Now that Esprit has declared insolvency in Germany and plans to close 56 stores, the brand is deepening a decline that started years ago, caused by competition and adverse economic cycles. However, LR consulted with the managers of the activity in Colombia, and they said that the operation, for now, remains uneventful.
According to the Unique Business and Social Registry, Rues, there are 72 active marketers of the brand in the country, located in major cities. The activity is managed by franchisees or local distributors who have the license to sell.
Simple beginnings
With 56 years of operation, this brand gained recognition for its focus on casual and affordable fashion. Additionally, it was accepted for the durability of its materials, showcasing an expansion that was a success story in the fashion business.
The first collection was sold by its founders, Susie and Douglas Tompkins, traveling in a minivan around San Francisco, thereby building an identity based on proximity to shoppers. Despite that humble origin, at the peak of the business, Esprit had a presence in over 40 countries.
When its stores were already recognized, the market capitalization reached up to US$20 billion, but that valuation plummeted significantly and today totals US$934.2 million; this translates into a loss of value of about 95%.
Last year it tripled its losses, which were recorded at US$1.901 billion. In 2022, these totaled US$664 million.
Since 2011, experts have mentioned that competition with Inditex (owner of Zara, Bershka, and Stradivarius) was fierce. The concept of fast fashion (rapid turnover of collections) turned the industry upside down, and the battle for shoppers became complex.
Changing industry
Amancio Ortega, founder of Inditex, is frequently cited as one of the greatest promoters of fast fashion and is often regarded as a prominent innovator for his ability to identify market gaps and fill them with his offerings.
During his days as a clothing store consultant, he wondered why large fashion houses only launched two collections a year and why major gurus decided which designs, fabrics, and colors were for buyers.
There he found out that revenues could improve if collections increased and turned over quickly. Furthermore, listening to customer suggestions and feedback became a constant mantra in Inditex stores.
Sebastián Diez, CEO of Inexmoda, mentioned that “the fashion business in the world is changing dramatically, and global companies are feeling this shake-up.”
“Nowadays, consumers are purchasing differently, with a particular preference for specialized products that meet their needs and at the same time connect in a genuine and specific way with their tastes and preferences.”
Beyond the commercial difficulties, Esprit indicated that “in recent years it has been struggling against rising costs due to inflation, interest rates, and energy prices (effects following the coronavirus) and with the consequences of international conflicts, which has weakened the financial situation.”
The company stated that it is already in negotiations to sell part of the brand rights in Europe, an intangible asset that, according to analysts, remains valuable due to its positioning.