Digital transformation of the business model

Digitizing the business model offers HUGO BOSS attractive possibilities for sustainably increasing customer value and for improving efficiency. In doing so, the Group is building on its strong IT and logistics capabilities. The potential for digitizing the business model is to be harnessed along the entire value chain wherever this is economically viable.

Digitization along the value chain (graphic)

The Company is increasingly developing its products digitally. In particular, the use of digital prototypes helps to shorten development times. The high degree of detail provided by 3D virtualization permits a realistic depiction of colors and contours. The product development of parts of the HUGO collections has now already been fully digitized. In coming years, this technology will be expanded and gradually transferred to the BOSS brand as well. Moreover, through the increased use of tools for digital trend recognition as well as a digital fabrics and trimmings database introduced in 2018, HUGO BOSS expects to further shorten the collection development phase in coming years. Research and Development

In the production process, the Company is focused on the digital transformation of its largest production plant in Izmir (Turkey). On the road to a “smart factory”, key milestones have already been achieved with the digital networking of all production machinery, employees, processes and products. This already allows the real-time tracking of various production data. As part of sourcing activities, the enhanced digital networking with suppliers makes it possible to reduce lead times and ensure uniform product standards. Sourcing and Production

To achieve efficient utilization of its distribution and logistics capacities, HUGO BOSS relies on a uniform modern IT platform and high-level automation at its own distribution centres. Thus both the three distribution centres located in proximity to its headquarters in Metzingen for hanging goods, flat-packed goods and its European online business, as well as logistics facilities like the one in Midway, Georgia, United States have been linked up to the Group-wide ERP system. These modern warehouses achieve high speed and quality in supplying the Group’s own retail stores with ready-to-sell articles in particular.

In addition, digital systems optimize inventory planning in the Group’s own retail business. This gives the Company a fully integrated view of the inventory flow and allows it to directly align inventory planning with customer demand. The range is optimized on the basis of the capacity of individual stores, the characteristics of the specific locations and the individual product life cycles. Over the next few years, the focus will be on achieving additional flexibility in the inventory flow so that goods can be reallocated across different regions and channels, even at short notice, to enhance availability to customers.

HUGO BOSS plans to further increase the effectiveness of its marketing outlays in the coming years. Around three-quarters of the marketing budget will be allocated in future to digital marketing channels (2018: around 70%). An emphasis will be placed on expanding the Company's presence in relevant social networks. By using advanced analytics, the effectiveness of digital marketing activities can be effectively measured and useful conclusions for future marketing activities can be drawn.

The use of digital elements is becoming increasingly important in the Group’s own retail stores. In particular, the newly launched store concepts for BOSS and HUGO, which differ substantially from the old one due to the integration of omnichannel services, are designed to offer customers an improved shopping experience. Besides the use of tablets, HUGO BOSS is relying on large touch screens for customer advising, so-called “Experience Tables” and “Shoppable Kiosks,” where products can be ordered conveniently. Lastly, digital channels also extend the aftersales services on offer. In addition to the changes to the existing business model, the Group is also examining new business ideas to assess their ability to contribute to future growth.

HUGO BOSS is also advancing digitization in its wholesale business. In the distribution of the HUGO collections, the Company is already relying more and more on a specifically developed digital showroom. This offers wholesale partners a flexible, convenient and fast alternative to conventional ordering, covering such aspects as the inspiration for the collection, the selection of individual products and the completion of the ordering process. The Company is convinced that, moving forward, digital showrooms will substantially simplify the wholesale selling process. Consequently, this technology is to be introduced on a comprehensive basis for both brands in the medium term.