LUXBAG

Hello. Who are you?
My name is Jarmo Pouttu, and I’m the co-owner, along with my wife Eija and a third co-owner, of the LUXBAG store in Pohjois-Esplanadi, Helsinki.

Tell a bit about you background. Is it fashion-related?
No, not at all. I come from a completely different area: the food industry, most specifically meat. My grandfather opened a small slaughterhouse in Pohjanmaa in 1938, then my father and my uncle took over and continued with the business’ growth. We were doing pretty well; in the eighties Pouttu was one of biggest privately-owned meat-processing companies in Finland. We began with raw materials, but in the seventies we started producing sausages (the official summer vegetable of Finland).

After my studies Eija and I got married (we had met in the same college of business and marketing) and we opened a new slaughterhouse unit. I was then twenty-four years-old (she was nineteen) and I became the plant director, responsible for 115 people. We stayed in eastern Finland for about nine years, then we came to Helsinki at the end of the eighties. I was in charge of product development, category management, and branding of the whole group.

Then Finland joined the EU.
Yes, and things got more complicated for the whole food industry in general (tougher competition, more centralized distribution channels, expensive raw materials). For Pouttu it was tough because the goal had always been to offer more value for the money (higher quality, healthier products) but the new EU scenario made things very difficult. After a long struggle the brand was first sold to the capital investor, and later on to an Estonian company, which makes me sad.

Why is that?
It could have turned out differently; we could have merged with another Finnish family company to stay strong, for example. But at that point the company was a family affair divided into three branches that could not agree on the same vision for the present and the future.

How did you transition from all that into fashion?
After Puottu I continued (surprise!) circling for a while around food-related industries. But Eija and I wanted to start a new business together. So one day, while traveling with the family, she mentioned the fact that there were no good accessories and bag stores in Helsinki. Only a few, offering medium-range products, but nothing high-end. I told her “that’s interesting, love, but I don’t know anything about handbags…” So I put my marketing abilities to work and analyzed the market. Her insight was correct: there was nothing at all focused on that segment.

So what was the goal?
To found a store in Finland, in the best possible location, and distribute high-end products by established brands. We began to investigate which ones would be interesting, and I noticed many of them (Loewe, Dior, Céline, Fendi) all belong to the same Louis Vuitton Group (LVMH). Eija, who comes from a background in cosmetics, confirmed this. So the challenge was how to contact such huge brands, as I know how hard it is to get a message through to such organizations. I started by sending out a simple email and got no reply. Then I wrote a couple of hand-written letters, one to the president of LVMH, Bernard Arnault, who is the big guy on the group. No reply from him. Then I wrote to Loewe and… no reply.

So then I contacted an old friend of mine, whose family operates a billion-euros industry in Spain. I told him “can you possibly help me get some contacts with Loewe (which is based in Madrid)”? He invited us to lunch, and during the meal he handed me some files and said “call these guys”. I did, and so Eija and I got invited to a meeting. When we get to the negotiation room, the big director shows me the two letters I had sent. He says “who are you? This I got personally, and this one I got from the headquarters in Paris, which you crazy people sent directly to our CEO!”

“Don’t try this outside Finland”.
Exactly (laughs). But we got there, we told our story and our plan. The first meeting went well but nothing was signed. And in the next one, a month later, we got a deal. At the same time we were negotiating also with Céline (which belongs to the same group). We also visited Dior, Marc Jacobs, all the heavy-weights.

Under what criteria do they judge whether or not you become a distributor?
It’s mainly a matter of trust; how they feel you will represent them. They receive daily dozens of offers from people around the world, and only a few of them they want to meet in person. For us a great advantage was that Helsinki is very exotic. We are close to Russia. In southern Europe they don’t know anything about this market. So if you go there and can tell what’s going on here, what is the potential, what is the market structure, how will it develop in the coming years, and why would these brands and categories be needed here, you stand a chance (and of course I had done my homework). Also we need to remember that in 2007 the business around the world, especially in Northern Europe, was going up like crazy, like a rocket. We opened just right before the big, black clouds began to gather…

Finland is such a small market. How did you get those brands interested?
What these big brands base their business on is not only volume, but brand value (which is estimated daily in the stock market). That was the main discussion. How is the brand value and image going to be developed locally? Finland is such a small market, even when compared to East European, ex soviet-bloc countries (the market is even bigger there) but at the same time Scandinavia was doing quite well in other businesses. I was able to show that purchasing power per-capita, generally speaking, was increasing. And also that the behavior of the customer, the Finnish lady, was changing.

