Klaus Steilmann GmbH & Co. KG

1929–1960

Klaus Steilmann GmbH & Co. KG is Germany's third largest apparel maker and ranks among the top five in Europe. Steilmann designs and manufactures women's and men's wear under private labels, mainly for leading German clothing wholesalers and retailers. The group's women's wear division, which contributes three-quarters of total sales, includes subsidiaries Apanage, A. Hölscher, Kirsten Modedesign, and Nienhaus & Lotz. Steilmann's menswear is designed and managed by subsidiaries Dressmaster and Cruse Bekleidung. In addition to private label production, Steilmann markets about 20 percent of its products under its own labels, such as KS, Apanage, Swept, Emozioni, and Stones. About one-third of Steilmann's output is manufactured in the company's 52 factories around the world, mainly in Romania and other eastern European countries. About 45 percent of Steilmann's clothing is sold outside of Germany, mainly in Western and Eastern Europe, but also in North America, Mexico, Japan, and other countries. The Steilmann group operates its own shops and shop-in-shops: 30 Apanage shops in Germany; 75 Julie Guerlande shops in France; and 100 Steilmann shops in eastern Europe. The Steilmann group is owned and managed by the founder's family.

A Leading Apparel Maker in Postwar Germany

Klaus Steilmann, the company founder, was a child of the Great Depression. Born in 1929 into a farmer's family in the small town of Neustrelitz in northeastern Germany, Steilmann dreamed of becoming a lawyer but had to serve in the German army as a young man during World War II and was taken a prisoner of war. A few years after the war, in 1950, he made his entrance into the fashion industry when he met a director of C&A Brenninkmeyer, one of Germany's leading apparel makers, in Berlin, where he started an apprenticeship at the company. In the evening, Steilmann went to school and got his high school diploma in 1951. For the next three years, Klaus Steilmann worked at C&A's purchasing department for women's coats and dress-suits at different locations. In 1955, he moved to the Ruhr where he took a position as assistant director of Josef Meyer, a women's coat manufacturer. However, after working as the boss's right hand for two years, Steilmann decided to strike out on his own. In 1958, he placed a newspaper ad stating that he was looking to buy a small sewing workshop. He finally found what he wanted: a small factory for men's suits with 40 seamstresses in Wattenscheid, near Bochum. In November 1958, Steilmann founded his own company, Klaus Steilmann GmbH & Co. KG, with a start-up capital of DM40,000, and began making coats for women.

Steilmann entered the women's fashion industry at a favorable time. The postwar economic boom in Germany had boosted the purchasing power of German women, whose hunger for coats and dress-suits seemed endless. In its first business year, Steilmann's business generated DM 7.8 million in sales, which placed him among Germany's large coat manufacturers. The company soon expanded its product range to include women's dress-suits. By 1960, Steilmann's sales had already doubled. Three years later, the company competed with Germany's market leaders in women's wear.

Right from the beginning, Klaus Steilmann worked on distinguishing himself from other competitors. His company created fashion with a mass appeal that attracted large customers such as fashion retailers C&A and Peek & Cloppenburg, as well as Germany's leading department stores. The company's attitude was summed up by Steilmann's slogan "fashion for millions--not just for millionaires." In addition, Steilmann offered his clients another special service. The way the fashion industry used to work was that, at certain predetermined times of the year, fashion retailers were able to order the textile manufacturers' latest collections for the upcoming season at fashion trade-shows. This system was somewhat stiff and clearly favored the manufacturers. If consumer demand was weaker or stronger than expected, or if the weather did not cooperate, fashion stores did not usually have a way to adjust to such circumstances. Steilmann customers, by contrast, were able to place additional orders and receive their merchandise shortly thereafter.

In November 1958, Steilmann founded his own company, Klaus Steilmann GmbH & Co.

1970–1988

Continued Growth in the 1970s-80s

The 1970s marked the end of the postwar era in Germany and brought major changes for the fashion industry. On one hand, cars and new household appliances, such as washing machines and TV sets, started competing for consumer cash. Despite the fact that those goods were significant expenses for German households, their popularity was on the rise. As a side effect of this new pattern of consumer spending, people started cutting back on expensive clothing, including coats and dress-suits. On the other hand, people's lifestyles became somewhat less formal in everyday life, compared with the previous era, which showed in a growing demand for more casual clothing. Skirts, pants, and blouses replaced the dress-suit; jackets replaced the coat.

