In a country of rapid growth, high-speed trains and fickle tastes, Esprit, the German fashion firm, is centering its Chinese turnaround strategy on the simple concept of speed.

Taking a leaf out Zara’s book, Esprit is trying to shorten the time needed to move fashion from the design phase to clothes shops from 9 to 11 months to 3 to 4 months.

“We are fully committed to the (China) market,” said Jose Manuel Martínez, a former retail veteran from Inditex, owner of Zara, who was hired to turn the brand around in 2012. “[There is] no way we can lose the opportunity in the market. We will put as many resources [as we need] to make it work.”

Martinez has a relatively upbeat story to tell: the turnaround in China appears to be underway. The Hong Kong-listed company posted net income of HK$95m ($12m) for the six months ended December 31, compared to the HK$465m loss a year earlier. But its revenue continued to decline, falling 5.5 per cent to HK$12.8bn.

Cost cutting has also been a key strand in the company’s strategy as soaring shop rents and rising blue-collar wages challenge retailers to consolidate their store networks. Esprit has cut its store numbers to 333 in China now, compared to 371 in 2012, according to its interim report.

De-bottlenecking supply channels also appears to be a priority. Martinez said the company is helping wholesale partners in China to clear up inventory by allowing them to return unsold goods. He met with partners in Shanghai in January to communicate and assure them of the company’s confidence in the China market.

The firm’s pricing strategy is also under review, as executives evaluate the results of 15-30 per cent price cuts in the Taiwan market over a six month period. There was no guidance on when such price cuts could be applied to the China market.

Shares in Esprit Holdings have risen 45.6 per cent in the last 12 months.

Related reading:
Corporate watch: Vipshop’s in fashion, beyondbrics
Esprit / Billabong – style differences
, FT (2012)
Esprit seeks HK$5.2bn to fund overhaul
, FT (2012)

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