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»No survival without profit«

Interview_Sueddeutsche Helmut Schlotterer in conversation with the Süddeutschen Zeitung industry magazine
(Katharina Wetzel). The interview was published on 27th October 2016.

In 1973, Helmut Schlotterer founded Marc Cain. In doing so, he also saved his father‘s knitting company. Here, a conversation about the difficult early years and why men are seduced differently to women.

Helmut Schlotterer has already received many prizes, something he likes to point out. His company, Marc Cain, generates a turnover of 261 million Euros per year, with a net profit after taxes of 18 million Euros. A result like this is currently something very special in the German fashion industry. What is the key to the brand’s success? From dresses to office furniture, Marc Cain creates everything it sells in its own production facilities in Bodelshausen, near Tübingen, in South West Germany. Schlotterer turned 70 this year. But he has not forgotten the difficult early years. And he is certainly not impressed by fashion fads.

How does a brand like Marc Cain manage to remain desirable?
This is the absolutely central question. There is no need, the wardrobes are already full. So, it is all about desire. What makes fashion desirable for women? At the core of it is temptation, every consumer reacts individually: men more to cars, women to fashion, with shoes and handbags.

Please explain this more closely.
First, the desire, »I must have this«, sets off the purchase impulse. If the purchase is made, there should be no disappointment afterwards, in terms of quality, fit or care. In that respect, a brand like Marc Cain is positioned differently to cheap labels. We operate in a different price category. A customer who has spent her hard-earned money also wants lasting value. Marc Cain is committed to sustainability.

A number of fashion companies, such as Strenesse and Steilmann are insolvent or are in crisis, such as René Lezard or Laurèl. What have they done wrong?
The German brands in the so-called premium sector were fairly level about 20 years ago. Since 2000, Marc Cain has shown brilliant growth, while the competitors have lost out. What is the reason? We are not just a sales organisation with a connected design department, we are manufacturer. In order to stay in Germany, permanent innovation was required, such as in digital printing and three-dimensional knitting. If a company’s options are based on what they can buy from foreign producers, the abilities of those producers is the limit of the label’s range.

How do you produce?
We mainly produce in Europe. Our fabrics, yarns and jerseys come from Italy and are further processed here in Bodelshausen. We knit, wash, print, we finish fabrics. We produce knitwear 24 hours a day, in a three-shift operation. The final finishing – trimming and sewing – mainly takes place in Hungary, Bulgaria and Romania. We are not dependent on cheap wages in Asia. But, in the end, we also have to satisfy our employees and partners and ensure that the price is paid by the consumer. A blazer costs between 199 and 499 Euros. And we have created the »right« fashion when sales achieve the desired level of success.

How high does the margin have to be to make it all worthwhile?
The calculation is divided vertically into three stages: production, sales to retail customers and the calculation of the fashion retailer. In retail, the price of a garment usually increases by a factor of 2.7, including 19 percent VAT.

What comes directly to you?
We try to generate good returns at all three stages – there is no survival without profit. In the retail trade, the constant price decline caused by discounts and special offers is a cause for misery. If you look what the trade is doing, it all seems to be about the price – quality and service hardly get a mention. We had a very hot September. To lift business, the retail trade tried to sell freshly delivered Fall/Winter products with discounts while it was 30 degrees outside. Not a good idea.
And then chains such as Zara and international design brands are also putting pressure on the retail trade. Well, Chanel, Prada and Gucci are not our competitors, as they play in a different league. The so-called verticals, such as Zara, Mango, H&M have another business model which we cannot be compared with.

Today, lots of city centres are suffering from a lack of footfall.
Yes, the frequency drop is a problem for the inner-city trade. Buying behaviour has changed. Every Euro, which is spent on the Internet, is missing from the bricks-and-mortar trade.

Is the slow death of the retail industry painful for you?
Not really. It is all about having a presence with the traders that have future potential. This applies both nationally and internationally.

Is there any chance of survival for the bricks-and-mortar trade?
Of course. There will never be a time where there are no shops and no shop windows anymore, with customers only buying via long-distance trade, ordering everything from their couch at home. The buying experience in the store and the personal conversation there have an stimulating and inspiring effect. The retail trade simply has to offer this.

