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"WE WERE ALWAYS PIONEERS."

Marc Cain has been the category leader in the premium segment for years now. However the market is getting tighter. CEO Helmut Schlotterer on omnichannel challenges, his new management team, his future and the growth strategy for the company.

Mr Schlotterer, you and the new Managing Director Design & Brand, Katja Konradi, surprised the public in Berlin with an unusual clean look. Why this change in style?
What we showed there was a Press Show, so just a part of the order collection, which contained the genes of the present, but not so flagrantly. The new direction of the Marc Cain sub-labels with more differentiation and clarity is currently in progress under Katja Konradi. The buyers have been very positive about this development in their order dates. The future positioning will be much clearer in the next seasons.

The personnel decisions over the past year were also clear. Creative Director, Karin Veit, left the company after 43 years. Urs Konstantin Rouette joined as Managing Director, Purchase, Production & Technical Development. It appears as if you’re occupying your house anew. How long do you want to remain at the top as CEO?
If you were to have asked me earlier, I would have jokingly answered: “at the age of eighty, half-days.” However, my racing car accident in 2017 gave me a change of heart. I am 72 now – physically and mentally fit but the question remains: How will my company be positioned after me? At present I’m in the process of successively giving up all the departments, which report to me as CEO. In the final phase there will be four Managing Directors. I will remain as owner and Chairman.

That sounds very precise.
Yes, we want to be ready by the end of the year. I’m not looking for a successor for me as CEO. But I am establishing a new management structure. I want to stabilise this level now. When all the company departments function with the new Managing Directors, I can look for the manager for the whole company. This would not work at the moment; someone from outside the company would not be able settle down currently. But I can imagine making the CEO appointment internally one day.

But this day will come.
Definitely but only when I show weakness. If this happens suddenly, I’ve made a decree, a will. Alongside the question of management, there’s a question of ownership. At the moment, I’m the sole owner; my wife and I don’t have any children. I have a social foundation, in which I concentrate my social commitment. I specified this as heir in 2008. But it is so that a social foundation is not an entrepreneur. I’m working on another solution for the question of an heir. I can imagine a fond which includes the active employees. This fond will be the owner after me – perhaps even earlier. I can’t imagine a better heir than the employees of this company. I’m increasingly pleased by this thought.

Sales are still not an issue? Despite the difficult successor issue that one can effectively observe in other companies?
If I had wanted to sell up, I would have done it ages ago. I’ve been offered immense sums. But this isn’t an option for me. I don’t need the money. I have a responsibility as an employer: to secure jobs and income for employees.

How far are you in the construction of this structure?
I am now in the lucky situation of being able to move into the future with two important people. One of them is in the position you were talking about – the Managing Director, Purchase, Production & Technical Development. Marc Cain is not only procurer, we are also producers. I was successful in finding Urs Konstatin Rouette. This is a very successful and forward-looking development. Then in fall, Katja Konradi came on board. Ms Konradi does not only carry responsibility for Design. She has taken over other areas, for instance Marketing and Product Management, as well as Marc Cain Interior Design. That means she is responsible for everything to do with our brand image on the market. I’m really happy that she has joined us. We were incredibly successful with Karin Veit – but this is now a new generation, another time, even conceptually. What we are now getting off the ground, is phenomenal. There is a lot in motion.

At the beginning you spoke of four Managing Directors.
Yes, I’m currently negotiating a new commercial manager, in other words, a CFO. This person will be responsible for Accounting, HR and IT, all areas that are still under me. As far as the finances are concerned, it’s not that difficult for us. We aren’t conducting bank discussions; we aren’t looking for investors. These battles do not take place at Marc Cain.

What battles do take place at Marc Cain? Your growth curve has increased steeply over the years. This development was consolidated for two, three years but on a high level.
That’s true. We have not grown in double figures over the last few years. In 2018 we were only able to increase our group turnover by 10 million Euros, that’s around 4% more than in 2017. The financial year 2018 was closed with a group turnover of 276 million Euros. That’s ok for today’s situation. The problem arises when the revenues do not increase as much as the costs, then the income decreases considerably. We had an EBIT of 18% once.

"These funny times are over."

And now?
According to the figures today, we will reach 11%. That’s not bad in the environment today. But we aren’t where we once were. The company has earnt enormously well in the last 18 years. We always financed everything with our cash flow. Strict budgeting was considered to be a nuisance. These funny times are over. We have great potential with the costs – high time to do something about it.

How do you see opportunities to reduce costs?
There are so many. At present, the main sources are in production, procurement and patterning. Many omissions have been carried out over the years and are being worked on urgently. There are millions which we could save here.

Millions?
Yes, substantial amounts. We’re discovering new sources every day. The best thing about this: recognise it and shut it down. This happens very efficiently at the company. The balance between the so-called finished goods to manufactured goods with passive contract processing simply wasn’t correct. We had 80% production against 20% merchandise. We strive for 50/50. That doesn’t mean that the quality will decrease but that certain areas of production are not worth production goods such as denim. I don’t know any premium companies that deal with denim with passive contract processing. Denim is a finished product. There are specialists for this. We had it with a lot of work in passive contract processing works.