In central Europe both men and women had shown a willingness to invest more on themselves, but not in Northern Europe. Here we still have this stereotype from the time of the war, in which the man of the family can spend money on his hobbies, but the lady tightly controls the purse. And she had not been used to spending one or two thousand euros on a handbag, the idea was ridiculous (unlike in other countries). It was a new way of thinking. And for the brands it’s very difficult to establish their own store, so if they want to be here, they need to find a good multi-brand partner. And this is what we were offering. A palette of excellent brands, aiming high, on the best location. In retrospect it was a big risk, but we opened in the fall of 2008.

A boon for us was the opening, in spring 2008, of the Louis Vuitton store. That triggered an explosion in customer behavior, because it gave permission to the Finnish lady to spend money on herself. It actually paved the road mentally and behaviorally. We were not lucky, we were blessed…

It seems obstinate and archaic ways of doing business are dooming many companies in Finland, but your approach is more dynamic and adaptable.
I believe there are two thing one must understand to make business. How it is NOW, and how it will likely be TOMORROW (and the day after tomorrow, if possible). If you can consistently measure and predict these two elements you can, perhaps, be successful in business. It all changes so fast nowadays, which is why companies like Nokia (and our own Pouttu back then) were stuck in old structures that could not adapt to new contexts. What Eija noticed is that something was about to change in the fashion sphere here in Finland, because people were getting more money.

How were you able do demonstrate your perceptions to the big wigs?
It is mainly based on analyzing numbers and the economy, but there is of course a degree of seeing properly and interpreting what is going on (and what will be going on). My previous work on marketing and my local and international connections from the family business played a role as well. I was able to evaluate the needs of a group of people which the average person doesn’t often get to see, and to gage how much available money they have for such purchases. For example, it used to be that 50-60 % of households were singles and female. They were working, getting paid, and would spend their money only on rent and basic costs, nothing else. So when H&M and Zara arrived there was a very welcoming market. In spite of the throw-away quality of those brands this is good, because enhances awareness to fashion (of course what we ourselves sell can last for twenty years, but still). So we saw those trends, women willing to invest more into themselves, and of course the age structure. In Finland the “older” generations (girls who are now over forty, fifty, and even beyond) are young in mentality. They are glad to receive the type of high-end products we are offering. But as I said, volume is not the issue anyway, it is brand value. In the end it’s about the personality, how they perceive you, and how well you can create trust. We were (and still are) a small company with a tiny balance, but when we got the chance of working with them, we could prove that what we were saying was correct.

So how did things go when you opened?
We opened our first store in Unioninkatu in 2008, and it just so happened that our neighbor’s store (a kiosk selling magazines and tobacco) burned up, and smoke came into our store and ruined our stock. But, luckily, two weeks before that we had signed an agreement with the Helsinki-Vantaa airport to open a new store in the non-Schengen terminal area. So after the fire thing we focused all of our operations, for more than three years, into the airport store. The start was tough, because it was a new terminal and costs were high, but there were, every day, transit flights from central Europe going to Asia, so 80% of our customers were Japanese and Chinese. Loewe is very big in Asia, so they love to buy it in Europe, because the prices are lower (when European brands export products the starting price is already higher). Those flights kept us busy for a couple of hours per day, but we had to be there from six in the morning to eleven at night… But it was good. It also gave us the momentum to return to the city.

