UK's luxury scene: Investor Rami Cassis on Hervia’s future

Last year, Manchester’s famed luxury retailer Hervia was at the centre of a takeover deal that saw it acquired by Rami Cassis, the founder of investment firm Parabellum Investments.

Cassis’ background spanned a multitude of industries, namely that of oil and IT, however Hervia was his first venture into the fashion space, and he is hoping to enter the sector with a bang. On the acquisition's announcement, initial plans for Hervia were outlined to be that of category expansions and international partnerships.

The retailer, which was founded in 1993 by Oscar Pinto-Hervia, who remained on as CEO, stocks a mix of designer merchandise by the likes of Raf Simons, Maison Margiela and Yohji Yamamoto. Now, on the back of Cassis’ takeover, the company has relaunched in an updated format, last week opening the doors of its brand new headquarters and retail space, which are now under one roof.

Speaking to FashionUnited, Cassis spoke on his plans for Hervia, the state of investments in fashion and luxury’s place on the UK high street.

What sparked your interest in Hervia? Why did you choose that as your first fashion acquisition?

There were a couple of things. I’ve been looking to find a way into fashion for sometime, but I wanted to firstly find a deal that was run by management with whom I felt there was a cultural fit. Oscar, who runs Hervia, is someone I felt that with – I liked who he was. I also really liked the designers and the brands that Hervia represents. I felt that for me, it would be an adequate start into the fashion sector before hopefully being able to go on and do other things, which may well mean other acquisitions or investments. Since the acquisition, one of the things we’ve done is obviously consolidate the office, the warehousing as well as our premises. Hence, the new store in Manchester.

By bringing all of Hervia’s operations under one roof, what are you hoping to achieve?

Bringing everything under one roof just makes communications easier. You are able to speak to the team, be onsite and understand what is happening in the stockroom, ensuring there are no discrepancies, which is one of the many issues I think retail firms face. You are also able to be based where customers walk in and can look at the designs and the brands.

Also, it may be minor, but there is a lot less driving around, to the extent that it has a modest impact on our carpet footprint. In the end, it just makes for easier business. Everything is more immediate, and it makes communications between the team and the premises much better. Our warehousing capabilities have gone up and I think the store also looks better.

As an investor, what do you bring to the table from your own perspective that other companies do not?

I know I’m often called a private equity investor, but I prefer to call myself a growth investor. Private equity investors tend to deploy other investors' money and have a certain way of doing things that typically involve generating fees from the money that they raise and having a generic approach to how they do business. It’s a bit different for me for a number of reasons. Firstly, I’ve grown up in industry, and most of my roles have been in leadership. Secondly, it’s my own money. Third, I’m really passionate about fashion and designers.

It’s not just about the numbers. Clearly they are important, but in many ways I am a lot more passionate about fashion than I am about tech, for example. However, if we talk about private equity investments in fashion, unless you look at ‘mega deals’, it's not a sector they typically invest in. It’s primarily manufacturing property and a whole other range of sectors. For me, I’m genuinely interested in the brands that we work with and I have an absolute desire to try and scale the business and do something with it.

Most importantly, and this is one of the many areas where I think I differ from private equity firms, it’s not another person’s money. In other cases, they often tend to set the rules. There’s also no exit timeline. Private equity will typically invest with a view to exit, to sell within three to five years. I’ve been involved with some businesses for 12 years, so this was not an acquisition done with an exit timeline.

This was an acquisition that was carried out because it made good business sense, and I had a real interest in the sector. I’d like to help with the process while aiding British designers, who I think have had a bit of a rough time recently with some of the political changes around Brexit, among other things. This is a long-term investment, and there is no third-party investor telling us what we need to do. It’s Oscar and I who decide what happens.

As Hervia is your first investment in the fashion industry, do you plan to use this as a leverage to continue growing in this sector?

Very broadly speaking, I think we’ll fall into two categories. There are organic growth investments, which will mean potentially looking at how we can possibly move into childrenswear or other brands, or partner with other brands. Then there are the inquisitive investments, which would typically be acquiring other retail firms. It’ll fall between the two. There might also be the development of an own brand, but we’re a little bit early in that process, but that’s something else that we need to speak about with Oscar.

