Indefinite,Positioning,and,Increasing,Rent,Explain,Esprit’s,Fall:sandwich复数

　　Recently, American fashion brand Es- prit secretly closed its flagship store in the CITIC Square of Shanghai, which was under heavy scrutiny of people.
　　Some people could still recall the impressive and grand opening ceremony of this flagship store ten years ago. Now its silent closure revealed years’ underperformance due to the ageing of the brand. Simply speaking, Esprit no longer matched the positioning of the CITIC Square and it could not afford the increasing rent of that place with its decreasing operating revenue.
　　The ageing of the brand, the expansion without matching management ability and the excessive reliance on a single market all inhibit the continuous development of the brand. This means that Esprit is getting further and further away from its previous path leading to success.
　　 Increasing Rent Brings Down the Business
　　An insider from a clothing store sharing the same floor with the flagship store said the Esprit’s contract of property renting with the management company of CITIC Square terminated in July and Esprit did not extend the contract. Therefore, the whole store was cleared at the end of July.
　　A worker for CITIC Square said the property management company had gone through a shakeup and the new executives had made the plan of pushing the square to a more high-class level. With that “evolution”, CITIC Square is not a proper place for Esprit.
　　It is known that Esprit rented two booths on the first and second floors of CITIC Square for its apparel business. The total area of these two booths exceeds one thousand square kilometers. In addition, Esprit also rented a place on the third floor for its hairdressing business.
　　The Esprit brand owner Esprit Holdings Ltd refused to tell the real reason about closing its store in the CITIC Square. But experts and market players generally believed that Esprit’s withdrawal was a result of both its underperformance and the increasing rent of the CITIC Square.
　　Xue Shengwen, senior researcher of the China Investment Consulting, said that Esprit Holdings Ltd has witnessed three years’ drop in its profitability, which applied significant influence on the Esprit brand.
　　 The latest quarterly financial report form Esprit Holdings Ltd shows that the company’s operating revenue in Europe, Asia-Pacific and North America respectively dropped 7.8%, 5.0% and 5.8% year on year in the third financial quarter ending March 31, 2012. Meanwhile, the wholesale of company also decreased by 13.3% over last year.
　　Qi Xiaozhai, chief analyst of the Shanghai Municipal Commercial Information Center, said: “When Esprit initially set up stores in the CITIC Square, there are no high-class brands in this place.” Then the CITIC Square increasingly upgraded its level, forcing many non-highclass products to move to another place. As the Square is positioned higher and higher, the rent is increasing accordingly.
　　An insider from China CITIC Corp., the investor of the CITIC Square said that it did not end the cooperation with Esprit as another of its project Shenhong Square in Shanghai will be the new place for Esprit. The new store will be opened at the end of September. As Qi Xiaozhai said, the business circle of North Sichuan Road is positioned for mass and the Shenhong Square was completed recently, so the rent won’t be that high.
　　 Predicament in Brand Positioning
　　Market players said that Esprit was the earliest foreign fashion brand entering China and was once very popular among young people. However, as Uniqlo, ZARA, Gap and other fashion brands stepped into China and got fast development, Esprit’s brand became outdated without any change in the style for ten years.
　　Compared with Esprit, ZARA is more fash- ionable; H&M owns a more abundant product portfolio; and Uniqlo has a better cost performance. “Outdated and expensive, that’s where Esprit’s predicament is,” said Ma Gang, an independent analyst of clothing industry. “Without a definite positioning, Esprit was soon overrun by its competitors.”
　　In Xue Shengwen’s opinion, the unstable management team of Esprit also brought great difficulties for the operation of the company.“Esprit once considered the innovation as the core competitive power, but now it is gradually losing its innovative power.”
　　From last year, shareholders began to reduce their stockholdings of Esprit Holdings Ltd due to its depressed performance. In last November, Blackstone reduced 38.8 million stakes, valuing 417 million HK dollars. JP Morgan cut off 1.81 million stakes of Esprit Holdings Ltd this June. Two months later, Marathon Asset Management followed suit by selling 955.7 thousand stakes of Esprit at 9.429 HK dollars per share. Investment banks like Merill & Lynch and HSBC also gave Esprit Holdings Ltd an underweight rating.
　　Confronted with strong competitors, severe loss of customers and depressed business performance, in August, Esprit invited a former senior executive of ZARA to take the CEO position.
　　For this, industrial analysts warned investors not to place too much hope on the change. “It is positive, but it is just the beginning of the reform, whose effect will not show in a while.”
　　Paul Cheng, non-executive vice chairman of Esprit Holdings Ltd said that the company would turn into a fast consumption apparel brand. Ma Gang believes that Esprit still has to face a lot of problems even though it finishes its transformation. “Changing one aspect is not enough. Esprit should have a clear judgment of the market to see whether there is enough room for its existence and expansion.”
　　He also said that fashion brands are vulnerable to the impact from outside. Esprit should be cautious in choosing the market of light luxury goods or the fast fashion products. “It is hard to be involved in the two fields simultaneously.”

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