How do you solve problems in trading?
Consumers are now on all channels: in real-life shops in city centres, in outlets and increasingly on the Internet. We call this method Omnichannel, we have to reach customers wherever they are. The market volume of our target group has not grown, it is stagnating demographically. Our growth is based on fierce competition – the better companies are more successful. In the performance data produced by the specialist trade magazine Textilwirtschaft, such as the fit, quality, attractiveness of the brand, profitability of sales and so on, we have been in the top position for years. In addition, we have grown strongly in new export markets.

However, business is not so good in Russia, is that right?
We have suffered losses because of the economic crisis, but we have been able to keep ourselves at a high level. We have Russian-speaking staff who write their emails in Cyrillic. In addition, we have also established a subsidiary in Russia, to be closer to the market. But in general, the political and economic development is not pleasant – and I can’t see it changing soon.

What are your main sales markets?
The EU – but less and less the Southern European area. The payment behaviour there is unacceptable, the structure of the retail trade is 40 years behind Germany. China has been a big market for us for 16 years now, Japan has stagnated. Our new focus is on North America.

Is the payment behaviour in Germany better?
Yes, our brand is so strong that we can choose our partners.

How do you make sure your Collection sells well?
We have a great amount of experience – and we are already orientating ourselves on what the greats in the international fashion business are doing. The art is then to find the right translation of the trends, with our unique touch, for our customers. It is not like we make a kind of fashion that the world has never seen – there is a state of constant transformation, in certain waves of colours and silhouettes.

Your roots are in knitting.
Our location, in Swabia, used to be a knitting region, with hundreds of companies that all disappeared in the seventies. My father also had one of these little knitwear factories. Owing to paternal pressure, I studied textile technology and, as a reward, was then allowed to live in Paris for a year. It was there that I realised that Bodelshausen was no longer my world. After studying business, I went straight to Italy and founded Marc Cain. Nothing drew me to Swabia any more. But, later on, it was different, when the restructuring of my father’s business brought me back again.

You saved your father’s company from insolvency. Did he ask you for help?
No, the fathers of this generation didn’t ask their sons for help - and words of thanks were not common either.

But you turned it around.
With a great deal of hard work and obsession. They were really terrible years: the banks on your back, the collection doubtful, the whole future uncertain, always teetering along the brink of bankruptcy. In 1976 my father‘s company had immense debts.

How did you manage to get through it all?
I had a vision that came true with the help of efficient staff.

Have you always been ahead of your time?
At 40, I had a midlife crisis. By that age, a Swabian is supposed to have built a house, conceived a child and planted a tree. I had not met these three Swabian goals, but I did have a few knitting machines. And it all went in the right direction. When the first digital revolution took place, we were there. In computer technology, knitting and printing. We have always been able to defend the production location by means of technical developments, thereby ensuring success through permanent investments and innovation, with committed and capable employees. Today, we »sew« patterns virtually, knit three-dimensionally without seams. We were always ahead of our time in sales and marketing. The process is never over, it goes on and on.

Was it your dream to take over your father‘s company?
Well, I never found my father’s products all that exciting. My dream was to study architecture. It didn’t happen, but, from today‘s point of view, I’m happy about that. From 2008, I was able to realise my architectural dreams at Marc Cain. I have built a white, aesthetically very sophisticated building and garden complex here in Bodelshausen. This is our high-tech location – a white factory. This has little in common with a normal textile company. The company is my family, I have 964 employees in Germany alone, and they don’t want a work’s council.

You are investing heavily in »Marc Cain City« in Bodelshausen, correct?
The last major project here was logistics, with an investment of 35 million Euros last year. I have spent a total of 140 million euros at this location.

And how do you finance it?
Through the generated income that does not have to be paid to investors or ramified parts of the family tree. After surviving the reorganisation struggle of the 1970s, I swore that I would never be dependent on bankers again.

How much are your profits?
If we generate a 16% return on sales this year, we will have achieved our goal.

Which market position would you like to reach?
In Germany and Northern Europe, we are number one in the »modern premium« sector. Then, when all of our homework is done abroad, I like to say, in jest, »If the madness gets me, I’ll make a men‘s collection.«

Have you solved the question of your succession?
I have used my social foundation as a legacy, because my wife and I have no children. I also think about an employee participation model. I will never sell. I constantly get offers from investors, but Marc Cain is not for sale.

What personal goals do you still have?
Healthy living and working. Being a good husband for my wife and to continue to be a good boss. My father only made it to 72. I live very intensively every day. As yet, my balance sheet is positive.