Tommy Hilfiger Case
By: Mick A. Leikanger, 3rd year BBA
Strategic Management.
Professor Ms Clarke.
Intro
In 1969, Tommy Hilfiger took up a job at store selling clothes, especially towards the hippie-inspired youth. After some time, he realized the great potential for fashion-retailers, and decided to sell 20 pairs of bell-bottom jeans out of the trunk of his car. Soon after, he managed to sell 600 pairs in a week, and the rest is history.
Although the rest is history, it was not an easy road. After the success with the jeans, Hilfiger and two friends decided to open Peoples Place, and focus their energy at reaching the offering fashionable clothing to young adults. At year-end in 69, Peoples Place had a generated more than one million dollars in revenue.
A few years later, many competitors had entered the market, and on top of that, the hippie-era was drawing towards an end. The result was that Peoples place went bankrupt. Hilfiger took some jobs as a fashion designer for some time, and his big break came when he entered into a licensing agreement with Murjani International. They believed so strongly in his abilities as a fashion designer, they took the liberty of claiming Hilfiger was “one out of the four great, American designers”. It did create some ruckus, but the effect none-the-less: $11 million of sales over 18 months. The success continued for many years, seeing sales doubling yearly throughout the 80’s.
Financial problems at Murjani, led Hilfiger to terminate his contract with them. He had an agreement with Novel Enterprises, Laurence Stroll and Joel Horowitz, and together they formed Tommy Hilfiger Licensing, LLC. Sales rose to over $100 million by 1989. In the 90’s they expanded their product portfolio to wide array of clothing. In 1995, Hilfiger received the Menswear Designer of the Year prize, further consolidating his position as one of the US’ leading designers.
Hilfiger – success and failure
From the start, Hilfiger showed he had the right stuff to make it in the fashion industry. His knowledge about what was trendy and what his target customers wanted was of vital importance to his success.
Hilfiger’s strategy was simple: Make high-end fashion available for the masses. The pricing was below that of other premium clothing brands, and larger sizes together with bright colours, made it appealing to a much wider audience. The style of Hilfiger was classic American and preppy.
His success in hip-hop depended on bridging the gap between the classic, American preppy and urban fashion. Urban fashion in the 1990’s was heavily influenced by hip-hop culture who also had its golden era at the beginning of the decade, and hip-hop is associated with baggy clothing and bling. Tommy Hilfiger, being perceived as a premium brand and offered in larger sizes, fit hand in glove with this fashion expression. Furthermore, hip-hop was especially popular in the black (African-American) community, and Hilfiger stood out amongst fellow designers: Whereas the fashion industry at large used predominantly white models, Hilfiger used people of various ethnic background in his marketing campaigns. This difference alone made Hilfiger appeal to a wider audience than his competitors.
The connection to hip-hop was profitable, but in terms of what Tommy Hilfiger as a brand stands for, they lost to a certain degree connection with the root – preppy, classic American. This was also the bling hip-hop sought after. Hilfiger grew in an industry that was declining elsewhere. The expansion of the distribution network, entry into new markets (Women’s wear, fragrances, kids and so on), combined with opening up flagship stores, made the clothing available everywhere. Until 2000, the company outperformed its rivals. Reality was that Hilfiger had become too available. What is so special with clothes you can buy everywhere? The market suggested: Nothing.
The idea to link up with artist such as Snoop Doggy Dog (today: Snoopzilla) and Raekwon must have spurred on the idea of linking up with more artist and celebrities, in attempt to build on the success. This was another mistake from Hilfiger side. As with distribution, the brand became too wide spread. Their core market (males age 12-25), felt alienated by artist such as Cheryl Crow and the Rolling Stones, even more so the hip-hop community.
Turn of the millennia.
All the success Hilfiger had enjoyed in 80’s and 90’s was almost ripped away from him just within a few years. Being overexposed, and present in all sorts of clothing, stripped the Hilfiger brand of its exclusiveness and it no longer considered “premium, but not too expensive”, but rather dull and ordinary. Sales were down 12% in the last half-year of 2000, and the company reported a loss. Instead of going to the core of the problem, the company decided to trust in Hilfiger’s abilities as a designer to get them back on track. Tommy Hilfiger’s solution was to downsize and almost remove the logo, as he believed people did not want them. The creation of a new luxury line called “Red Label” also indicated the status loss of the “normal” Hilfiger clothes.
Design, price and too much availability were not the only issues in this period. Controversy’s about racists and derogatory comments made by Tommy Hilfiger an unpopular figure. Questions remains if he actually said anything remotely racist. Hilfiger himself choose to ignore the allegations since they were rooted in nothing. Another bad move. Once loved and popular for including ethnic minorities in ads, Hilfiger was now unpopular in those communities – especially damaging considering the strong hip-hop link.
A year later, sales were still declining. The American market had saturated earlier than expected, and the design changes had not had an impact either. To grow, the Hilfiger Company decided to expand abroad to both Asia and Europe. The move lead to a profit of $135 million in the fiscal year 2002, and the success of is evident still today as Tommy Hilfiger generates around 42% of income in the European region.
For the year 2003, the company reported a loss of $514 million. In 2004, profits were up, but sales still declining. The positive increase in profit was attributed to overseas business in Europe. The same year, the company planned to launch in India, but failed to deliver the following year on that promise.
