De opkomst van de Zweedse kledingketen Lager 157

The Swedish fashion chain Lager 157 is expanding in Europe. The brand opens its first store in Germany, which is intended as a “springboard” for further expansion in the country and the continent. In an interview, CEO Stefan Palm explains his expansion plans and the business model behind the success of Lager 157’s wardrobe.

Lager 157 has conquered Scandinavia in the past decade with its utilitarian clothing 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 was able to expand its stores to a total of 81 in the home countries of brands such as H&M and Filippa K.

“The interest has been good so far. We hope to have a proof of concept in Germany fairly quickly, after which we can continue with the country as our main European expansion market,” said CEO and founder Stefan Palm in an interview on November 18. “To be successful in Europe, you have to be successful in Germany. It is also part of our future ambition to become a global brand.”

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

It all started with denim

This rough estimate and indication reflects a healthy dose of self-confidence from the otherwise rather modest fashion veteran. After all, its business model with affordable basics has proven extremely successful in recent years. The fashion company, founded in 1999, now employs 3,000 people and achieved a profit of more than 27 million euros last 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 residual stock of denim brands. To meet the demand they noticed for basics, they initially introduced their own denim. Over time, their own brand became increasingly important.

“We received very good feedback from customers. Everyone said: your products are just as good as the branded products,” says the founder. Ultimately, Lager 157 focused exclusively on its own brand from 2014 onwards.

Since then, years of development have followed, during which the business model, supply chain and stores have been adapted to one fundamental idea.

Basics for everyone

“We focus on items that are worn by many customers. Instead of making fashion run faster and faster, we use the facts and customer data to see what the most common products with the highest demand are,” Palm explains. “We are not driven by speed or trends, but rather by functionality and practicality with a fashionable touch, without wanting to be at the forefront of trends.”

Indeed, there is no trace of trends in the offline or online store: T-shirts, jackets and sweaters for men are mainly offered in black, white or navy blue – the styles are simple and utilitarian, without frills or other embellishments. Classic cable sweaters or checked shirts add some more variety to the range. The items don’t look old-fashioned, but they are certainly basics.

People who are not interested in fashion will find everything they need here, Palm emphasizes. Those with an interest in fashion will find the basics that they can combine with other items from their wardrobe.

Anti-fashion

“We have created – you could almost call it that – an anti-brand. We didn’t want to sell things by showcasing a certain brand, we wanted to sell basic items,” Palm said. “Items that can be a fundamental part of your daily clothing.”

The current range for women, men and children consists of approximately 600 to 630 items, of which 60 percent are always available. The remaining 40 percent is seasonal, but even about half of that remains on sale for more than twelve months.

The basic collection, which is tailored to needs and functionality, also allows Lager 157 to keep prices as low as possible. “We never want to be the trendiest, we want to be the best based on value for money and offer clothes that you can wear many times and that add value to your daily life,” explains the founder.

Simple and sleek

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

“The best marketing, the most authentic and valuable marketing, is when one customer tells another that this is the product they need to try. Without satisfied customers we would not have grown as much,” says Palm.

Relying on word of mouth is part of the business model because it makes it possible to keep product prices low. The sleek and simple collection ensures further cost savings. If clothing does not go out of fashion, it can remain in the store until it is sold. Until now, Lager 157 has always been able to sell everything, Palm claims.

“The biggest expense in the fashion industry is discounting and the need to withdraw goods without selling them,” says Palm. We have no waste because we use everything and waste nothing. This is a huge difference compared to almost all fast fashion players.”

The consistent range also saves costs in collection development and enables an efficient supply chain with long-term planning. You could compare the approach with Ikea, says Palm. Lager 157 sources the majority of its items from long-standing suppliers in India, Bangladesh, Turkey and China.

Standardized 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 material and everything that goes with it – a year before Lager 157 was founded.

“We haven’t changed it since. We focus on efficiency, sustainability and a long-term vision in our own way,” says Palm.

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

“We want to be that store where you can always get what you need for the day. T-shirts, hoodies, denim, underwear, all these products are offered to the customer in a clear manner and in volume,” Palm explains. “It is a super practical layout. We do not present or sell fashion trends. We sell clothing and fashion as raw materials.”

Physical 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 on northern Germany.

Testing the water

“We got a good chance in Bremen. We like medium-sized cities, we generally perform well there,” says Palm. He assumed that the store in Bremen will have the largest denim department in the Hanseatic city. Even today, denim is a strategically important product for Lager 157, accounting for almost 20 percent of its product offering.

If the store performs well as a proof of concept, Lager 157 plans to expand further in Germany. In addition, the Swedish fashion chain has already set its sights 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 is concerned about the expansion at all. “During my 35 years in the fashion industry, I have come to realize that there is always a good time when you are relevant,” he says. “Of course there are also challenges when it is a slow market, but when the market is low there are also opportunities, such as getting good offers for retail space.”