Hugo Boss New Concept Store in Milan: an Analysis of Customer Reactions

  
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categories, for avoiding a cannibalization of the current positive (but yet 
weak) brand image; the presence of a relax area is likely to become a 
valuable source of differentiation and a way to stimulate customers’ minds to 
remember; furthermore, the presence of an exclusive café/restaurant inside 
the Concept Store results to be highly appreciated as well; a membership club 
could be used for selecting customers interested in participating to social 
events and diversifying the offer for Entertainment Services; finally, high 
professionalism of sales people must be guaranteed inside the Concept Store, 
as target customers normally expect it. Finally, a manifest coherence between 
the theoretical propositions and the empirical results has been found.  
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
  
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1. INTRODUCTION 
 
This Chapter will provide an overall description of the paper’s structure, clarify its basic assumptions, 
and assess the scenario before going deeper into the matter.  
 
Nowadays, as a result of the profound renovation occurred in the society 
structure and in the nature of consumer demand, the retail strategy that 
companies need to follow, substantially changed. New retail initiatives are 
taking place in several and different modes. Yet, all of them follow the same 
logic: emphasis has gradually shifted from promoting the product to capturing 
and retaining the customer through the preponderant use of Experiential 
Marketing, especially in upscale markets – “Luxury is moving from product to 
experience, instead of a special cream, we want a day in a spa. Instead of 
fancy trainers, we want to become athletes”.  
In particular, the upscale fashion industry offers an interesting case of a 
significant use of Experiential Marketing in retail. This is mainly due to 2 
factors:  
I. The overcrowdness of the specific industry, as a major threat: “Retail 
renewal has become the critical issue of the decade. Partly, this is the result 
of saturated markets.” 
II. The perpetual search for differentiation - the fundamental basis of average 
profitability in the long run - of upscale fashion companies, as a major 
strength. As a matter of fact, companies appear always very similar in both 
stylistic and retailing terms. Success depends upon the value that a firm is 
able to provide to customers – which carries on in becoming the firm’s 
sustainable competitive advantage. This competitive advantage has two basic 
ways: low costs and constant offered benefits, or benefits whose uniqueness 
counterbalance a higher cost. The difference between this higher cost and the 
average one is named as Premium Price. As in the upscale fashion market all 
prices are premium because of products’ quality standards and specific 
  
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guarantees offered by the brand itself, a continuous search for differentiation 
is always an appropriate strategy.   
 In the field of retail, “the store has become the hero”, being valuable 
opportunity for differentiation and activation of customers’ emotions, through 
applying Experiential Marketing. Its applications are several, and depend upon 
the industrial, geographic, and company profile specifics.  
 With the intention of examining its effectiveness as a strategic lever, the 
paper focuses on some limited areas of investigation, but yet willing to be 
extendable to a broader context. Some parameters needed to be defined at 
the very beginning of this study in order for the empirical research to be 
feasible. The industry under investigation will be the upscale fashion industry, 
selected for the major utilization of Experiential Marketing; the relevant 
geographic market will be Italy, selected for its well known high and under-
exploited potential as a fashion market; the relevant company will be Hugo 
Boss Italia, chosen for the specific branding issues faced in the Italian market; 
the specific Experiential Marketing application tool will be the Concept Store, 
for recently rising as an interesting but yet not very well known branding tool. 
There are indications that the opening of a Concept Store in Milan, the main 
fashion centre of Italy, could be an effective solution, with specific reference 
to the issues currently faced by Hugo Boss Italia - a substantial lack of brand 
awareness and a weak brand image.  
 The Concept Store will be defined by 4 features: Structure, Assortment, 
Service and Interactions. Some propositions within retail will be drawn on the 
theoretical antecedents and consequences of brand awareness and brand 
image. With the intention of enriching the latter evidence with a practical 
insight from real life, a research design is presented and the propositions are 
validated by means of an empirical study. The chosen research methodology 
will be qualitative as requested by the peculiarity of the issue. While the 
research issue will be the effectiveness of the Concept Store on brand 
awareness and brand image within the upscale fashion industry, the research 
questions aim to identify antecedents and consequences of brand awareness 
  
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and brand image. The analysis of results will be finalized to a model 
construction. A presentation of academic key learnings will follow and some 
managerial implications will be provided for an effective implementation of the 
possible Hugo Boss Concept Store in Milan. The Armani study case in 
Appendix will prove a real example of a Concept Store successfully 
implemented. 
 
