Minimalism meets mass appeal: The rise of Swedish apparel chain Lager 157

The Swedish fashion chain Lager 157 is expanding to Germany. The first store in Bremen is only intended to be the “springboard” for further expansion in Germany and Europe. In an interview, CEO Stefan Palm explains his expansion plans and the business model behind the success of Lager 157's wardrobe staples.

Lager 157 has conquered Scandinavia in the past decade with its utilitarian apparel for everyone at extremely low prices. Prices range from 52 euros for a ski set of a jacket and 17 euros for a hoodie. No wonder that the clothing chain could grow its stores to a total of 81 in the home countries of brands such as H&M and Filippa K.

The first German store will open in Bremen on December 5, the same day as the online store in Europe's biggest fashion market. The location outside the city center was chosen deliberately. Rents are more affordable there, especially given the standardized store concept of Lager 157, which covers 2,300 square meters in the German port city.

“The interest is good so far. We hope to have a proof of concept in Germany pretty quickly, then we can proceed with the country as our main European expansion market,” said CEO and founder Stefan Palm in an interview on Nov. 18. „In order to be successful in Europe, you need to be successful in Germany. It’s also part of our future ambition of being a global brand.”

When asked about possible locations and number of future stores in Germany, the laconic Swede refrained from giving a specific answer. Instead, he preferred to do the math: In its Swedish home market, Lager 157 operates around 50 stores for a population of ten million, with a market share of around 1.5 to 2 percent. How would this market potential translate to a country with 80 million people like Germany?

It all started with denim

This rough estimate and indication reflects a healthy dose of self-confidence on the part of the otherwise rather modest fashion veteran. After all, his business model with affordable basics has proven to be extremely successful over the past years. Founded in 1999, the fashion company now employs 3,000 people and achieved a profit of more than 27 million euros in the past year on a turnover of 235 million euros.

The current concept was initially created as a by-product. In the 1990s, Stefan Palm worked as a buyer for the Scandinavian denim retailer JC, where he was in constant contact with brands such as Levi's, Diesel and Lee. In 1999, he founded Lager 157 in the Swedish village of Gällstad to sell remaining stock from denim brands. They initially introduced their own denim to meet the demand for basics that they noticed. As time went on, their own brand became gradually more important.

“We got really good customer feedback. Everyone said: your products are as good as the branded goods,” the founder recounted. Eventually, Lager 157 focused exclusively on its own brand from 2014.

Years of development have since followed, during which the business model, the supply chain and the stores have been adapted to match one fundamental idea.

Basics for everyone

“We focus on items that are worn by many customers. Instead of driving fashion faster and faster, we use the facts and the data from customers to see what the most common products in highest demand are,” explained Palm. “We’re not driven by speed or trends but rather by functionality and practicality with a fashionable touch but not looking to be at the forefront of trends.”

There is indeed no trace of trends in the offline or online store: T-shirts, jackets and sweaters for men are offered mostly in black, white or navy – the styles are simple and utilitarian, with no frills or other adornments. Classic cable knit sweaters or checkered shirts bring a little more variety to the range. The items do not look old-fashioned, but they are definitely basics.

People uninterested in fashion will find all they need here, Palm pointed out. Those with an interest in fashion will find the basics that they can combine with other items from their wardrobe.

Anti-fashion

“We created – you can almost call it – an anti-brand. We didn’t want to sell things by exposing a certain brand, we wanted to sell staple items,” said Palm. “Items that can be a fundamental element in your everyday dressing.”

The current assortment for women, men and children consists of around 600 to 630 items, 60 percent of which are always available. The remaining 40 percent are seasonal, but even about half of these remain on offer for longer than twelve months.

Its basic collection, which is geared towards needs and functionality, also allows Lager 157 to keep its prices as low as possible. “We will never want to be the trendiest, we want to be the best based on value for money and offer garments that you can wear many times and give you value in your everyday life,” the founder explained.

Simple and sleek

The combination of tried-and-tested basics at low prices seems to be so popular with customers that Lager 157 has been able to expand over the past five years even without advertising.

“The best marketing, the most authentic and valuable marketing is when one customer tells another that this is the product that they should test out. Without happy customers we wouldn't have grown that much,” said Palm.

Relying on word of mouth is part of the business model, as it allows product prices to be kept low. The lean and simple collection brings further cost savings. If clothes don't go out of fashion, they can stay in the store until they are sold. So far, Lager 157 has always been able to sell everything, Palm claimed.

„The biggest cost in the fashion industry is discounting and the need to take goods out of sales without selling them,” said Palm. We have no waste, because we take care of everything, and don't waste anything. This is a huge difference compared to almost all fast fashion players." The consistent assortment also saves costs in collection development and allows for an efficient supply chain with long-term planning. You could compare the approach to Ikea, said Palm. Lager 157 sources the majority of its items from long-standing suppliers in India, Bangladesh, Turkey and China.

Standardised store

The focus on efficiency and essence is also reflected in the store design. The current store concept was developed in 1998, with furniture, sales materials and everything that goes with it – a year before Lager 157 was founded.

“Ever since then we haven’t changed it. We focus on being efficient, long-term-oriented and sustainable in our own way,” said Palm.

Lager 157's standardized store concept requires a retail space of between 2,000 and 2,400 square meters to accommodate its product assortment with a “good volume.”

“We want to be this store where you can always get what you need for the day. T-shirts, hoodies, denim, underwear, all these products are offered in a clear way to the customer and in volume”, explained Palm. “It’s a super practical layout. We are not presenting and selling fashion trends. We sell garments and fashion as raw material,”

Brick-and-mortar stores generate 80 percent of the company's revenue, with the remaining 20 percent coming from e-commerce. For its first store in Germany, Lager 157 plans to leverage its existing infrastructure in Denmark and therefore focused its search for retail space to Northern Germany.

Testing the waters

„We got a good opportunity in Bremen. We like mid-size cities, we have a tendency of performing well there,” said Palm. He assumed that the Bremen store will have the largest denim department in the Hanseatic city. Even today, denim is a strategically important product for Lager 157 and accounts for almost 20 percent of the product offering.

If the store performs well as a “proof of concept”, Lager 157 intends to expand further in Germany. In addition, the Swedish fashion chain has already set its eyes on other European countries such as the Netherlands, Belgium, Poland and the United Kingdom.

Given the current economic outlook and subdued consumer spending, the question remains whether Palm has any worries about the expansion at all. „During my 35 years in the fashion industry, I have come to realise that there is always a good moment, when you’re relevant,” he said. “Of course, there are also challenges when it’s a slow market but when the market is down there are also opportunities, such as getting good store offers.”