The Smart Business Decision Stüssy and Tommy Hilfiger Have In Common

Long term success in the fashion game isn't an easy science, but many would agree that it involves some combination of slow-growth, a price point that matches product, and (perhaps the most obvious point) well designed clothing season-after-season. When this blend of influences is done correctly, brands will see steady, and more importantly, stable growth over several years. Done incorrectly, and—the brand simply won't last. If you still don't believe us, take a look at the diverging histories of Stussy and Mossimo.

Like the aforementioned streetwear labels, Tommy Hilfiger was a symbol of '90s cool. But, like mny brands of that era, Tommy's own success undermined the brand; a public offering made the brand go bigger while falling demand and over saturation sent Tommy Hilfiger tumbling downward. But while Tommy peaked out in the U.S. around the turn of the century, the tightly-controlled European wing of Tommy Hilfiger was able to ride out the early millenium woes to secure growth. As Fred Gehring, Executive Chairman of Tommy Hilfiger, explained to the Harvard Business Review, shrinking the business allows the brand to stay strong, focused, and in-demand.

The main issue Tommy Hilfiger faced at the beginning of the 2000's was one of over saturation. This lead to a falling demand for product, which in turn lead to heavy discounting. Once this happens, Gehring notes, a fashion brand goes into a tailspin.

Sadly, while Gehring was flourishing a continent away, the company heads—located in NYC—were too focused on keeping the floundering U.S. business afloat. The problem was only made worse due to the brand's public ownership, with shareholders looking for growth instead of reinforcing where the business was actually pulling in profits. The brand was going to destroy itself without a new strategy—the best option was to return to privatization. Simply put, it's f@#king expensive to run a publicly traded company. Returning to private ownership would reduce operating costs—while giving those in charge an easier time in correcting the course of Tommy Hilfiger at home and abroad.

After some conflict with the board, the ultimatum was that Gehring would need to set up plans to buy the company (with help from private equity firms) if the brand was going to return to private ownership. True to his strategy, Tommy Hilfiger was purchased by European-based Apax Partners in 2006. This is when things start to turn around. By going private, the board could focus on fixing Tommy Hilfiger's wider brand issues—instead of trying to please shareholders with the latest quarterly sales report. An exclusive deal with Macy's (who already played a major role in Tommy's U.S. business) helped root the brand back in the United States. From there, it was about rebuilding Tommy's image into one that matched it's casual luxury beginnings.

Compare this strategy to that of Mossimo, who effectively crippled their brand by going too big, too fast. It was a move that ultimately devalued the brand; Mossimo's own desire to grow is what caused it to shrink—in a negative way.

As Gehring describes, the major success of going private, ironically, made the brand interested in going public again—an idea that was squashed after the financial crisis of 2008. Inevitably, the Tommy Hilfiger's "shrink" strategy is what allowed it to weather the financial storms until its purchase by PVH in 2010. PVH owns Tommy Hilfiger to this day.

For Gehring, the chronicle of Tommy Hilfiger is reminder that bigger isn't always better. Like Stussy before them, focusing on a smaller market may yield bigger rewards. In the case of Stussy, it was keeping the product limited and isolated to a few select retailers. For Tommy Hilfiger, it was recognizing that the smaller European market was where the brand could enjoy consistent, stable growth.