This present paper is structured as follows.  
1. The following Paragraphs – Introduction - aim to assess the background 
of the study: the focus is on the modern Italian consumer, on the 
modern Italian retail strategy, and finally on the Hugo Boss Italia 
company, including SWOT analysis. 
2. Chapter 2  - Core concepts - presents the core concepts on which the 
paper is based: the constructs of brand awareness and brand image, the 
concept of Experiential Marketing and Concept Store. Some theoretical 
propositions on antecedents and consequences of brand awareness and 
brand image within retail will be drawn. 
3. Chapter 3 – Research questions - summarizes the key issues from both 
above chapters, and introduces the research questions leading the 
following empirical research. 
4. Chapter 4 – Empirical research - explains the empirical research 
method, provides a content as well as a quantitative analysis - where 
relevant - of its results, and ends up in a model construction about the 
resulting antecedents and consequences of brand awareness and brand 
image within retail.  
5. Chapter 5 – Conclusions – reviews the main academic learnings and 
provides some managerial suggestions for a real implementation.  
Exhibit 1 presents an overall picture of the paper’s structure. 
 
 
  
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Exhibit 1: The overall structure. 
 
Introduction
Core Concepts
Research Issue
Research questions
Outcome
SCENARIO: Italian fashion market – customer’s profile and retail strategy
STUDY CASE: H   U   G   O      B   O   S   S Italia - company profile and SWOT
BRAND AWARENESS and BRAND IMAGE
EXPERIENTIAL MARKETING and CONCEPT STORE (Structure-Assortment-Service-Interactions)
EFFECTIVENESS of Concept Store with respect to the specific challenges
CHALLENGES:  lack of brand awareness and weak brand image
ANTECEDENTS and CONSEQUENCES 
of brand awareness and brand image among all Concept Store factors
MODEL and mangerial suggestions for implementation
 
 
1.1 ITALIAN CONSUMER 
 This paragraph will present those specific aspects of the modern Italian 
consumer that contributed and inspired the renovation of retail strategy in 
Italy. 
The consumption in Italy is expected to grow by 1.3% in the period 
2006-2008. Furthermore, there are indications that, if only looking at the 
luxury goods consumption, the percentage rate would be substantially higher. 
What drives the percentage down is mainly the consumption of primary 
goods, which will dramatically decrease, if not as volume certainly as value, in 
the medium/long-term. There is no doubt that amongst sectors most vital in 
the Italian market, upscale and luxury clothing plays a priority role, followed 
by some distance by restaurants, services, and technology. The Italian 
consumer sensitivity to price will incrementally increase, when referring to the 
primary goods market, as well as his willingness to reduce the average 
expense. Therefore, the income percentage devoted to the purchase of 
  
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primary goods will decrease, whereas the income percentage devoted to the 
purchase of luxury goods will raise. In other terms, the elasticity of demand to 
price will increase, when facing primary goods, and it will decrease when 
facing luxury goods. Meaning behind luxury goods is goods that play a role of 
status symbols and tend to signify the purchasing power of those who acquire 
them. These items, while they may not be any better (in quality, 
performance, or appearance) than their less expensive substitutes, are 
purchased with the sole purpose of displaying wealth or income of their 
owners. These kinds of goods are the objects of a socio-economic 
phenomenon called conspicuous consumption and commonly include luxury 
cars, expensive watches and jewelry, designer clothing, yachts, and large 
residences, and so on. The shift in purchase consumer habits can be explained 
in social terms. In Italy, as in the rest of Western countries, the number of 
working people has exponentially increased, together with the number of 
working hours per day. Instead, wages did not evolve accordingly. An average 
day has become full of activities and spare time has decreased accordingly. 
The Italian society in general appears to be characterised by a stagnant, 
ageing but healthier population, as an effect of a higher level of education 
than ever before. Furthermore, the modern society has imposed people to 
look young and good, especially when getting old. Trends in customers 
expenses reflect this need. Italian families have become smaller as a 
consequence of the limited time each member can devote to the others. More 
and more women are working. A new kind of woman emerges, independent 
and career-minded. This woman would want clothes and a look that suits her 
needs (even better if it makes her look masculine). More couples are getting 
married in later years. They are heavy users of technology and the main 
reason of usage is information.  
Physiologists declare that the average Italian consumer strongly desires 
to get rewarded and compensated for this everyday hard life. For instance, 
they would like to travel more, devote more time and financial effort to the 
various activities of looking after their beauty, and demand for a longer leisure 
  
