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News selection from business week

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News selection from business week

  1. 1. News Selection from“BusinessWeek”Presenter: Joan Chang 張宇慧
  2. 2. Hugo Boss Plays Catch-Up in ChinaBy Julie Cruz on April 12, 2012Even though it’s the world’s hottest market,especially for luxury goods, China offers noguarantees. Just ask Hugo Boss (BOS).
  3. 3. The German luxury clothing maker began selling itsapparel through franchisees or by wholesaling goods toindependent retailers in Hong Kong as early as 1982, butit didn’t open its first company-run stores in China until2006, 15 years after Italian suitmaker ErmenegildoZegna.That slow start, and an emphasis on opening stores inlots of cities rather than concentrating on the mostaffluent metropolises, have taken a toll.
  4. 4. Although Hugo Boss now has about 90 of its ownstores in Greater China (which includes Macauand Hong Kong) and 30 percent of all its shops inAsia, the region made up a mere 15 percent of theclothier’s €2 billion ($2.67 billion) revenue lastyear. At Burberry Group (BRBY), Asia salesalmost equaled European revenue last year, at32.6 percent.
  5. 5. “They entered China in tootimid a way, and now they needto change their distributionstrategy” to retailing, saysArmando Branchini, founder ofluxury consultancyInterCorporate in Milan.“Competition is much tougherthan years ago. The wholesalestrategy does not provide theservice quality and productassortment that the consumerwants for luxury items.”
  6. 6. Makers of pricey apparel and accessories cannot ignore China’sbrand-conscious consumers. Luxury goods sales in Greater Chinaclimbed 29 percent, to €23.5 billion in 2011, Bain & Co.estimates, with Chinese customers accounting for more than 20percent of global luxury consumption. To raise its brand’s profileamong the mainland’s affluent, Hugo Boss will open about 20stores in China this year, including an 800-square-meter (8,600square foot) flagship in Shanghai, start online sales, and invite1,500 guests to a fashion show in Beijing in May. “If you want tobe successful in China, you need to be visible in Beijing, inShanghai, as well as in Hong Kong,” Chief Executive OfficerClaus-Dietrich Lahrs says. “In the past, we underestimated theneed to make an impact in those three cities.”
  7. 7. Hugo Boss elsewhere sells a variety of lines, including lower-priced sportswear and leisure clothing. But in China, it’s pushingits high-end Selection line, with suits for €649 ($865) and jeans for€249. That’s expensive, but frequently less so than Zegna, whichoffers suits for €1,490 and leather shoes for €380.Under Lahrs, who joined Hugo Boss in 2008 after stints withChristian Dior and LVMH Moët Hennessy Louis Vuitton(MC), store locations are improving, says Anna Patrice, an analystat Berenberg Bank. He’ll add a store in Taipei 101, the world’ssecond-tallest building, in May. Hugo Boss’s two-story Shanghaistore, to open in December in the Jingan district’s Kerry Center, isnear Gucci, Giorgio Armani, and Montblanc stores. “If there aresophisticated, high-end stores in those new luxury malls, it’s theright place for Hugo Boss also to be,” Chief Financial OfficerMark Langer says.
  8. 8. Although the Hugo Boss brand is almost 90 years old, it didn’tbegin operating company-owned stores until the 1980s. It had 622stores worldwide at the end of 2011. The wholesale model workswell in Europe and the U.S., where department stores have longhawked multiple high-end brands. Not so on the mainland. “InChina, our typical wholesale distribution model does not exist,”CFO Langer says. By 2015, Hugo Boss hopes to build its ownretail operations to 55 percent of its total revenues, up from 45percent currently. Retail staff may also make up the biggestproportion of employees for the first time this year, saysLahrs, who wants to raise Asia sales to more than 20 percent ofHugo Boss’s total by 2015.
  9. 9. Still, the company is expanding in China after the “gravy train”has passed, figures Luca Solca, global head of European equityresearch at brokerage CA Cheuvreux. That’s because growth inluxury sales is slowing even as competition increases. MichaelKors Holdings (KORS) will open 15 stores in Greater China in2012 and hopes to have a total of 100 in five years. Zegna thisyear will add 10 stores to the 82 it has in China, which is itsstrongest-growing market. And Hermès International (RMS)plans to open a flagship store in Shanghai in late 2013. “I expectthat our catch-up activity in this part of the world will eventuallyhelp us to go beyond what we see as a slight slowdown ofactivity in the retail world,” Lahrs said in March.The bottom line: Hugo Boss was slow in operating its own storesin China. Now it gets just 15 percent of sales in Asia, far lessthan some luxury rivals.
