CEO Talks: William Pak on Strategy for Esprit's Ambitious Global Relaunch




  • In Business
  • 2022-09-26 05:00:00Z
  • By WWD
 

William Pak is ready to help Esprit get its groove back. The Canadian lawyer might be an unconventional pick for the chief executive officer of the once-iconic brand. He spent years bouncing around the world from San Francisco to New York and Hong Kong in private equity working with tech and energy companies, as well as fund management.

In short, he's a numbers guy - now tasked with bringing the brand into the black after a series of seasoned fashion executives failed.

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The company, which was founded in San Francisco is 1968, expanded quickly to Europe and Asia in the '80s, becoming one of the most recognizable brands in the world. Diversifying into eyewear, homewares, accessories and watches, it built one of the first global lifestyle labels.

But for years it operated under fractured leadership, shifting priorities and diffused geographical focus with competing offices in San Francisco, Hong Kong and Düsseldorf, Germany.

In the last decade, Esprit brought in CEOs from Zara, and then New Look, in an effort to compete with the fast-fashion juggernauts, but the brand drifted as it closed most of its physical locations around the globe - exiting the U.S., U.K., Australia and most of Europe. It shuttered all of its stores in Asia in 2020, and went into receivership in Germany, its last major market, in 2021.

"The company very, very much lost its identity over the last 10 years," Pak told WWD.

Under the direction of its largest shareholder, North Point Talent Ltd., the company relocated its global headquarters to Hong Kong in July 2021. Pak joined the company mid-shake-up to steady the ship, first in an operations role before settling into the CEO's chair on March 1. The first year and a half were dedicated to restructuring the company and shoring up its finances.

The brand lost not only its identity, but more than $1 billion since 2017 through the leadership change in 2021, before returning to profit for the two last two consecutive reporting periods.

"Now we're on a good solid footing. The company is debt-free, and we have a large cash pool of about 350 million euros as of the last financial year. What this means is we have, for the first time in probably three decades, the shareholder capital base aligned with management. We're on the same page, same goals, and have a capital base that is willing to invest in the future of the brand and not just to save it."

The Hong Kong move made sense, said Pak, as it consolidated the executive team near its investor base, where it's about to celebrate its 30th anniversary of being listed on the stock exchange with a splashy ceremony.

"The company now has something different compared to other brands and competitors. There are not many brands out there without leverage," he said, which gives him confidence as the global economy faces the dual macro headwinds of recession and inflation. It's part of a cyclical adjustment, he believes.

"A lot of companies are going to have to hunker down and protect themselves, but we can actually invest in the future.…I want to make sure that we're financially sound, are able to come out of this and capture the next boom. If we're ready, we can expand and see growth once we come out of this inflationary period."

Pak brought on an entirely new C-suite, including chief digital marketing officer Larry Luk, formerly at L'Oréal and Calvin Klein, and chief product officer Sang Langill, formerly at Adidas and Calvin Klein. Tom Cawson, former creative director of Helmut Lang, also joined the team to head up design in New York and Amsterdam.

Now standing on more solid financial ground, the company is ready for a rebrand.

"Esprit right now means a bunch of different things to different people," said Pak. For many, Esprit is less about the drab, midlevel mall brand it had become and more about the bright colors and distinctive, deconstructed logo of its heyday in the '80s. There are Instagram fan accounts slavishly devoted to finding old ads and curating those vintage items. Pak intends to cash in on that cachet.

The team unearthed the long-abandoned archives at a warehouse in Germany. "It's basically a treasure trove of Esprit's history, so a lot of this we are incorporating," said Pak. He's careful to clarify that the new look won't be "gimmicks or just retro things," but rather sleek and upscale, with elements of color.

"Sweet Escape," the first collection from the new design team, launched Sept. 14 with sunny puffer vests, letterman's jackets, denim trenchcoats and bright colorblocking that is on trend. The company has cut down its calendar from 13 to four in-season drops a year, to eliminate wastage and excess inventory, Pak said.