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time in general. “Luxury means different things to different consumers, who 
are increasingly affluent, empowered by infinite choices and refusing to be 
segmented”. This suggests that, the typical consumer of luxury goods or 
services is no longer identifiable through a demographic segmentation (for 
instance, on the basis of income level). As a matter of fact, anyone can be a 
luxury goods consumer, as far as he/she perceives it as an adequate reward. 
Therefore, the ancient phenomenon of polarization of consumption between 
the highest end and the mass market that registered until the Second World 
War, appear to have come to an end. While in the ancient ages, the higher 
class used to demonstrate its own status through the conspicuous 
consumption of luxury goods, in today’s scenario, a division between high and 
mass market on the basis of purchases is no longer possible. For instance, if a 
customer buys a luxury good, this cannot be taken as an evidence of his/her 
belongings to the upper class. As a matter of fact, consumption is no longer 
polarized. On the contrary, it consists of a continuum – “there are different 
kinds of rich people”.  
To clarify the major characteristics of the modern Italian consumer 
which mostly contributed and inspired the renovation of the Italian retail 
strategy, two major sociological factors should be further underlined:  
1. individualism and hedonism: today’s family is no longer a “unit” where 
members discuss among each other, but a cellular base camp for individuals 
with their own phones, TVs and computers, front door keys, meal times (and 
content), friends and values. They do not trust formal and traditional 
authorities figureheads but only their own feelings and experiences. This type 
of consumption seeks fun, amusement, fantasy, arousal, sensory stimulation, 
and enjoyment. Indeed, the evidence suggests that consumers typically spend 
the majority of their lives eating, sleeping, chatting with friends, making love, 
and watching television (Robinson 1977). Today’s consumers virtually deny 
classification. They reflect the influences of the generation into which they are 
born, the life-stage they have reached, their own income and lifestyle, their 
own personality. Unlike past times, when there was a peer group pressure to 
  
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conform to a stereotype, today’s consumer feels more than ever at liberty to 
“be himself or herself”. In fashion terms, this obviously reflects a growing 
evidence of consumer rejection of mass products and clones stores, in favour 
of something and some place which is “right for me”. The tangible shift 
demonstrating the predominance of the individual above the community in 
Italy is the burst onto the scene, since the middle of the 1980s up to the 
present, of Italian and foreign fashion designers. Before, the market could be 
represented like a pyramid, with a number of price segments that reflected 
the segmentation of social classes. Thanks to the booming consumption after 
the crisis of the 1970s, the new riches sustained the growth of the designer 
labels. Capitalising on their reputation designers began brand extension 
strategies through licensing agreements. Diversification was looking for new 
market segments where people showed aspirational purchasing (for example, 
teenagers who could not buy a designer dress could buy a designer perfume 
or accessory). In the end of the 1990s a new era began. The Italian society 
was no longer like a pyramid, but took on the shape of a cylinder, which 
emphasised the disappearance of the high and the mass market consumer in 
favour of a continuum of people, whom demographics were extremely 
different and consumption was oddly same. What counted was the individual 
and his self-image (Ritzer, 2000). Facing an explosion of options, the Italian 
consumer learned to judge, to become his own fashion designer and 
professional buyer. His search was increasingly for products that had meaning 
and spirit, that could create emotions.  
2. time availability: The modern Italian consumer is, as previously mentioned, 
the complete lack of spare time, which heavily crashes with the growing 
willingness to devote a higher percentage of the everyday life to shopping. 
Therefore, shopping must be effective and time efficient: the consumer needs 
a reward, wants it quickly, never wants to regret his choice. For many people, 
incremental time now has more value than incremental money. Most people 
are striving to increase their personal time productivity in order to squeeze 
more activities and more experiences into a finite (if longer) life expectancy. 
  
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“I want it now” has become the cry of today’s consumers (Dalli, Romani, 
2000). Furthermore, because of blurring activities, people no longer perceive 
aspects of their life in discrete compartments. Eating and eating out no longer 
retain their traditional significance. Sport, fashion and music overlap. Greater 
attention is being paid to the services provided to consumers, from opening 
times and quality of service, to the professionalism of sales staff. All these 
factors are being perceived as savings of time. Markets can no longer be 
identified by product categories, but rather by multi-dimensional lifestyles, 
which present multi-faceted problems requiring new types of total solutions  
 
1.2 ITALIAN RETAIL STRATEGY 
The luxury market in Italy has undergone far-reaching transformations 
in the last ten years, as a consequence of the substantial changes occurring in 
the society structure, as mentioned above: the impossibility to segment the 
market according to demographic variables; the raise of the individual and the 
collapse of the community; the lack of spare time; the need for lifestyles. 
Distribution has taken on an essential role and only those brands that have 
been able to build up coherent and ambitious distribution strategies by 
developing a network of outstanding boutiques, have been able to weather 
the storm. This has led these brands to invest particularly in stores most 
powerful and effective locations, mostly in Rome, Florence, Milan. As a result 
of this trend of opening big boutiques in certain cities and in certain streets, 
places like via Montenapoleone in Milan, via Condotti in Rome, via Tornabuoni 
in Florence became over the years proper “fashion streets” where the 
consumer could find all the main luxury branded stores, enjoying zero 
research costs. Milan appears to be the undisputed heart of the fashion 
network, accommodating the creations of the best designers in the region. 
The three keys to success in retail marketing were famously said to be 
“location, location, location”. As a matter of fact, having a boutique near to 
where large numbers of target customers are located, is still a must for 
international luxury brands. On the other hand, if a company does not locate