Brand in Crisis: How Esprit lost its way
Hong Kong - Once a US$20 billion company, Esprit’s market value has plummeted 90% to US$1.8 billion in the past four years. Increased competition from Hennes & Mauritz, Zara and now Gap, has lured customers away and driven the brand to confess it has “lost its soul”.
In September 2011, the company reported a 98% drop in its full-year net profit amid Europe’s continued economic weakness.
Chief executive Ronald van der Vis then devised a $900 million plan to expand and refurbish Esprit’s stores worldwide over four years. An extra $870 million will be spent on branding, leading with a campaign featuring model Gisele Bündchen.
The retailer hired former brand director of Hennes & Mauritz in 2010 to rejuvenate its fashion lines, which Van der Vis said had become “too safe and boring”. Last
November it appointed Holly Li, the former adidas general manager for North China, as CEO for China, putting in motion its plan to double its number of stores and sales revenue in the world’s most populous country by 2015.
Can Esprit rebuild its brand in the face of fierce competition and more demanding consumers? Is advertising enough?
"The stakes have changed for Espirit," said Sarah Woodhouse, Group managing director at Cohn&Wolfe-impactasia.
"The retail landscape has transformed considerably in the past few years. New brands have entered the market and competition has increased. I think consumers are no longer clear about the demographic Espirit is pursuing and so they are not sure whether the brand is “for them”.
Woodhouse, which recently landed the Forever 21 launch in Hong Kong, said consumers are used to constant reinvention and creative communication and brands need to work hard to engage and maintain their interest.
"There is no room for complacency in the market. It doesn’t mean what the brand is selling is not good, but if no one is communicating its benefits then no one will sit up and take notice and be enticed into the store.
Catherine Feliciano-Chon, managing director at CatchOn & Company, argues the group failed to stay relevant, especially with growing competition from fashion brands such as Zara, H&M and Forever 21 and retailers such as Uniqlo.
"While other brands have defined their universe as a point of difference, Esprit’s mishmash of youth and lifestyle is so muddled it fails to register a heartbeat. There’s very little PR can do unless the brand re-thinks and overhauls its product offering and brand image.
"Meaningful PR can only draw from a well-defined proposition because today’s consumers are savvy and will see through fleeting stunts and superficial initiatives. In short, give me a reason to believe again."
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