Branded young fashion chain USC is rolling out a radical strategy in a bid to return to profitability, and marketing boss Jo Bohling is its man on the ground.
USC brand and marketing director Jo Bohling is tackling two marathons this year. The first is the 26-mile London Marathon, which he is running to raise £8,500 to buy an incubator for his local hospital. The second is turning an £8.2 million loss at USC back into a profit by January next year.
Branded retailer USC has been dressing young shoppers in the UK for the past 19 years, but has been loss-making for the last three of those.
Retail tycoon Sir Tom Hunter bought the young fashion chain from its founders Angus Morrison and David Douglas in 2004, via his West Coast Capital private equity firm, and on doing so he was understood to have lowered prices and shifted USC’s strategy towards cheaper self-sourced own-brand merchandise. But in the past four years that strategy has struggled as faster high street chains, too many mid-market players and a resurgent JD Sports have all eroded USC’s sales.
If Hunter wants a return on his investment, something radical must be done to turn around the business. After a strategic review of the entire operation in June last year, the board of directors, including chief executive Jim McGonigle and 33-year-old Bohling, devised a strategy which, if given the go-ahead, would change the face of USC and the multi-brand multiple sector.
“You can’t sit there in a declining market saying ‘I’m happy’,” says Bohling. “We could control three things: our product, our conversion rate and our transaction value. We looked at the overall market and we were sitting in the middle of the middle market. But very few people operate in the upper-middle market.”
The strategy suggested that USC should return to its premium roots and become a branded retailer focused on menswear, and a destination retailer for denim.
Hunter signed off the plan, injecting £4 million into the business to finance a new shopfit for the 58-store chain and implement a new marketing launch to support the change of direction. Both the plan and budget are on target and will be completed by the end of June.
Menswear has been a low single-digit growth market over the past three years at USC, but womenswear is a different story. Sales in the category have been dropping rapidly, leaving the retailer with crippling residual stock issues and fuelling USC’s approach to heavy, in-season markdowns. Bohling, aware that the retailer will have to work hard to shed its image as a discounter to move upmarket, says this approach has now changed. “Every time you do a promotion, there is a cost to the brand and to the marketing line, plus the cost of the discount. You will now never see USC discounting in-season, other than during the mid-season Sale,” he points out.
In USC’s stores womenswear accounts for 25% of turnover, with menswear taking 75%, so it was decided that all stores would be reconfigured to a 75% menswear and 25% womenswear mix by June this year.
This means that working closely with USC’s key brands – which include denim giants G-Star, Replay and Diesel – has never been more important. As a result, last September Bohling, who was then marketing director, was elevated to brand director and charged with maintaining supplier relationships.
Terry Bates, commercial director of Fashion Box UK, which operates denim brand Replay in the UK, says Bohling now acts as the glue between USC and the brands. “Jo is the bridge who makes sure those stores perform,” Bates says. “He is very intelligent and has a wonderful charm and dry wit, which he uses to build relationships and get his point across. Since David Douglas left, USC has been lacking in that department.”
Getting into his stride
Bohling joined USC five years ago from advertising agency Mediator Marketing – he was hired by former joint chief executive Stephen Craig after they worked together on a USC campaign. Before Mediator Bohling worked for advertising firm Bates, working with tobacco companies on Formula One racing campaigns – as a young man and a smoker, he says he was in his element.
But he was attracted to USC by the passion and drive he witnessed at the retailer. He says: “The people I have worked with now run Cruise, All Saints, Gio-Goi and Fashion Rocks. They have all come through USC. Is it a hotbed of talent? You can’t deny it. It’s fact.”
Leaning back rather uncomfortably on a billiards table in USC’s Watford branch in Hertfordshire, posing for Drapers’ photographer, Bohling says he has found his natural stride at the business. The billiards table on which he is perched was salvaged from the local British Legion. Along with exposed brickwork, bright yellow balustrades and designer wallpaper, the decorative touches are just some of the new shopfit elements that USC hopes will tempt more male shoppers.
Watford is one of 20 shops in USC’s 58-store portfolio that has been earmarked to receive the new shopfit, or parts of it, by the end of June.
As a result of the shopfit and the reconfiguration of product, the numbers are already stacking up. The in-store denim offer has increased from 27% to 40% and denim sales across the 10 stores that have already been revamped are up 40% like for like, with sales at the Brighton store 120% ahead on last year.
