Brand Health Check: Esprit's crowded road to recovery in Asia's retail market

A hip and trendy, high-flying brand of the 90s, fashion retailer Esprit posted a 15^th consecutive year of double-digit growth in 2007 along with HK$6.45 billion (US$822 million) in net profit in the same financial year. However, the birth of fast fashion in the early 00s marked the demise of this popular label as it tumbled into years of losses.

Over the next decade, the company was sold to a Hong Kong-based conglomerate, and it has been downhill since then. The brand experienced a rapid decline. Esprit shares fell almost 50% over the next decade, was removed from the Hang Seng Index in 2013 and posted a whopping HK$2.55 billion (US$325 million) net loss in 2018. Brand equity plummeted as well.

The pandemic-induced closures were the final nail in the coffin. Between 2019 and 2020, the Asia business contributed only about HK$267 million (US$34.4 million) to the group’s revenue. That was less than 4% of its total turnover. In June 2020, Esprit decided to retreat from the retail business in Asia, shuttering 56 stores in all. Mainland China was the exception, with a plan to continue operation under a joint venture. But owning to licensing issues, that strategy didn’t fly either.

Now post-pandemic, the brand is re-emerging. The first signs of recovery came in March, when the fashion brand announced a new senior leadership team, including a new chief executive, chief financial officer, chief product officer and chief digital and marketing officer to “shake up brand” for an international comeback. The brand also reported its first profit in five years on top of HK$8.31 billion (US$1.06 billion) in revenue for 2021.

William Pak Eui Won, CEO of Esprit Holdings Limited. Photo: Esprit

A pop-up store opened in Seoul in April, and another in Hong Kong’s prime shopping hub Causeway Bay in August. While the brand strategy remains ecommerce, the company wants to have at least one signature store in key Asian markets where it also has an online presence. As the company plans an optimistic return across Asia, it faces the uphill task of winning back market shares in one of the most competitive and crowded fashion markets in the world where global giants are rapidly and aggressively expanding their presence. Campaign Asia-Pacific asked marketing and brand experts on what the key to second-time success look like for Esprit. 

What must the fashion retailer do differently to avoid the fate of 2020?

Olivia Plotnick
Founder, Wai Social

Consumers are no longer flocking to Western-style, low-quality clothing products. Therefore, if Esprit wants to imitate the business model of fast fashion brands, it will obviously no longer work.

At present, the main consumer groups who buy clothing are culturally confident and pay more attention to individual expression. Esprit's product design needs to keep up with the current consumer preferences of Chinese consumers and prepare to compete with domestic brands, like Peacebird (太平鸟), Li-Ning (李宁). In the meantime, they will need to invest resources into shortening their supply chain, re-planning the layout of offline stores, greatly improving the efficiency of online sales, and making good use of digital marketing tools.

However, the most important thing is probably to clarify the brand positioning as soon as possible. After all, Esprit once (very publicly) fell from the leading position and experienced several years of decline, finally becoming a "dead brand” that was sold at super low prices and abandoned by most previously loyal consumers. These consumer impressions are indeed difficult to erase in a short period of time.

Whether it is to move closer to high-end clothing or get into athleisure wear; whether it is to discover retro style from its own DNA, or to open up a new vision, it must be suitable for the aesthetics of current local consumers and show the attitude and courage to surpass competitors.
 

Martin Roll
Business, strategy and brand marketing consultant

Fashion retail has moved very quickly in recent years, so Esprit needs a compelling new strategy to recapture Asia. The brand has deep legacy, was a first mover back in time, and an iconic status. These are basic features that can play in the background and add texture to imagery, strategy, brand communication and visual merchandise.

The strategy should clearly communicate how Esprit views the world, how they view their consumers and most importantly: What type of fashion are they bringing to the world? What statements do they provide? Consumers use fashion for functional purposes, but also for a wide range of emotional and sociological benefits. Fashion is used to express the individual consumers views and perspectives so Esprit needs to have a distinct profile so consumers can easily identify themselves with the brand.