Steilmann expanded its product range to include these new items and ventured into men's wear through a series of acquisitions. In 1970, Steilmann acquired Herne-based men's wear maker Dressmaster, a company that offered a whole range of men's fashions from casual to formal, and operated the company both as a contractor and as a producer of its established Stones clothing line. Two years later, Steilmann added Gelsenkirchen-based firm Nienhaus & Luig belchic GmbH & Co. KG, a manufacturer specializing in trendy dresses and combinations for young women, to its women's wear division. The new subsidiary, which marketed its products under the labels Lisa Marlén and Emozioni, was later renamed Nienhaus & Lotz GmbH. With the acquisition of men's fashion manufacturer Cruse Bekleidung GmbH & Co. KG in 1981, Steilmann further strengthened its men's wear arm. In 1988, the company entered a joint venture with German Chanél couturist Karl Lagerfeld to create and market the designer collection KL by Karl Lagerfeld, a high-fashion line with a broader appeal.

Klaus Steilmann's enterprise became one of Germany's largest apparel manufacturers. The company's creations were in such high demand at the regular fashion trade shows that Steilmann's sales representatives had to set up more and more ordering tables; they even took orders standing when there were not enough tables to seat all the eager-to-order visitors. In addition to the company's strong domestic growth, Steilmann expanded internationally, tackling new markets in western and eastern Europe. By the end of the 1980s, the company was present in the world's major markets, including the United States and Canada, Japan, Australia and Mexico.

Struggling Against New Market Forces in the 1990s

1970–1995

Up until the 1990s, Steilmann had not encountered any major setbacks on its way to becoming Germany's largest women's wear manufacturer and a major player in the European apparel industry. However, beginning in the 1970s and continuing into the 1980s, the progressive movement toward globalization changed the fashion industry forever. Large clothing retailers--looking for ways to cut cost--started ordering their merchandise from the sewing factories sprouting up all over eastern Asia. This move was made possible by the changing taste of consumers who preferred more and more casual wear. While women's dresses, dress-suits, and coats required sophisticated manufacturing techniques, the more casual skirts, blouses, and pants could be made with less know-how--and for much less money. Consequently, Germany's clothing retailers started bypassing their own garment makers, and their Asian contractors copied the latest European fashion styles.

Steilmann was not among the many German clothing manufacturers going out of business during that time. However, the company's profit margins began to shrink and its market position in relation to its customers began to weaken. The big department stores and clothing retailers were not willing anymore to pay premium prices for fashions "Made in Germany," while the average German consumer preferred a more varied wardrobe of a lesser quality over only a few very expensive pieces of exceptional quality. Some German apparel makers began early on to move their production abroad. Convinced that moving production facilities outside the country would weaken the purchasing power of Germany's consumers and therefore the country's economy in the long run, Klaus Steilmann waited a long time before following suit. However, at the beginning of the 1990s market pressures became so severe that his company had to quickly adjust its business policy in order to survive.

By that time, Steilmann consisted of more than 30 subsidiaries. In 1992, the firm closed four of its German production sites and cut its domestic workforce by 17 percent. In 1992, for the first time in the company's history, Steilmann reported shrinking sales and shrinking profits. Despite measures to keep down cost, industry overcapacities, unfavorable exchange rates, and the weakening domestic demand contributed to the recessive market environment in which Steilmann found itself in the mid-1990s. Unlike many competitors that moved their manufacturing to Asia, Steilmann focused its international activities on eastern Europe after the breakup of the Soviet Union had opened the Iron Curtain. Klaus Steilmann explored the countries east of Germany and found a sophisticated fashion industry and skilled workforce in Russia, where he could employ three dozen Russian workers for the cost of one of his German workers. By 1995, the number of domestic Steilmann subsidiaries had been cut almost by half, from 40 down to 22. The company invested in three new production sites in Romania and used a number of other foreign sub-contractors. In 1970, 70 percent of Steilmann's output was manufactured in Germany. Twenty-five years later this percentage had gone down to 18 percent. By the end of the 1990s, only two production plants remained in Germany, and these contributed less than 2 percent to Steilmann's total output.

