Sensing profound change coming to the retail landscape, Larry Rosen called his senior executives to an urgent meeting at Canada’s premier high-end men’s clothier.
Luxury men’s sales were on a tear despite the shaky economy, but Harry Rosen Inc. still faced uncertainty. Savvy new foreign retailers were rapidly invading Canada, and upscale U.S. department-store powerhouse Nordstrom Inc. was mapping out its entry here.
At the meeting late last year, Mr. Rosen’s top team drew up its own battle plan, buttressed by an unprecedented $100-million war chest to expand most existing stores, add a few new ones and pump up e-commerce and staff training over five years. It envisions eventually making acquisitions, possibly even a risky move into women’s luxury fashions, although Harry Rosen ditched the segment more than two decades ago after a challenging run.
Mr. Rosen’s deliberations about betting again on women’s wear underline the lengths that domestic retailers must go to today to keep up with a fast-changing retail environment. Foreign merchants, including Nordstrom Inc. and even key suppliers such as Hugo Boss, are rushing to set up shops here. Canada’s relatively stable economy makes it an attractive venue for international expansion, but a more crowded field threatens to steal business away from incumbents, including Harry Rosen.
“It’s not business as usual,” said Mr. Rosen, 55, chief executive officer and the second generation to run the family business, founded almost 58 years ago by his father Harry, 80 and retired. “In the next five years, there are going to be winners and losers. I am very confident that we have the direction to be on the right side of that equation.”
Today, the CEO is racing to cash in on the burgeoning demand from thirtysomething men for everything from $5,000 Tom Ford suits to $800 Denham jeans, while global luxury players such as Gucci and Hermès focus more than ever on men’s products.
“He’s taking an offensive strategy now before the potential entry of Nordstrom,” said Antony Karabus, a Toronto-based retail consultant who has advised luxury chains across North America. “There’s a lot of untapped spending among men. … But I struggle with the female side. There’s more risk there.”
The risks and rewards are surfacing worldwide. The men’s luxury market is outperforming the women’s sector in all global carriage-trade categories, according to a recent study by consultancy Bain & Co. Sales of premium goods rose 14 per cent in men’s merchandise in 2011, but just 8 per cent in women’s, it estimated.
Mr. Rosen isn’t letting the moment pass him by. His annual sales of more than $260-million have jumped about 10 per cent in each of the past three years, after having dipped 8 per cent in 2008 when the financial meltdown hit, he said of his privately held chain. Even so, amid the rocky global economy, he anticipates his gains will slip to 8 per cent this year.
His pondering of a move into women’s luxury fashions reflects an urgency to plan for a time in the next few years when his premium men’s wear sales will begin to peak, and he will have to search for new growth opportunities in either international markets or domestic acquisitions. He favours the latter.
While Harry Rosen’s foray into women’s wear in the eighties was disappointing, today’s CEO said he’s learned from the chain’s past mistakes. In particular, it entered the women’s field on its own, rather than acquiring a specialist retailer to provide it with expertise in the area. “You would be surprised at how little I know about women’s wear.”
For now, he’s sticking to what he knows best. It means spending $100-million in five years, triple the capital investment of the previous five, with the goal of almost doubling annual sales to $500-million. It entails virtual changes to draw younger men, including adding suits to its e-commerce site, even though Mr. Rosen once thought selling tailored products online didn’t make a good cyberfit. Now he feels young customers are comfortable with snapping up suits on the Web and heading to the store for alterations.
The virtual world is a priority for him because foreign retailers such as Nordstrom have had a head start in building their online businesses. “We realize it’s important that we not just get as good as these people but we have to be better.”
Nordstrom also excels in customer service, which hasn’t escaped Mr. Rosen’s attention. He’s doubling his staff training budget to $2-million to upgrade practices, which now include keeping track of customer preferences, measurements, birthdays and names of the wife and children. Mr. Karabus, who shops at Harry Rosen, said his regular salesman, Rocky, e-mails him regularly about new shipments of Canelli or Zegna items, and has them ready for him to try on when he comes to the store. “He knows what I like.”
Still, while Mr. Rosen and other luxury retailers are enjoying a rebound from the downturn, some are starting to see signs of a slowdown. Mr. Rosen’s sales grew a less-than-expected 5 per cent in the key holiday month of December, pinched by a domino effect of heavy industry discounting to draw reluctant consumers. Consultancy Bain predicts global high-end sales will rise 6 to 7 per cent a year to 2014, down from 10 per cent in 2011.
In Canada, Mr. Rosen feels the pressure of the shifting sands. He thinks he has an edge over foreign rivals by catering to distinct customer tastes at each store. His Vancouver outlets stock more sports jackets over suits and ties for the more casual West Coast shopper; his Toronto Yorkdale Shopping Centre outlet carries more Versace and Dolce & Gabbana for its large Italian and Russian clientele. “Our international competitors wouldn’t have a clue about these discrepancies.”