In 2003, the company decided to change its CEO, and David Dyer stepped in. Known for being a turnaround specialist, rumours said the company prepared itself for a take-over, but the plans were denied. Expansion continued in Asia and Europe, and new deals with celebrities was signed, most notably David Bowie and Iman. Analysers feared that Hilfiger was committing old sins over again.
In the US, problems remained the same. Hilfiger was losing market share, and sales were down. Remaining in contact with the core market is important, especially to Tommy Hilfiger who position himself as a designer of “cool, classical American wear with a hint of preppy”. Where Tommy Hilfiger once was the trendsetter of American fashion and business wear, the public no longer thought it to be that way.
The strategy for Tommy Hilfiger should have shifted towards revamping the brand reputation at home. Hilfiger himself signalized he would be going back to his original design of preppy and American. The company followed this up, by signing agreements with Jay-Z and Beyoncé, which also is in line with the successful link to Hip-Hop earlier. Further actions were taken by cutting down on stores and reconsidering the distribution network. This helped the brand towards reclaiming the sense of exclusiveness in its products amongst target markets.
Today, Phillips-Van Hausen (PvH) owns Hilfiger company, and amongst others also Polo Ralph Lauren. Tommy Hilfiger’s global sales are estimated at around $6 billion, up from $2.5 billion in 2005. As mentioned, Europe is the largest in sales. The brand has also reclaimed its position as preppy and American at home.
Today
Danger is still looming. Already back in 2000 the Tommy Hilfiger Company had problems with allegations of horrific working conditions and slave labour at the factories in Thailand. The respons at the time was to implement a new code of conduct. Whereas this was successful is highly debatable. The problem is not isolated to Tommy Hilfiger, but the industry at large. According to ABC news, more than 500 workers died in the garment industry in 2007-2012. In 2012, a Bangladesh factory caught was set ablaze, and 29 workers died. The news reported that on Tommy Hilfiger blazers was produced at when the flames started.
In a world where news spread on the internet in an instance, and information flows more freely than ever, a company cannot remain ignorant concerning its supply chain and the possible impacts it might have on business. There has been several cases the last 10-15 years revealing horrible conditions at factories, and workers being paid close to nothing. The fashion industry, being extravagant and expensive, have often been put under heavy criticism for exploitation and will continue to be so.
The strategy ahead must be based on accepting and acting as a global, responsible company. Such a strategy requires an honest effort towards those values. Proactive efforts are also less costly than reactive measures. Building trust and brand reputation takes time, and as Hilfiger knows, it can be swept away in a short space of time.
Producing clothes cheap, does not pave the way for use of slave labour, nor acceptance of factories as death traps. Efforts such as upgrading factories or moving production to safe locations must be considered. Although more costly, it will help the brand to regain trust amongst its customers and target markets. One option could be to relocate parts back to the US. This would underline the American part of Tommy Hilfiger’s image and ensure proper working conditions at factories. In addition, the company could gain new markets by promoting it as part of plan to reduce CO2 footprint (lower transportation costs).
On the other hand, markets such as China and India hold very promising outlooks for further growth. Thus, allocating funds to reconstruct and improve factories in Bangladesh, Thailand and China is an equally viable option, and production would remain close to the growing markets in Asia. Participating in improving conditions in the third world and poor regions would be entailed by a shift in culture to some extent, at least in regards to supply chain management. A new leader(ship) could be necessary to see the reforms go through. It is also important to remember that Hilfiger was known for using not only white models, but also models with various ethnic backgrounds. Thus, focusing on improvements could give back the status Tommy Hilfiger once enjoyed amongst the minorities in the US.
Conclusion
Hilfiger was an entrepreneur, and had a nose for knowing what is trendy and desirable in fashion. Today, the Hilfiger Company is leading global brand, even after much turmoil. The brand still holds a high star in many markets, and its many diversifications been a varying success. The company should stick to what it knows, and focus on building trust and brand reputation amongst its target markets. There is no reason why the company should not prosper. Tommy Hilfiger has received countless awards, some more notable than others – his reputation as a designer is cemented. The company should yet be aware of the impact of its business operations in other countries. When scandals surface and accidents happen, people no longer accepts apologies. Action must be taken, and evidences presented to the public.

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[ 1 ]. Mukund A, Case study “Tommy Hilfiger: The Struggles of an American Fashion Icon”, 2004, Center for Managament Research.
[ 2 ]. http://global.tommy.com/int/en/About/overview/7
[ 3 ]. Mukund A, Case study “Tommy Hilfiger: The Struggles of an American Fashion Icon”, 2004, Center for Managament Research.
[ 4 ]. Bling = the imaginary sound of the sun reflecting of a diamond, used about luxury or expensive products http://nb.urbandictionary.com/define.php?term=bling
[ 5 ]. Mukund A, Case study “Tommy Hilfiger: The Struggles of an American Fashion Icon”, 2004, Center for Managament Research.
[ 6 ]. ibid
[ 7 ]. ibid
[ 8 ]. Annual Report 2012, p 20, PVH, https://www.pvh.com/pdf/annual_reports/2012/ar2012.html?pageNumber=18
[ 9 ]. Mukund A, Case study “Tommy Hilfiger: The Struggles of an American Fashion Icon”, 2004, Center for Managament Research.
[ 10 ]. Ibid
[ 11 ]. Annual Report 2012, p 22, PVH, https://www.pvh.com/pdf/annual_reports/2012/ar2012.html?pageNumber=18
[ 12 ]. http://abcnews.go.com/Blotter/workers-die-factories-tommy-hilfiger/story?id=15966305