  10. 10. Summary of the news“Hugo Boss”, a brand selling mainly luxuries, decided to change its operatingplan in China, hoping for better revenues.
  11. 11. Words1. Apparel : (formal) clothes2. Timid: not having courage or confidence.3. Assortment: a mixture of different things or of various kinds of the same thing.4. Flagship: The best and most important product, building…etc. (旗艦店)
  12. 12. ViewpointWhy College Isnt for EveryoneBy Richard Vedder on April 09, 2012A person who compares the annual earnings of collegeand high school graduates would no doubt conclude thathigher education is a good investment—the present valueof the college earnings premium (the better part of $1million) seemingly far outdistances collegecosts, yielding a high rate of return. But formany, attending college is unequivocally not the rightdecision on purely economic grounds.
  13. 13. First of all, college graduates on average are smarter and havebetter work habits than high school graduates. Those whograduated from college were better students in high school, forexample. Thus, at least a portion of the earnings premiumassociated with college has nothing to do with college per se, butrather with other traits.Second, a goodly proportion (more than 40 percent) of thoseattending four-year colleges full-time fail to graduate, even withinsix years. At some colleges, the dropout rate is strikingly higher.While college students sometimes still gain marketable skills frompartial attendance, others end up taking jobs that are often given tohigh school graduates, making little more money but havingcollege debts and some lost earnings accrued while unsuccessfullypursing a degree.
  14. 14. Third, not everyone is average. A non-swimmer trying to cross a stream thaton average is three feet deep might drown because part of the stream is sevenfeet in depth. The same kind of thing sometimes happens to college graduatestoo entranced by statistics on averages. Earnings vary considerably betweenthe graduates of different schools, and within schools, earnings differ a greatdeal between majors. Accounting, computer science, and engineeringmajors, for example, almost always make more than those majoring ineducation, social work, or ethnic studies.Fourth, the number of new college graduates far exceeds the growth in thenumber of technical, managerial, and professional jobs where graduatestraditionally have gravitated. As a consequence, we have a new phenomenon:underemployed college graduates doing jobs historically performed by thosewith much less education. We have, for example, more than 100,000 janitorswith college degrees, and 16,000 degree-holding parking lot attendants.
  15. 15. Does this mean no one should go to college? Of course not. First of all, collegeis more than training for a career, and many might benefit from the social andnon-purely academic aspects of advanced schooling, even if the rate of return oncollege as a financial investment is low. Second, high school students withcertain attributes are far less likely to drop out of school, and are likely to equalor excel the average statistics.Students who do well in high school and on college entrance exams are muchmore likely to graduate. Those going to private schools may pay more intuition, but they also have lower dropout rates. Those majoring in somesubjects, such as education or one of the humanities, can sometimes improvetheir job situation by double majoring or earning a minor in, say, economics.
  16. 16. As a general rule, I would say graduates in the topquarter of their class at a high-quality high school shouldgo on to a four-year degree program, while those in thebottom quarter of their class at a high school with amediocre educational reputation should not (optinginstead for alternative methods of credentialing andtraining).Those in between should consider perhaps doing a two-year program and then transferring to a four-year school.There are, of course, exceptions to this rule, but it isimportant for us to keep in mind that college is not foreveryone.
  17. 17. Words1. unequivocally: completely clear and without any possibility of doubt.
  18. 18. Referenceshttp://www.businessweek.com/articles/2012-04-12/hugo-boss-plays-catch-up-in-chinahttp://www.businessweek.com/articles/2012-04-09/why-college-isnt-for-everyoneLongman Dictionary of Contemporary English 5th edition.

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