Shakeups and Strategies in the 1990s and Beyond

In June 1994, company founder Klaus Steilmann turned 65. Although his two eldest daughters, Britta and Ute, as well as his wife Ingrid, worked at the company in leading positions, he had not yet decided yet who would become his successor. A possible candidate, the long-time chair of Steilmann's advisory board Lothar Wackerbeck, who worked for Deutsche Bank, had switched to Steilmann in January 1993 to learn the nuts and bolts of apparel manufacturing. But before his retirement, Klaus Steilmann wanted to resolve the problems with which his company was struggling. After sales had dropped by another 8 percent in 1994, Steilmann merged the management of several divisions and organized them under the group holding company Britta GmbH as independent profit centers. Wackerbeck left the firm--Steilmann obviously needed an industry expert and experienced salesman more than it did a banker--and Franz Konrad, a long-time Steilmann manager who had left the company in 1984, joined Klaus Steilmann at the top of the firm's management.

1992–2001

In the following years, Steilmann enacted several cost-cutting measures. It closed down more of its domestic production facilities, including women's coat and suit maker Heitmann; discontinued unprofitable activities, such as the company's cooperation with top designer Karl Lagerfeld; and focused on listening more to its customers. The company started setting up a number of its own outlets around the world and launched men's wear under the Stones label in the United States. Steilmann also invested in the eco-collection "It's One World"--an initiative of Klaus Steilmann's oldest daughter Britta to introduce environmentally sustainable technologies and products. In addition, the company ventured into corporate uniform manufacturing, which was added as a new profit center, and launched the business collection Klaus Steilmann Men.

After Steilmann's 40th anniversary in 1998, the company reported that sales were going up again. Klaus Steilmann's three daughters and his wife were now more actively involved in the family business. His oldest daughter, Britta, managed the group's export and retail business, while his second oldest daughter, Ute, was responsible for the company's skirt division. At the same time, his wife Ingrid led the advertising, marketing, and personnel departments, and his youngest daughter Cornelia worked as an executive assistant. It seemed to be just a matter of time until Klaus Steilmann would hand over the reins to his daughters, who were also members of the company's advisory board. However, the rest of the family was not willing to back Britta Steilmann's strategic vision to shift the company's main focus from inexpensive private label mass production to a marketing and design oriented manufacturer of higher-priced brand name collections. In January 1999, Britta Steilmann left the family business and set up her own consulting firm.

After Britta Steilmann's departure, Klaus Steilmann started looking for an alternative way to secure the future of his enterprise. In September 1999, about three months after Klaus Steilmann had turned 70, the company announced the appointment of Joachim Vogt, the former CEO of Germany's leading men's wear manufacturer Hugo Boss AG, as Steilmann's successor. Vogt's job was to reorganize the company under a management holding run by managers from outside the family and to boost Steilmann's revenues and profits to make the company fit for a possible initial public offering within five years. Vogt closed down five German production facilities, reducing Steilman's domestic workforce by one-fifth. He also reduced the company's workforce abroad by almost one-third and cut down the number of contractors. During Vogt's two-year tenure, sales dropped by roughly 20 percent. While Vogt maintained that profits had gone up at the same time, the Steilmann family was not happy with his work and with the fact that profits were down to less than 1 percent of sales.

To everyone's surprise, Steilmann announced in mid-2001 that Britta Steilmann would take over as the company's new CEO. After studying fashion, design, and marketing in New York, Paris, and Montreal, Britta Steilmann had joined the family business in her early twenties. Starting out as a marketing and product manager, she soon developed a special interest in environmentally sustainable fashion design, resulting in the launch of her first eco-collection in 1992, which brought her into the public eye. She then became responsible for Steilmann's environmental department, and in the second half of the 1990s joined the company's top management, heading Steilmann's foreign subsidiaries as well as its retail and public relations activities. Joining the ranks of her father's enterprise again after her short stint as a strategic consultant for Internet start-ups, she seemed to be well suited to lead the Steilmann group into a new era. In fall 2001, the company introduced Steilmann's new executive management team: Britta Steilmann, responsible for group strategy; her sister Ute, responsible for design and production; former Nike-manager Jürgen Schlebrowski, responsible for distribution; and CFO Julian Deutz, a former Bertelsmann manager. In 2001, the 36-year-old Britta Steilmann said that her plans to sell more Steilmann fashion in Steilmann shops under Steilmann labels had to wait until the company's profits returned to a satisfactory level. For the next few years, Steilmann would continue making "fashion for millions--not just for millionaires."