An interview with Ruben Arutyunyan, CEO of Henderson, a Russian brand of fashion clothing for men.
Please describe the identity, history and values that underpin your company...
Established in 1993, HENDERSON is striving to reinforce and expand its position as a Russian market leader in the upper-middle market segment for elegant menswear and accessories. The company operates two brands: the primary brand “HENDERSON” (classic and smart-casual) and a secondary brand “HAYAS” (casual only). With headquarters 3km from Moscow, HENDERSON currently operates the largest retail chain in the Russia menswear segment* with 160** stores located exclusively in leading Russian shopping locations, including the flagship store on Tverskaya – Moscow’s main shopping street. Henderson’s mission is to help men look fashionable and elegant and thus improve their quality of life. The mission is supported by the company values which are communicated clearly to employees and role-modelled by senior management. The values include knowledge, effectiveness, cooperation, responsibility, and integrity.
What is the USP for your products/services and what are the reasons for their success?
Our main unique selling proposition is our ability to offer a wide range of luxury menswear and the best customer experience at an affordable price. HENDERSON is focused exclusively on menswear and its stores aspire to be the number one destination for Russian men of median income for smart clothes. The superior service recognised by our customers is maintained through direct control of our stores, all of which are fully owned by HENDERSON. Although the size of the Henderson chain in Russia is unmatched by any competitor, customers receive the same price and service from Kaliningrad to Irkutsk. More details on how the chain operates:
- with 160 stores in 55 cities, HENDERSON is currently the largest menswear retailer in Russia by number of stores;
- the company has as a strong base with its dominant position in Moscow (50 stores) and Saint Petersburg (20 stores), and is also present in other cities with over a million inhabitants; it is continuously rolling out its successful concept to other promising locations;
- a focus on high quality malls in premium locations gives HENDERSON access to high traffic, and strong relationships with mall developers allow for optimal store location within malls;
- the store format is shifting towards larger areas accommodating a wider range of products.
The size and quality of the chain are further supported by strong brand awareness. Henderson is popular not only among customers, with 11 million visitors to the stores in 2016 and 85% of sales to HPC (HENDERSON Privilege Card) members, but also among professional establishments – HENDERSON’s founder Ruben Arutyunyan was a finalist in E&Y’s “Entrepreneur of the Year” award, among many other recognitions of his success. HENDERSON is an official tailor and partner to the Russian National Ice Hockey Team and the Moscow Virtuosi Chamber Orchestra led by Maestro Spivakov.
Last but not least – among many players competing for online space, only HENDERSON with its extensive chain can offer smooth integration of the online and offline customer experience. As evidence of the success of this omnichannel approach, HENDERSON online sales are in constant growth.
Strong financial track records
- Sales CAGR 34% in the period between 2009 and 2013, better than market and competitors’ growth in the turbulent period 2014-2016, and 27% YoY growth for the first 19 weeks of 2017
- High transparency, consistency and a conservative accounting approach underlined by Ernst & Young audited IFRS financials since 2009.
State-of-the-art management systems:
- The company put in place a top-notch EPR system in 2013 and has constantly developed it since then, so that all departments have up-to-date management information, and the progress HENDERSON makes towards its strategic goals can be measured transparently in real time
Long-standing relationships with international suppliers and manufacturers:
- Having worked with 50+ producers and suppliers the company has built up a transparent and well-coordinated supply base which fits HENDERSON’s high quality standards
- HENDERSON has suppliers throughout Europe and Asia, with major partners in Italy, Hong Kong and China.
What are your growth strategies, challenges and vision for the future?
Key elements of our growth strategy are as follows:
- Control of costs by moving sourcing to countries with the lowest labour costs and strengthening the internal quality control team
- Double the area of successful stores to an average size of 300m2 (60+ stores in the coming 3 years) and open new stores only in the highest quality shopping malls.
- Close small stores and stores performing badly due to reduced mall footfall or decrease in demand for quality clothing (the number of such stores is expected to be less than 15 to 20 over the next three years)
- Expand the collection and improve customer service
- Continuous development of omnichannel strategy.
The company faces the following main risks:
- Change in customer behaviour leading to reduced spending in favour of saving
- Increasing costs due to possible further depreciation of the ruble
- Competitor activity.
VISION FOR THE FUTURE
We see HENDERSON as the Russian leader in the following five areas:
1. Collection creation by:
- keeping quality of the apparel our highest priority
- establishing faster communications with suppliers using product life cycle management software to receive products in a timely and frequent manner
- shortening collection development cycles and production lead times
- aligning collection design with in-store presentation.
2. Total quality management by seamless communication among company employees.
3. Brand communication by employing optimal mix of offline and online advertising.
4. Chain expansion in terms of both number of stores and typical store size – increase to double the current area
5. Store management by improving management practices and strengthening the team.
How far does the company consider innovation a strategy for growth?
The following innovations are embedded in HENDERSON’s strategy:
- new services, such as made-to-measure – HENDERSON SU MISURA SUITS
- online shopping so customers can save time
- using all relevant technologies for business digitalisation to stay ahead of the competition
- innovative features of the products themselves, such as accessories that protect customers from wireless credit card data theft and non-iron clothing for travellers.
What does "business internationalisation" mean for you today? Exports, outsourcing, partnership, or a combination of these?
Business internationalisation also means an opportunity to strengthen HENDERSON’s senior management team by attracting top world-class professionals from leading retail companies and adopting their experience and knowledge of business processes to the Russian environment.
What are your most important markets today? And what markets are you looking at with greater interest in the medium to long term?
Over the next three years HENDERSON will be focusing on developing the Russian market of 147 million people. When domestic growth is exhausted, the company will look to expanding into CIS countries.
What was the most important project or time for your company and for consolidating it?
The most important existing project is increasing the typical store format from 150 to 250-350m2 to accommodate the expanded HENDERSON range. The project should be fully accomplished within 3 years.
What does it mean for you to be part of the Elite Growth project?
We welcome the opportunity to hear about inspirational stories of creating and developing businesses in different parts of the world, and to exchange best practice with companies recognised as leaders in their sector. We appreciate the information and networking opportunities that the Elite Growth project has provided.
* Please see the recent rating of Russian menswear retail chains prepared by RBC, a leading Russian market research agency, in Appendix A.
**Size and structure of Henderson’s chain are provided as of May 2017.