Are you thinking of other areas alongside denim? Finished goods are en vogue at the moment, especially in the premium market. One wants to buy cheaper. Isn’t there a danger of losing the high quality and level that one is used to from Marc Cain?
Every group of items is checked thoroughly. But one has to be careful – Marc Cain has great competence when it comes to quality and fit. We don’t want to endanger this. This means that even with finished products, we test the fabrics and materials. We won’t give up these checks. It would be fatal to save in the wrong places just to raise the profit margin. This will backfire. We want to retain our lead.

Marc Cain and the performance of the brand are, as ever, seen as very good. But are you still feeling the universally declared limitations of the industry?
The pre-order round Fall/Winter 2019 is still in progress. It is becoming increasingly difficult. I think it’s the same for all companies. If you achieve a par, it’s already a success. Even in the spring season, some customers announced how much less they were thinking of ordering. But then, the amount was unharmed. As in the past. Our growth in the last 18 years is based on repression. The premium market hasn’t grown, so the competitors had to be lessened. In the 90s, the German premium brands were the same. Today many have vanished; others have huge financial problems.

Is it possible that you have exhausted the market in this country?
We only have to keep fine-tuning. Improvements in the ranges which are held by strong competitors. Optimisations in delivery with regard to time and content.

Where do you see chances for growth when you look around the world?
Well China and Russia joined us in 2000; this was an important part of our growth. These markets developed quickly from the beginning. However, they are stagnating at the moment. With our own Marc Cain Russia, we have stabilised and legalised the situation. In the Middle East we have the conventional malls and a few franchisers. But the level has stayed the same. I don’t see any world markets at the moment, apart from the USA and Canada where we have real potential with our own subsidiary. In Europe, we consider France to be an interesting market. We have had a new Showroom in Paris since 2017 and achieve two figure growth every season. There are further opportunities here.

So all efforts in Canada and in the USA?
Firstly in Canada. We have been very active there over the last two years. We founded Marc Cain Canada Inc. Alongside 60 to 80 wholesale customers, we now have eleven Marc Cain Stores in malls. It’s really about own Stores but then only in malls. It is only here that one has the frequency and a chance even as an unknown brand. After opening the Store we usually make a profit after the third season. I would never open a free-standing Store in a country in which the brand did not have any traction.

How do you evaluate the USA? There malls are losing their appeal.
That depends. There are some that are performing well and then weaker ones. But I give preference to the expansion of the Stores in Canada. There, as in general, our expansion strategy strongly depends on the question of how to implement our omnichannel business. This is our most important project and we have to advance rapidly.

The topic is complex, expensive and time-intensive. How do you go about it?
We develop our own software. I have an aversion to standard sector-specific solutions. There aren’t any systems that work the way I want them to. The goal has to be that the customer always finds the goods she’s looking for regardless of whether they are in the online shop or in the Store. We want to make the goods, which are sometimes in the wrong places, transparent and available on all channels.

"There are millions which we could save here."

You are developing systems for this goods management now?
Yes. Up till now we’ve had separate software packages for the stationary Stores and for our Webstore, which we operated by ourselves right from the beginning. Our Webstore gave us a turnover of 24 million Euro in 2018. In the year before it was still 16 million Euro. The Store is growing. But I need an omnichannel system, which we can connect franchisers in.

Your motto leitmotif is still developing everything in-house?
Yes, we have our own competence and skills in many areas. I don’t know of any other fashion company which has its own carpentry and paint shop. And at the same time we have our own IT development. It has always been important to me that we concentrate high quality skills here in the company.

You have also been working on developing the digital processes in the collections for a while now. Has this established itself now?
We were pioneers when it came to digitalisation. Even in the 70s with digitally-steered knitting machines. Then along came digital print. We were forerunners here. The last project was 3D knit. Now it’s about the development of the collection using 3D technology. We have a department as an interface between the design department and pattern-makers. This is highly complex. But it does aid faster and cost-effective collections development. That’s why we’re investing massively.

How fast can you become in the development of the collections?
One can create simulations much quicker with digital development and this can be presented to a much larger auditorium to gather opinions. I can get opinions on forms and patterns much faster. This means that the success rate of developing a coherent article significantly higher. This all entails a huge turnaround. When the markets and volumes stagnate and are fiercely contested, you have to have a higher success rate with those who order.

Keyword Showroom. Doesn’t one have to digitalise purchasing in the future?
I have examined this but it doesn’t work for our pieces. The collections have to be there albeit not in all varieties. I’m a fan of thematically-decorated goods zones. The same dress in another form or designation can be shown digitally. That’s the future. In the Showroom and later in retail.

And when it comes to variations, speaking in analogue terms, is it is becoming easier to develop collections using 3D, can you imagine further Marc Cain lines or products?
There is potential. In essence we have five collections – Collections, Sports, Additions, Essentials and Bags & Shoes. We want to emphasise their statements in a much stronger way, always under the umbrella brand of Marc Cain. With Sports we are on a young, urban wave. Even with the single pieces in Additions, I can see product areas in which we can grow. For example, women’s trousers. We have a competence that has not been highlighted enough.
Helmut Schlotterer in a talk with Silke Emig and Michael Werner from the Textilwitschaft. // The interview was conducted in the 06/2019 edition.