look like then.
Yes, you will be able to see it in a few months.
This article originally appeared on FashionUnited.NL. Translation and edit by: Rachel Douglass.
