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Wednesday, December 06, 2006

Rebranding failures: Tommy Hilfiger

The power of the logo

Tommy Hilfiger is one of the world’s best-loved designer clothing brands. During the 1990s Tommy Hilfiger moved from being a small, niche brand targeting upper class US consumers to becoming a global powerhouse with broad youth appeal. But then, in 2000, the brand was suddenly in trouble. From a high of US $40 per share in May 1999, Tommy Hilfiger’s share price fell to US $22.62 on New Year’s Day 2000, and was cut in half again by the end of that year.

Sales were slowing and, most tellingly, flagship stores in London and Beverly Hills closed down. Various runway shows at fashion events worldwide were also cancelled.

So what was going wrong? According to Tommy Hilfiger himself, the explanation is to be found in his decision to be adventurous with the brand.

He said in a 2001 interview with New York magazine:

At one point, I told my people, ‘We have to be the first with trends’, so we ran out and tried to do the coolest, most advanced clothes. We didn’t just do denim embroidery. We jewelled it. We studded it. We really pushed the envelope because we thought our customer would respond.

But the customer did not respond in a big way, and our business last year – men’s, women’s, junior’s – suffered as a result.

Part of this ‘pushing the envelope’ strategy involved reworking the brand’s famous imagery. Tommy Hilfiger, more than any other brand in the fashion industry, is a brand based on a logo. Indeed, some of the company’s most successful products have been T-shirts with the red-white-and-blue logo emblazoned across them. Everything about the logo, from the primary colours to the capital letters shouting TOMMY HILFIGER, suggested a bold, brash and 100 per cent US identity. When you wore a Tommy Hilfiger T-shirt everybody knew exactly what you were wearing, so long as they could read.

Of course, these logo-centric US brand values had been present in other fashion labels – most obviously Calvin Klein and Ralph Lauren – but Tommy Hilfiger had taken it a step further. And by 1999, Hilfiger himself was starting to feel it may have been a step too far. ‘When business plateaued in 1999,’ he explained, ‘we thought the customer didn’t want the Tommy logo anymore. So we took it off a lot of stuff. We made it tiny. We became very insecure about being a red-white-and-blue logo brand. We thought we had to be much chic-er, more in line with the Euro houses like Gucci and Prada.’ In other words, Tommy Hilfiger abandoned the values that had built the brand. Of course, the brand had in many senses become credible in high fashion circles but this credibility arrived, in part at least, by the brand’s urban appeal. In No Logo (written before Tommy Hilfiger’s dip in fortunes).

Naomi Klein explored the twin identity of the Tommy brand: ‘Tommy Hilfiger, even more than Nike or Adidas, has turned the harnessing of ghetto cool into a mass-marketing science. Hilfiger forged a formula that has since been imitated by Polo, Nautica, Munsingwear and several other clothing companies looking for a short cut to making it at the suburban mall with innercity attitude.’

However, this twin identity (suburbia meets the inner-city) happened initially by accident. In the beginning, Tommy Hilfiger produced clothes for the ‘preppy’ market, falling somewhere between the Gap and Ralph Lauren.

Pretty soon though, the hip-hop community embraced the label, and the Hilfiger logo could be seen popping up on every other rap video. It was only later that Hilfiger deliberately designed clothes for this market. In effect, this meant accentuating what was already there – making the prominent logo even more prominent, and the baggy T-shirts even baggier.

This strategy proved successful because the company was only exaggerating a formula that was already there. In 1999 though, the formula was abandoned completely, and, because of this, it strayed from the original preppy style that had made the brand so strong originally. For instance, Hilfiger launched a ‘Red Label’ sub-brand aimed at the very top of the market. This logoless range included such garments as US $7,000 patchwork, python-skin trousers. Clearly these items were out of the reach of the average Tommy Hilfiger customer. Another bad move was the decision to place stores in locations such as London’s Bond Street and Beverly HillsRodeo Drive. ‘The London flagship store wasn’t open for a year when we realised we had made a mistake,’ he said in the New York magazine interview. ‘And the average age on Rodeo Drive is probably 50 years old. My customers are much younger than that. We thought all the cool people in LA come to Rodeo. But they don’t.’

Since 2001 though, Tommy Hilfiger has been learning from his mistakes and going back to basics. ‘As a result of learning from our errors, we went back to our roots: classics with a twist. We’re about colour, we’re about preppy, we’re about classic, we’re about America!’ And as a result of this turnaround, customers and investors alike are again comfortable with the Tommy Hilfiger brand. ‘It will never again be the hot, sexy, overly talked about, flashy, zippy, fast-growing company it was, but it will be a damn nice company with lots of cash,’ observed one Wall Street analyst at the time of the turnaround. ‘What you’ve got now is a company that went from an Aplus to an F-minus. And now it’s going back to a B. And it’s a hell of a business as a B.’

Lessons from Tommy Hilfiger

  • Don’t deviate from your formula. Known as the brand which produces ‘classic with a twist’, Hilfiger concentrated too much on the ‘twist’ and not enough on the ‘classic’.
  • Don’t compete with irrelevant rivals. Tommy Hilfiger attempting to compete with successful European high fashion brands such as Gucci and Prada on their own terms was a mistake which even Hilfiger himself has acknowledged.
  • Don’t over-extend the brand. During its bad patch, Tommy Hilfiger moved into a lot of new product categories for which it wasn’t suited.
  • Don’t be scared of your logo. The logo is what made Tommy Hilfiger the brand it is today. In fact, the Tommy Hilfiger brand is pure logo. When the logo disappeared or was toned down, the brand ran into trouble.

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