The company will also roll out different segments at various price points in the first quarter of 2023 with "black label" and "white label" lines. Black label will be at a higher price point with more expensive materials and intricate design, while the white label will be geared toward younger and more price-conscious consumers.

A diffusion line called Esprit Jeans, aimed at Gen Z and Alphas with more trendy and contemporary items, is also in the works and will be soft-launched in Asia in November.

Pak admitted that omnichannel is the catchphrase of the moment as brands try to balance their booming online business with in-store sales, but said theirs is being built from the ground up. "We actually have a very, very big R&D [research and development] process going on right now to make sure it is really omnichannel, both physically in our new stores and also in our online universe that we're creating.

"Esprit has not opened new stores in over a decade, and this is a very exciting thing internally. We feel we need a lot of new touch points," he said.

The need to reinvent led to the creation of Esprit Futura, a hub system with bases in Amsterdam, which will take on infrastructure innovation and denim design; London, which will be an omnichannel-driven flagship, and New York, which will serve as the global creative hub.

London and New York will have physical stores where customers can interact with the brand, while Amsterdam will primarily be a research and design hub. It will abandon its big-box style and the new flagships will be "in the ballpark" of 10,000 square feet, while boutiques will be roughly half that.

If having the headquarters in Hong Kong and the hub system placing various teams around the globe seems counterintuitive after bringing the management under one roof, Pak said that it's part of his plan to create a global Esprit that relies on 24-hour innovation and collaboration.

The move to Hong Kong also positioned the company closer to its suppliers in China and across South East Asia. Pak said the company slimmed down from more than 200 suppliers to just a handful. "We're very nimble in terms of where production is. So we're able to handle and adapt to different supply chain challenges that a lot of brands have been facing, especially earlier this year. We came out OK, because we already diversified."

Another strong point will be sustainability, which is baked into Esprit's ethos. The brand was using organic cotton 30 years ago, something learned while digging through the archive. "That was not the case for the last 15 years, and that is going to be the case going forward," he said.

"By decreasing our supply chain, we have actually improved the quality of our materials. It's much higher quality but our margins are higher, so we don't have an increasing cost per unit that will affect the brand. This is something that will allow us to give back to the customer what they really liked about Esprit, because a long time ago it was about the quality and that's where we want to come back to. This is something we definitely want to split from the current market perception."

Retail stores will have a global-local approach. The first stand-alone opened in Seoul, South Korea, back in June. It was not a country the brand had previously been present in, so Pak was able to start with a clean slate and experiment with some of the new marketing concepts. They collaborated with Korean brand Rest & Recreation on a collection to coincide with the opening, the first in the model of locally designed and produced capsules that will be unique to each city.

A Los Angeles pop-up, which opens next week on South Robertson Boulevard, will follow. "In the U.S., the first capsule is designed in Los Angeles, for Los Angeles," he said. There's already an office operating there, planning for a permanent store in the first quarter of 2023, while the London and New York flagships are still staffing up.

But don't expect to see any big celebs or guest designer stunts on the roster. "Yes, we're doing collaborations, but it's not going to overpower the brand," he said.

Pak would not reveal what regional mix he expects for the business going forward, but noted that revenue from e-commerce grew from 29 percent of sales in 2020 to 44 percent in 2021. With the relaunch of e-commerce in the U.S. and Canada in October, Australia in the fourth quarter of this year and Europe in the first quarter of 2023, he sees sales becoming an "even mix" between online and IRL.

If it all sounds like a lot - it is, Pak admitted.

"This might be the largest expansion in terms of global coordination that's ever been done in history as a retail brand. There's not a lot of comparison in terms of what we're trying to do, and it's hitting everything at the same time, both online and offline. I think we need to do that to to put one coherent message to the consumer," he said.

"We want to rush to position ourselves for growth coming out of this, and we're finding that a lot of people want us to hurry as well, meaning they want to come back to the brand and they need a happy brand like Esprit."

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