As you mentioned, investors tend to shy away from fashion and the creative industry in general. Why is that?

As I have lived on both sides of the North Sea, I have become familiar with both British and French cultures. There are a number of points to consider. In French and Italian culture, fashion has always been a part of the fabric of society. It has always been an industry that has been highly respected and has also received a lot of government support. This is particularly true for the two largest groups, Kering and LVMH, but there are also a lot of other small- or medium-sized designers who receive a lot of recognition in those countries.

In the UK, and I'm maybe going to be a little bit unfair, but I think fashion has a little bit of a frivolous nature to it, and I think it's entirely unjustified. There's a lot of really talented, hardworking individuals in fashion, but I don't think the fashion industry in the UK receives the same political and government support and coverage that it does in France and Italy. It's a shame because historically there's a lot of really great talent in the UK, and they end up moving to France or working most of their time there.

Retail in the UK has also been pushed into a challenging space due to various issues over the past few years. Do you think luxury retail, in particular, still has a place on UK high streets?

In times of crisis, you either want to be in the really low cost end of the market or in the high end. My view is the middle gets squeezed in times of economic downturn, because people will either be drawn to either ends. So there does remain a space on our high streets for luxury brands. A lot of luxury buyers still want to feel what the garment is like and check the fit, because it's more than just buying a garment. They also like the experience of shopping and seeing the clothes. It has to be tailored to the customer demand. Knowing your customers has never been so important.

You can do that online too, of course. There’s lots of analytics firms that can be used to track buyer movements, but there is no replacement for being able to see the clothes in person and speaking to a sales assistant who's able to advise you directly. The question is how you might then be able to scale that model, because retail is a hard sector to be in, and typically only really works well if you have scale.

You do have some specific expansion plans already outlined for Hervia. What do some of those entail?

I will be looking for suitable acquisitions that we can integrate within Hervia to increase the number of stores we have in the UK and potentially also look at suitable targets in Europe – namely France or Italy – as well as growing the number of brand partners. Those decisions, particularly the latter ones, will be determined by Oscar, but they're really the three main areas – the brand partnerships and looking at acquiring businesses who have a similar culture, approach and theme in terms of the brands they work with.

Why is it that you are particularly leaning towards an acquisition-heavy strategy?

In order to drive reasonable margins within retail and build more of a buffer and contingencies to be able to ride out downturns, I think you need scale. Trying to build organically is sometimes more difficult, because it takes longer, and in some ways, may end up being riskier, because you may well have to invest in stock, for example, that doesn’t shift because you’ve made the wrong call on where your sales are going to move. So acquisitions are the fastest way of achieving scale.

You have set your sights on childrenswear. Why this category in particular?

Childrenswear is the fastest growing category of clothing. Faster even than both men’s and women’s, which is substantially larger than men’s. Generally, people will think of buying clothes for their children before they buy for themselves. And a lot of the brands that we work with also design childrenswear, so it’s a natural extension of what we already do.

Do you have plans to take the brand beyond Manchester and expand it in terms of retail?

Yes, London would be the immediate place, from a retail perspective. It’s probably worth noting that 80 percent of our sales are from Asian customers, many of those are online and many in retail. But the answer to this question is yes, and London is the primary place we are looking at.

How was the strong connection with the Asia market established? How did it become one of your biggest selling points?

There has been a historical association between Hervia and a broad Asian buyer group. They like the brands that we represent, and we are frequently online or in dialogue with our buyers on social media. It’s been a longstanding relationship that predates my acquisition of Hervia. Comme des Garçons is Japanese and Rick Owens is hugely popular with many of our customers. We pride ourselves on the fact that we have some intimacy with our customers, so we know the type of clothing and design they like, which I think has underpinned the success of Hervia for many years. The challenge is how we might then be able to scale that to other cities, but certainly online there’s a lot of engagement between the Hervia brand and our Asia-based shoppers.

What is the immediate next step for Hervia?

It’s one of two options, and both are possible but neither are confirmed. It is either looking at a new store in London, or acquiring a number of other retail operations, most likely in the UK. We would either be doing an organic investment ourselves into a new store or we'd be looking at another acquisition. Both are in discussions, and they may well fall through and then it could end up being something else. I’m not in a position to be able to commit to either, but these are the options we have been thinking about.