Kamis, 01 Desember 2011

[Article] Kim Hyun Joong (김현중) - Hang Ten competing in tough times

Taken from hyunniespexers 
Source : Korea Times
By Eric Shih 

Singer and actor Kim Hyun-joong poses in the Hang Ten brand clothes in this photo posted on the firm’s Facebook page. Hang Ten has signed up hallyu stars to improve the brand recognition.
/ Courtesy of Hang Ten

The fashion industry is one of the most competitive in Korea. When it started out in the late 1970’s, the Korean fashion industry was dominated by little-known local brands offering basic clothing lines at low prices.

Fast forward 40 years, the Korean fashion industry is now highly globalized but also highly fragmented. Established brands often have to compete side by side with up and coming domestic brands in a variety of segments that range from luxury market to mass market, and both are facing threats from well recognized global brands from Europe and North America that are starting to take root in Korea.

This year, the domestic fashion market is estimated to reach 28 trillion won with an annual growth rate expected to hover around 4 to 5 percent. While the industry bounced back successfully from the recent economic downturn, operating conditions nevertheless remain a major challenge.

Today, many fashion companies are still focusing on staying “alive” and suffering from the aftershocks of the recession which saw about 20 small and medium-sized companies go out of business between 2008 and 2009. Amid these tough times, Hang Ten is a company that has beaten the odds and thrived.


With a pair of iconic feet and the first ever board shorts, Hang Ten was founded as the first surfing clothing brand in America. Established by surfers for surfers, Hang Ten exemplified the rebellious California surfing culture that was just emerging into public consciousness. The company led the way in combining fashion with action sports and led the mission of delivering extreme outdoor activities from the fringes of society into the mainstream.

In the process, Hang Ten became the first fashion brand to sponsor events that turn kids into athletes, establish major competitions that got them showcased on the mass media around the world.

But as the popularity of the sport and culture waned, Hang Ten began to reposition as a mainstream casual fashion brand that appeal to consumers who are looking to represent their active yet laidback lifestyle.

Hang Ten Korea was established in 2000, and launched its own retail operation, Hang Ten Casual, in 2001. It was not a new brand in Korea ― the previous licensee went bankrupt during the financial crisis in 1998. It was unheard of for a defunct brand to gain customer loyalty again in Korea.

The initial years after re-launching of Hang Ten were fraught with difficulties due to poor design choices and operational inefficiencies. To help right the ship, the company appointed Dilip Shivkumar Ramanathan as the new CEO in 2002. An Indian national with many years of experience in the fashion industry throughout Asia, including stints in Singapore, Hong Kong, and Taiwan, Ramanathan immediately made several significant changes to Hang Ten Korea’s marketing strategy.

Ramanthan sought to improve the operations of the company from the very start. He repositioned Hang Ten Korea as a fast fashion brand that delivers the latest casual fashion for the active lifestyle at an affordable price.

Along the way, he got designers to focus on consumer preferences instead of their personal taste, and introduced two new chains of concept stores to target different segments. Hang Ten Kids was launched in 2005 (renamed Hang Ten Junior in 2011) to target younger consumers and H&T was launched in 2006 to appeal to the premium segment.

The early- to mid-2000s saw the introduction of mountaineering fashion with premium brands such as Columbia and North Face gaining popularity in Korea. There was an opportunity for the company to reposition itself to take advantage of the trend, but Ramanathan resisted the temptation, believing such positioning is not consistent with the value and image of Hang Ten. Instead, the company continued with its fast fashion positioning and steadily gained market share in their primary segments.

Starting in 2007, the macroeconomic environment also deteriorated rapidly as the global recession started to hit Korea and cotton prices more than doubled due to worldwide price speculation.

New challenges also emerged as international fast fashion giants such as Zara, H&M, and Uniqlo entered Korea with better name recognition and more financial resources. But instead of retrenching from the marketplace and cutting prices to compete with the new foreign arrivals, Ramanathan refocused the brand to deliver more value to their customers by introducing more cutting edge designs and maintaining its product quality without raising prices.

While several underperforming stores were closed during this time to improve efficiencies, Hang Ten also perused aggressive expansion in other locations and increased marketing support for the brand. This strategy resulted in growth of the brand from 90 stores with approximately 55 billion won in sales in 2003 to 355 stores nationwide with forecasted sales of 210 billion won in 2011 ― an impressive growth record despite the recent recession and very different outcome than the crisis of the late 1990s.

Hang Ten’s lessons

There are several lessons that can be learned from Hang Ten. The first lesson is, “Focus on your core value proposition during a recession and stay true to who you are.” For Hang Ten Korea, the heart of their brand is fashionable clothing for an active lifestyle at an affordable price.

Instead of chasing the latest fashion trend such as mountaineering where Hang Ten does not have strong competitive advantage, it decided to serve existing customer segments rather than trying to be all things to all people. Going the other way would have meant additional investments to reposition the brand and compete in a new category which is very risky.

Second, as economic hard times loom, consumers are more sensitive to price changes and take more time to search for a good deal. This does not mean consumers are automatically looking to buy the cheapest product available, but they are paying more attention to what they are getting for their money.

Hang Ten did not rely on sharp price cuts or gimmicky promotions to maintain store traffic during the worst of the recession. Instead, they relied on a strategy of delivering better value for the same modest price to grow their business.

During the past few years the company has maintained product quality and not cut corners despite the sharp increases in raw material costs. In order to maintain profit margin, they squeezed their operations to achieve higher efficiency. As the recession caused consumers to trade down to more affordable brands, Hang Ten was in a position to reap the maximum benefits.

Finally, a recession is not a time to cut marketing investments. Research has documented that brands that increase marketing efforts during a recession, when competitors are cutting back, improve market share and return on investment at lower cost than during good economic times.

Hang Ten did not back down from their expansion plan. They continue to increase their presence in the marketplace and actively sign-up Hallyu star such as Kim Hyun-joong as the spokesperson and improve their brand recognition. As Korea is coming off its recessionary woes, Hang Ten’s investment in the past three years is paying off handsomely with a higher market share and an enhanced growth rate.