CK’S BRITISH INVASION
Byline: James Fallon
LONDON — Calvin Klein is one of the world’s truly global fashion brands. Now, it’s beginning to act like one.
The company has been on an aggressive international shop-opening program for the year — Calvin Klein Collection stores in Seoul and Paris and CK Calvin Klein stores in Hong Kong, Jakarta, Milan, Kuwait City and Riyadh. The last two months alone have seen the openings of CK Calvin Klein stores in Moscow, Sydney, Barcelona and, most recently, London and Lisbon.
This month will come Tel Aviv and Jeddah shops, while next year the company plans to add CK Calvin Klein stores in Rome, Dubai and possibly Berlin or Dusseldorf, as well as a Collection store in London. It’s all part of a drive to have 100 CK Calvin Klein stores in Europe and the Mideast by the year 2001, generating wholesale sales of more than $100 million, said Gabriella Forte, president and chief operating officer of Calvin Klein Inc.
The London store, which at 10,000 square feet is one of the largest, needs to have sales of $7 million in its first year to break even, she said.
But Calvin Klein realizes that a sound corporate structure is just as important as the stores themselves, and that’s what the company is now implementing.
“We were late in arriving on the international scene and that meant we’ve had to do a lot in two years,” Forte said in a recent interview in the CK Calvin Klein store in London. “It isn’t just about opening stores. It’s whether our company can behave like an international one internally as well as externally.” This has meant setting up international licensees (including Stefanel for CK Calvin Klein and Designer Holdings and Fratini for Calvin Klein Jeans and Calvin Klein Khakis) as well as installation of information systems and business processes in Calvin Klein Inc. to oversee its international communications, marketing, promotions and licensees.
“To create that kind of international culture within a company takes a good five years,” she said. Or longer. While Calvin Klein may have lagged behind Ralph Lauren in expanding globally, the fact is that Klein’s fragrances, jeans and underwear have been sold globally since the late Eighties.
Because of that, the brand is almost better known in London than some of its European competitors and many of Klein’s American contemporaries. In addition, most U.S. designers have had little major impact in Europe until the last five years, when slower growth at home forced them to look overseas for expansion. Only then did American designers begin to focus their formidable financial resources on Europe in terms of shop openings and advertising to build awareness of their brands.
The two-floor CK Calvin Klein store in London — delayed by four months because of problems obtaining building permits — is part of a mushrooming of designer stores here that also is seeing the arrival of Tommy Hilfiger men’s wear in Sloane Street this fall and a flagship Tommy Hilfiger store selling women’s, men’s and children’s wear in New Bond Street next year.
In addition, Ralph Lauren’s 20,000-square-foot flagship will showcase all the designer’s collections beginning next spring. The arrival of the Americans on Bond Street marks a shift in a designer market that previously was dominated by Italian and French labels. But what the Americans seem to realize this time is the importance of structure and management expertise.
Many came over to the U.K. in the early Eighties with freestanding stores — often through a link-up with the London retailer Browns — but the strength of the dollar and difficulty meeting deliveries sent them back to the U.S. Only Ralph Lauren maintained a presence in London with his store on New Bond Street, but it took almost a decade for that to be consistently profitable.
Having undergone such a rapid shop-opening program, Calvin Klein executives are now pausing to examine what their next step will be.
“This has been the first phase of our rollout, and we now are trying to draw conclusions,” Forte said. “We need to look at the mix of merchandise, what shops are adjacent to ours and the fixtures in the stores. It all needs to be addressed.”
The shops, all of which involve local partners, have opened with a set product mix in terms of women’s and men’s wear and with set percentages of tailoring, casualwear, jeanswear and underwear. The company now is fine-tuning those mixes to match each store with its local market. In an indication of its growing sophistication, the company recognizes that consumers in Italy view the brand differently from those in the U.K. It is those subtle differences it is trying to address.
“We never considered doing these stores without a local partner,” said Forte, adding the CK Calvin Klein store in London is owned by Stefanel. It originally was going to be owned by Tricia Earl, wife of Robert Earl, who also was due to open the Collection store on Sloane Street. Forte said Calvin Klein currently is in talks with Tricia Earl about the Sloane Street unit.
Meanwhile, the brand is building up its distribution in Europe through department and specialty stores. In the U.K., it is selling to Selfridges and Harvey Nichols, while in France it will begin wholesaling CK Calvin Klein to Galeries Lafayette and a few specialty stores in southern France. But Forte recognizes that the company needs to keep a sharp eye on distribution so it doesn’t end up in the wrong doors or endlessly counterfeited. She said the U.K. market is a particular problem when it comes to counterfeit Calvin Klein Jeans, and the company has to hold regular sweeps and raids to seize shipments.
“Being international means we have to aggressively pursue counterfeit products and the diversion of U.S. product to overseas markets,” she said. “We also have to be very aware of our price structure worldwide.”
Such issues are why the company is moving to set up country-specific organizations in all its major markets. Calvin Klein has had a European operation based in Milan since the early Nineties and also has an Asian operation based in Hong Kong.
Forte said those are no longer enough. “The companies that are successful are the ones directly linked to their consumers,” she said. “We need to set up systems to clearly understand what the Calvin Klein consumer wants. Now the only feedback is the stores, and maybe that isn’t so ideal. We need to be in every major market with our own people to monitor the brand and find out what is expected of us.”
Forte continually stresses the necessity of meeting consumer needs. It is Calvin Klein’s emphasis on the consumer that will enable the brand to get up to 55 percent of its sales outside the U.S. by the year 2001, she predicts. Forte said that when she originally mentioned that target to the company’s executives two years ago they thought she was too ambitious and scaled it back to 45 percent.
But Calvin Klein expects to get about 28 percent of its projected worldwide sales this year of $5.3 billion in Europe and about 15 percent in Asia. Last year, 21 percent of its $4.4 billion in sales came in Europe and 11 percent in Asia. “So we already are talking 43 percent of sales outside the U.S., and we still have four years to go to our plan,” she said. “But we have to make sure the structure is in place to achieve that goal,” Forte added.
“Calvin doesn’t want just dreams. You can open stores, but if the company doesn’t have the structure those stores won’t survive and be profitable. That’s the reality. To dream without a reality check is great for the image, but that’s not what we aspire to.”