The fashion retail market is very crowded and fragmented, so the largest challenge will be to develop and own a unique position in the market. Esprit will face competitors like Zara and H&M, and a very long list of smaller, regional competitors including more niche-based Asian brands. The new strategy needs to be very agile, in tune with the ever-changing trends, and at the same time, very responsible in regard to sustainability. Esprit became irrelevant because it lost touch with the market, and the fast-moving rebalance between retail and ecommerce. The brand needs to demonstrate that it can capture the modern consumers, bring relevance and differentiation, and be fit for tomorrow.

Sonja Prokopec
Marketing Professor, Essec Business School

Focus not on being a fast fashion brand selling inexpensive clothing but rather a more premium brand that produces high quality, sustainable clothing is a must for the brand. In addition, the visual aesthetic is important. Consumers today, in particular Gen Z and millennials which the brand will target, are looking for more unique pieces that would allow them to express their identity better. Esprit has been known for youthfulness and colour, which is not enough in current climate.  

What strategic steps should Esprit take to weaken the negative brand image and what will the key to success in Asia’s highly competitive and crowded retail market look like?

Olivia Plotnick
Founder, Wai Social

To weaken the influence of the negative brand image on consumer behaviour, it might be worthy to consider changing or upgrading the brand name to a different one, or only using Esprit as the name of a specific retro series to echo the nostalgia of the brand's golden period.

The use of high-quality fabrics and simple, elegant design with fashion acumen will have long-term appeal among consumers. At the same time, comfortable, breathable but relatively inexpensive fabrics will also be welcomed by younger generation. With the gradual improvement of people's awareness of healthy living, attention to fabric materials will become as important as a food ingredient list.

Instead of opening many stores and getting into management chaos, it is better to open large-scale boutique experience stores in popular areas of key cities, providing services such as coffee, roasting, VIP rooms, flash events, etc. to increase the brand's added value.

A strong e-commerce and logistics network has become imperative for success in the domestic market. Opening a flagship store on Tmall, linking to a fully functional mini-program store on WeChat, and exploring live-streaming opportunities on Xiaohongshu or Douyin is a strategy replicated by tens of millions of brands. But the key to success is that instead of rolling it out all at once, it is better to tailor it to the most important platforms, and then seek for longer-term and stable development based on proven operational capabilities. Of course, in the case of Esprit, the management of current retailers who sell products at very low prices and cleaning up mixed product information on Taobao and other ecommerce platforms will be a challenging reality that cannot be ignored.

Martin Roll
Business, strategy and brand marketing consultant

Fashion is primarily about the product, so Esprit needs to upgrade and redesign its entire product portfolio: Are they basic? Fast fashion? Fashion forward? They need to develop a clear product strategy in line with their new corporate strategy and brand identity. It should be clearly aligned with sustainable fabrics and materials, and circular elements should be considered too. The product strategy needs a critical balance between basic styles and more fashion-oriented styles.

The stores need upgrades so they both show newness and a new design identity, but at the same time are in tune with the legacy and keeps some elements that are easily recognised. Stores act as an important identifier as they will seen by many consumers and potential consumers including younger audiences. The stores need modern fittings, colours, lighting, and overall ambience. Shopping in a retail store is about experiences so Esprit needs to craft and deliver on very compelling experiences for the shoppers. Ecommerce is of course also critical so the brand needs a strategy for how they will offer their product and services via digital channels.

Communication will have to showcase the new Esprit. It should be clear, distinct, relevant, and differentiated, so consumer easily can identify what Esprit is offering. This includes a new style of models, photography, and visual elements.

Digital communication will be critical including social media. Social media is a great opportunity to engage (and re-engage) with the brand’s audiences, as it can give a more personal feel that will help to develop the brand in the consumers’ minds.

In conclusion, Esprit has a unique chance to capture the market, but it requires owners and management to be bold, be daring and be different. The Asian fashion market is very competitive so agility and resilience will be key factors for success.

Sonja Prokopec
Marketing Professor, Essec Business School

For products [Esprit needs] better quality, products made in a sustainable way, but also a clearer expression to the brand identity. A strong brand DNA with strong visual codes is essential when trying to position the brand as premium. 

This should also translate in the whole strategy—more focus on storytelling, better store experience, and, most importantly, good customer service. There is also a potential for collaborations with other brands or designers or even artists which would allow Esprit to elevate their brand image and help consumers forget about their past.