When Ben Sherman launched internationally seven years ago with a more premium image than in its domestic UK market, there were more than a few sceptics.
How, they asked, could a business for whom 80% of its turnover was made up of sales of an affordable men's button-down collar shirt suddenly reinvent itself as a British heritage lifestyle brand overseas? "Impossible" and "yeah, I'd like to see that," were some of the remarks made to Drapers at the time.
But the brand's chief executive Miles Gray and his team have made the market eat their words over the past five years. Since being bought out by US investment specialists Oxford Industries in 2003 for US$147 million (£72m), Ben Sherman has been given the financial backing to realise its ambition.
Gray says that 55% of the brand's global sales of £130m now come from outside of the UK. The firm has stores in the US, the Philippines, Kuwait, Bahrain, United Arab Emirates, Singapore and Australia. It will open in Cape Town in South Africa in October, Tokyo in Japan in March 2008 and has just signed a deal with Chinese partner Tri-State to open stores in Beijing, Hong Kong and Shanghai in January and February next year, with a long-term plan for a 30-store roll-out across China.
Ben Sherman is restructuring its management team to ensure these new markets are better served. It has set up an Asian hub in Hong Kong which will service Australia, China, Japan, the Middle East and South Africa, to be led by international sales director James Bettle, who will become head of Asia Pacific. It has also created a European hub out of its office in Dusseldorf, headed up by Ricardo Meyer, the German managing director now taking on the role of head of Europe. Gray says Europe is an untapped market, and that he will be disappointed if Germany alone is not worth £10m in sales in three years time.
"We will open in Berlin in spring next year and then aim to open in the big regional cities such as Cologne, Munich and Hamburg. We will open in Milan within the next year and have just signed a new distributor in France," he explains. Gray admits to now travelling for 40% of the year, with one week in four spent in the US.
So far so good for the international business then, but it is the company's success overseas that has led to crunch time in the UK. For the past seven years Ben Sherman has been a schizophrenic brand running two collections - Black and Orange, which is sold overseas and in all its UK standalone stores, and a cheaper Blue label for UK wholesale only.
But in spring 08 all that will change when the Blue label is axed and the complete offer will go under the Black and Orange label. The move will also see Ben Sherman jettisoning 20% of its wholesale customers, about 150 stockists, to ensure distribution better reflects the more premium price bracket of Black and Orange. Consequently, top-tier prices will increase by 10% in the UK and the average wholesale price of a shirt will rise from £16 to £22.
Gray is clear on why the move has to be made. "With value retailers taking £1 of every £4 spent on fashion in the UK we know we can't compete if we stay in the middle market. We have got the backing from our owners Oxford Industries, and if it comes to it they accept that a smaller, better brand in the UK will pay off when we are leveraging Ben Sherman globally. It's going to be a substantial hit to the EBIT in the first year or so and we are up for that."
Gray says the move has led to him and his team having some "tough conversations" with the trade. "It's important that we clean up our distribution. This strategy applies to all of our customers including some of the biggest."
This is likely to be a veiled reference to Debenhams, which accounts for about 18% of the brand's UK turnover. Gray says he is keen to hang on to Debenhams' business. "We have no wish to part with Debenhams. It's the biggest customer for us on the high street and houses good brands such as Sonneti and Levi's. These are not brands that we want to distance ourselves from. But we need to look better in Debenhams. I hope we are pushing on an open door on this, because I believe Debenhams recognises it has to do better in terms of the way the stores look and is working hard on that."
He says a pragmatic approach has to be taken to the distribution cull and the brand's ambition to replace those stockists with spots in more premium independent, branded chains and department stores. "People are going to have to see us walking the walk for a couple of seasons before they buy into us. I know that getting back to the same level of UK wholesale turnover is doubtful, which is why we have to have a UK retail strategy. Three to four years down the line when we have 15 stores the balance will be redressed, although we accept the UK market may not make us as much money as in the past. However, we will still be selling two million to two-and-a-half million garments in the UK."
The upside for Ben Sherman, as creative director Mark Maidment points, out is that precious man hours that were spent producing the Blue collection by his 24-strong design team can now be dedicated to other projects. They will also gain some margin efficiencies when the two collections merge, as the buying team will be able to put in bigger orders on fewer styles.
The three-year target for Ben Sherman is for its revenues to be roughly split into one third licensing, one third wholesale and one third retail. The brand has UK licensees for toiletries, accessories, sunglasses, suits and dress shirts, underwear, bedding and headwear.
Gray admits there are few examples of brands that have successfully gone through similar distribution restructuring exercises. "Puma is the only one I can think of where a cheap and cheerful brand has slashed two thirds of its turnover and started again from a completely different premium position," he says.
Not ones to tackle one job when they could be doing half a dozen, Ben Sherman has taken the opportunity to introduce a new logo for spring 08. A simple icon based on a guitar plectrum will replace the embroidered Ben Sherman name on most garments. Creative director Mark Maidment says it is an easy way of playing on the brand's music heritage, and ties in with the 'Mods in the Mansion' theme that is a key part of the brand's merchandising and image.
Informal endorsement from musicians is key to the brand's creative vision. So much so that Gray hired a one-woman placement machine to cover the East Coast of the US. Dana Dynamite, as she is known, has got Ben Sherman onto the backs of an impressive amount of bands and celebrities, which has convinced Gray to take on another representative to cover the West Coast.
Gray is pleased with progress since the brand was bought by Atlanta-based Oxford Industries and describes his bosses as "real gentlemen".
"Like any investor they want their pound of flesh, but they do listen. I'm not fearful of them. I'm fearful of disappointing them. The whole team would be so ashamed if we did not deliver, because they've backed us to the hilt."
BEN SHERMAN FACTS AND FIGURES
- UK stores
Carnaby Street, central London
The Trafford Centre, Manchester
Lakeside shopping centre, Essex
The Oracle in Reading, Berkshire
The Bullring, Birmingham - due to open in November
Six outlets in BAA McArthurGlen centres
- Product Categories with percentage share of turnover
Licensed business: 15%