Sales on the increase
Initial signs are encouraging. Pre-tax losses will come in at less than £4 million this year, down from £8.2m, and Bohling believes the retailer will hit profit by January 2009.
Sales were £118m last year, but USC is budgeted to hit £137m this year driven by the fresh focus on menswear and denim. Non-denim sales are also up by 7% year on year, while womenswear sales densities have risen because of the smaller, more focused offer.
However, one source in the branded retail market warns that USC should be wary of putting so much faith in a single category. “In the past USC has over-reacted to any category which is doing well. It needs to make sure its maintains a balance and doesn’t go overboard on denim, which could be dangerous.”
To establish the new men’s/women’s mix, last year USC axed 13 womenswear brands from its stores, including own label Stark and Danish label Vila. Bohling was given the task of breaking the news to the brands involved.
However, he believes that USC strategy of cutting back its womenswear brands came as no shock to the industry. “It was no surprise to the brands. Topshop and H&M have come through and you can’t deny they are defining the [womenswear] market,” he says.
The head of UK sales for one brand agrees, but points out that while USC upped its spend on menswear it also bought deeper into its remaining womenswear labels, which softened the blow to brands.
He adds: “Now that USC’s main focus is denim, it has done what the rest of the market was thinking. Reducing womenswear makes sense.”
Menswear from Puma, Levi’s and Modern Amusement have all been introduced, alongside new womenswear brands including Traffic People for autumn 08. Stores in more premium locations are being targeted for high-end brands such as Ralph Lauren and Paul Smith. The retailer is also looking at selling MP3 players and music in its stores for spring 09, and Bohling maintains it will constantly evolve its proposition.
Picking up the pace
USC’s turnaround strategy will continue at an aggressive pace into the second half of 2008. In the next phase, brands will launch shop-in-shop formats in USC’s bigger stores in Cardiff and Birmingham’s Bullring.
In Cardiff, 20 brands will each be allocated in-store plots of 320sq ft to 540sq ft and will install their shopfit into the space, which they will pay for themselves. Product in these spaces will remain own-buy. The format will not work on a concession model, but it will allow USC to put both smaller and bigger brands on a more level playing field in terms of emphasis in-store.
Bohling says: “Customers are going to make their choice. Currently if you are a big brand in USC we buy lots of your product, therefore it is a self-fulfilling prophecy that you will continue to be the biggest brand. With a shop-in-shop format you have more parity between the brands on offer. If you walk into Watford you’ll see Diesel and G-Star dominate, but in Birmingham those brands will have as much sales space as Energie and Gio-Goi.”
So is it a more democratic way of working? Bohling quips: “Are you saying we’ve got some sort of autocracy at the moment?”
The new Liverpool store, which will open at the end of September, has the potential to follow the shop-in-shop format. As USC learns what product works in the shop-in-shops, it will use the information to make decisions about the offer across the rest of the chain. “You can water the model down,” he says. “For example, if we were to give Nike 320sq ft in the Watford store instead of a tower unit, would it work? It’s a huge gamble, but not if you have some learnings.”
Sales data from the shop-in-shop format will also enable USC to spot branded winners early and use the data to inform its buying.
So will the new strategy lessen USC’s reliance on the big three denim brands? “Not really,” says Bohling. “We are in a more comfortable position than ever. Diesel has been 35% of our business before [four years ago]. We don’t want Diesel to fall away, we want the other brands to come up. They will all have to fight for space. We are in a more competitive environment now.”
For those that do not feature in the new shop-in-shop plans, the recently relaunched USC website will enable the retailer to add and test new brands. The site was developed using a joint Baugur and West Coast Capital web service called eCommera, and accounts for 3.6% of turnover. Sales from the website totalled £1.7m last year without any marketing behind it, and the target this year is £5m. Within 18 months, the website will be USC’s biggest store in terms of turnover.
The website features a Charles Darwin quote: “It’s not the strongest of the species that survive, nor the most intelligent, but the ones most responsive to change.” A little pompous perhaps?
“You can say its clich餬 but that is the young fashion market,” says Bohling. “It’s about evolution. The whole market is changing all the time and if you stand still you carry on making an £8.2m loss.”
Jo Bohling CV
2007Becomes USC brand and marketing director
2005 Promoted to marketing director at USC
2003 Joins USC in-house as head of marketing
2000 Works on the USC account at Mediator
1998 Senior account manager, Mediator Marketing
1994 Account executive, Bates Advertising
1992 Leaves school