Is there a LUXBAG store still at the airport?
No, for several reasons. Finavia has sold all their duty-free business to the World Duty Free Group, and they have taken over almost everything at the Helsinki airport. It would have been too risky for us to continue there. Then we also felt that big brands didn’t feel comfortable at airports anymore. Even though it can be good business, it’s not high-profile enough for them; brand value takes precedence and so they prefer to be downtown. And we had also been hearing lots of requests from customers asking us to come back to the city, so we did. We opened the store at the Kämp gallery (now Galleria Esplanad) and we also added Fendi to our brand-folio.

Then, in 2012, it became evident brands were narrowing their distribution channels, establishing their own stores there where markets were big enough, and for smaller volume markets finding multiple-brand partners who can present the total look of the brand. So you can’t operate only with accessories and bags, you need to present the whole brand look (the ready-to-wear, the shoes, etc). So we decided to go ahead and find an even better place, a willing partner, and a great brand selection. We negotiated with Ilmarinen (owner of most of the buildings in this area) who were actually looking for the type of business we were offering. Pohjois-Esplanadi definitely needs something like this, not only Finnish brands like Marimekko and such, but good international brands as well, so it was easy to convince them.

What brands does the store currently offer?
Céline, Givenchy, Balenciaga, Fendi, Lanvin, Loewe, and Valextra. The first five have the total look, and for the others we continue to offer handbags and accessories.

How do you select the items from each collection?
There is a PRE-collection (where we can select items from a batch corresponding to the before-the-fashion-show) and the MAIN (where brands present their collection in a show for the public and the media, with a catwalk and the fanfare). Usually the fashion collection is higher in price, and the pieces are more rare, high-end, and flamboyant. All of this happens twice a year for the spring/summer and fall/winter collections.

Do you have to go there physically?
Oh, yes. They sent us a schedule with the dates in which the collection will be shown, we need to make an appointment, and wait for a formal invitation. Then we can go to the showroom, view everything, and select which items we are interested in. You are assisted by somebody at all times, and taking photos is strictly forbidden, of course.

Are certain items mandatory?
Some items are representative of the collection, so we have to buy them. Of course there’s always a push-pull between our limited budget and the amount they want us to buy, but we always manage to reach an agreement (laughs).

Considering your butcher-past, have you embraced fashion?
Yes, it’s inevitable. You begin to scan everything. I usually dress low-key, but I wear my Givenchy flowery thing on certain days (laughs). But I think we have come to a point at which we don’t need to be super-fashionable all the time. We have become fashion-conscious in a general way, mixing high-end with generic items, and I think that’s a good thing.

Since fashion is such an inherently materialistic environment, how do you keep it real?
Eija and I both have strong values, and are Christian. We’ve had to go through the losing of our first-born when the baby was just one day old, so we know that the time we have in this life is limited, we understand what matters. Fashion is just that, we think we can put it into the right perspective. And we pray often that everything will go as smoothly as possible.

Where do you go from here?
Our main focus is to continue establishing a strong local image, because it’s a new concept, at a new location, and we have lots of new customers. We want to strengthen not only the relationship with them, but with other business: for example, the adjacent space is empty right now and we are inviting other stores (even competitors or mono-brands) to join us in Pohjois-Esplanadi because it’s good for everybody. We also have a new partner and co-owner, who has contributed new energy and vision for our future plans. And we want to be ready to present something new, when the time is right.

Will you be able, if you decide so, to go back to food or do something else entirely?
I am a very creative guy, I get excited about new things and I’m always looking into the future. I’m usually projecting five years ahead, which is a blessing and a curse sometimes (in the very conservative food industry my views were not very well received). I love selective and niche brands, and product development. I took a course (twenty years ago) in international business management and I vividly remember something they said there: if you want to build something, you have to add some value that comes from you. It can be just one thing, but it has to be that special core competence that only you can provide. It has to differentiate you from the rest. My motivation for business is to add this unique value.

But I wanted to partner with such excellent brands and to represent them because it’s so exciting. They take care of the brands, we take care of delivering their products, it’s great. And we love our customers, we meet very nice people here, we love the everyday interaction with them.