Nile Clothing AG: Efficiently underway through digitalization
At just 26 and 28 years old, Marc and Kevin Willy took over the Swiss fashion label Nile. Before that, Kevin set up an office for the company in Shanghai, and Marc drove their expansion into Germany forward. Above all, however, they are a step ahead of other companies in digitalization.
Today, you are co-CEOs and majority shareholders of Nile Clothing AG, eight years after joining the company as students. How did you do it?
Marc Willy (MW): Because I am a distant relative of the company’s founder, Markus Gygax, there was a basic level of trust from the beginning when I joined as his personal assistant. Half a year later, Kevin also joined the business as an assistant, and I became Markus Gygax’s deputy.
Kevin Willy (KW): In this way, we got to know the company very quickly. Markus gave us a great deal of creative freedom and room for personal initiative. At the beginning, though, the idea that we could take over Nile wasn’t up for discussion at all.
You soon received the opportunity to prove yourselves with larger projects. What did that involve?
MW: When I joined the company, my first assignment was to improve the logistics. Before then, all of our processes were handled on paper. I recruited a computer scientist to write a logistics program for us. When Kevin joined, we identified even more potential for increasing efficiency.
KW: We decided to approach digitalization very consistently. All steps and processes, from creation of the design idea to sale at the counter or in the web store, should be linked together.
Many fashion labels and companies in other industries must have comparable needs. Surely there was already suitable software on the market?
MW: Surprisingly, no. We found software for cash register systems, production, and logistics, but nothing all-encompassing that could satisfy all of our requirements.
KW: Together with Christoph Widmer, we built up an IT team, which would later emerge as its own subsidiary with Christoph as the managing director and minority shareholder: Fadendaten GmbH. Three programmers at Fadendaten GmbH, together with six additional external programmers and ourselves, developed the system’s architecture. Since 2012, we have had a solution that arranges our processes far more efficiently. To our knowledge, no other system exists that can join together every business area with this level of complexity.
MW: If we need specific values, we can find them at the press of a key – and they reflect the current status. We don’t want to go through lists all day, only to operate with outdated figures.
This software must be highly sought-after by other companies, and you founded a separate company for that purpose. Are you planning to switch from fashion to IT?
KW: Not at all. We believe that Nile Clothing still has huge growth potential, although the same applies for the software. Christoph Widmer and our new CFOO Richard Meier will handle this subject in the future. For us, selling clothes is simply much more fun – and that’s why our focus is staying on Nile Clothing AG.
What happens if you receive concrete proposals for the IT system?
MW: The system has been programmed so that it can be reproduced and adapted for other industries, which is what we intend for it. We could well imagine bringing the software onto the market.
Logistics, and the IT solution developed for it, is not the only area where you have driven forward changes in favor of increased efficiency since joining the company. Four years ago, you and company founder Markus Gygax decided to open an office in Shanghai. What were the specific reasons for this?
KW: Quality issues were difficult to manage from Switzerland and always particularly vexing; low quality clothing must either be taken out of the inventory or sold at a much cheaper price. In addition, this generates additional administrative rounds, which is very inefficient.
MW: In addition to quality improvement and control, we had two other goals. We wanted to be in a better position for price negotiations and complaints vis-à-vis the suppliers. Lastly, we also wanted to monitor our measures regarding social responsibility, meaning fair production standards, protection for the factory workers, and compliance with environmental directives.
Kevin Willy, you were tasked with setting up the Shanghai office at only 24. Did you feel up to the challenge?
KW: I didn’t think like that; I simply focused on completing one task after the other. There were several obstacles. Simply founding a company was a challenge that took me three months and countless administrative visits.
Where did you find support and the necessary information? Had you established a network in China beforehand?
KW: Credit Suisse was a big help to us in this regard by giving us access to its network. Every contact brought us one step further. This is especially true of our conversations with Urs Buchmann, the renowned China expert at Credit Suisse, who has lived and worked in the country for almost 30 years. He gave us valuable tips for the founding formalities; we also had long discussions with him about cultural differences. Another very useful contact was Switzerland Global Enterprise, still called OSEC at the time. This contact was also established through the bank.
Did Credit Suisse mainly serve as a network intermediary or did you use other banking services?
KW: In addition to the usual services like documentary credits, which we had already needed, we were the first Credit Suisse clients with a renminbi account. This meant that we had access to local currency in Shanghai, which made daily business much easier. Until only a short time previously, the Chinese currency could not be traded. This way, we could pay the salaries of our Chinese employees and workers in local currency.
The Chinese mentality is very different from ours. In which areas did you notice this the most?
KW: In communication. At the beginning, when I gave an employee an instruction, I would ask: “Do you understand?” and the answer was always “Yes,” even if they had not understood at all. So I learned to ask a different question, namely: “What will you do first?” If the answer was correct, I could assume that the rest was also understood. Several situations are funny in retrospect: Once, a worker installed a shower for us; when he was finished, only cold water came out of the pipe. When I asked him where the hot water was, he pointed out that I had never specified hot water.
Accurate communication saves both time and money. Another subject with regard to efficiency is that of the franc shock in February 2015. How did Nile react?
MW: We were already tending towards expecting that sort of event, although not necessarily so soon and to such an extent. Currency hedging allowed us to do relatively well during this phase.
What other measures did you pursue, beyond digitalization and the office in Shanghai?
KW: The simplest option for counteracting falling margins is always growth. That is, not just to increase efficiency for the same level of turnover, but to increase sales through growth.
That’s easy to say. What methods are there for increasing growth?
MW: At Nile, we have three options: The first is to open new stores; this is the fastest way. However, finding suitable locations with affordable prices is challenging. The second method is to open showrooms for the wholesale trade, like we have done in Düsseldorf and Munich. And the third option is the web store.
KW: We see the web as being limitless. The retail trade has already changed considerably in recent years. We don’t know what stores will look like in 20 years, but it will definitely be different from today. Online retail, however, is a key part of the future – we are still just at the beginning.
Nile still has huge growth potential, although the same applies for our software. But for us, selling clothes is simply much more fun.
What does this future look like, and how are you preparing for it?
KW: One option we’re considering, for example, is investing in a photography setup consisting of a booth where clothing can be automatically photographed on a mannequin from all angles, in front of a green screen. Tools like these can save a lot of work, but we believe this technology will improve while becoming cheaper very quickly. That’s why we’re still waiting.
It’s not surprising that Markus Gygax saw you two as potential successors so early. But what about the bank – did you need to convince people here?
KW: Since our activities in China, we have been involved in intensive discussions with Florian Würsch, our client advisor. The resulting trust was very helpful for the succession.
MW: Since we have always played with our cards on the table, with both Markus Gygax and Florian Würsch, it was never about convincing anyone. The priority was simply on finding the best solutions together.
On the other hand, you also must have developed a great deal of trust for him, and you have evidently chosen Credit Suisse as your house bank.
MW: That’s true. Succession itself is something very intimate. Florian Würsch knows the details of our tax return, as well as other information that no one outside the Board of Directors knows. This foundation of trust made it possible for an enduring relationship to emerge. A long-term orientation is central for us – not only in terms of our client advisor, but also our producers, employees, and clients. A great deal of Nile Clothing AG’s success is based on lasting relationships like these. The connections were made by Markus Gygax long before we joined the company, and now it’s our job to maintain them.