IMD-7-1970

v. 05.07.2019
IMD995

ZIMMERLI OF SWITZERLAND: BUILDING BRAND

DESIRABILITY IN THE DIGITAL AGE

Christof Dutoit, Antje AARBURG, SWITZERLAND, ZIMMERLI HEADQUARTERS, JANUARY 8, 2018.

Kanngiesser and Mauro Marcel Hossli, CEO of Zimmerli, a Swiss underwear manufacturer,
Tramacere (IMD EMBA 2018) leaned back in his chair and took a break from working on the 2019–
prepared this case under the 2024 investment plan. He pressed “play” on YouTube and the
supervision of Professor Autumn/Winter 2018/19 Zimmerli collection came to life.1 He was
Stéphane J. G. Girod as a basis proud of the new collection and the way the video was shot. But today
for class discussion rather than he felt that Zimmerli was once more at a crossroads in its nearly 150-
to illustrate either effective or year history.
ineffective handling of a
The traditional underwear company had survived two world wars and
business situation.
several financial crises, and its products were worn all over the world
by kings, politicians and celebrities. Clint Eastwood and Arnold
Schwarzenegger even came to the Geneva store to pick up their beloved
Zimmerli underwear and T-shirts in person; other Hollywood stars wore
the clothing on screen. 2 Television stations sometimes reported on the
company (mostly in German). This was perfect advertising – at almost
no cost – for the underwear, which was produced in Switzerland. 3
However, Zimmerli’s brand awareness and desirability were still low,
especially outside Switzerland.
Until recently, the company had sold through a network of wholesalers.∗
In 2012 it had started direct sales in its own shops, and two years later it
launched its own e-commerce platform – www.zimmerli.com. Marcel
was convinced that this was a good decision: Sales had grown 8% on
average year on year between 2011 and 2017. However, the decision also
had its downsides: Relationships with wholesalers, who felt threatened by
the new competition, grew tense. What if they refused to sell Zimmerli
products? Would the company lose more customers than it could attract
through direct sales? Although Zimmerli had grown, the cost of selling
luxurious underwear in the best locations was high. With a net margin of
0% to 5%, Zimmerli’s profitability had recently been below the industry
average of 10%. 4 How sustainable was this direct sales approach, given
the company’s limited funds? Would it be better to invest in its online
presence? But what if these new channels were not appropriate for
attracting customers? In fact, who were Zimmerli’s customers in the
digital age?
Marcel knew he needed to answer these questions to make the right
investment decisions to improve Zimmerli’s brand desirability in future.

Copyright © 2018 by IMD - International Institute for Management Development, Lausanne,

Switzerland (www.imd.org). No part of this publication may be reproduced, stored in a retrieval
system or transmitted in any form or by any means without the prior written permission of IMD.

∗
In the luxury industry the wholesale network refers to stores the brand does not own, including department stores, stores-
within-stores and individual retailers. The retail network refers to stores owned by the brand, or mono-brand stores.

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 -2- IMD-7-1970

Company Background
Zimmerli Textil AG was an underwear manufacturer located in Aarburg, Switzerland. Since
1871, the company had manufactured an assortment of fine underwear, nightwear, leisurewear
and socks for men and women. The products were made in Switzerland from high quality
natural fibers and were sold globally through a variety of channels. Zimmerli had 100
employees, of whom 55 worked at the production facility in Mendrisio, in the canton of Ticino,
and 45 at the head office in Aarburg as well as in Zimmerli’s own retail stores.

During its nearly 150-year history, the company had experienced financial difficulties on
several occasions. The last time was in 1997. Walter Borner, a textile engineer, bought the
company and assumed the role of CEO. He managed the turnaround by repositioning the
Zimmerli brand, focusing on high quality and emphasizing “Made in Switzerland.” He also
stopped license production for third parties like Michel Jordi and Navyboot, which improved
the company’s profitability. Since then, the company’s sales had increased continuously. In
2017 annual sales were approximately CHF 25 million, predominantly generated in Swiss
francs and euro. The majority of Zimmerli’s sales came from Europe, mainly Switzerland and
Germany, but also France and the UK (refer to Exhibit 1).

Zimmerli was sold to the German von Nordeck Holding GmbH & Co in 2007. In 2009 Marcel
Hossli became the CEO. He had joined the company the previous year as the sales and
marketing director, after a career in the luxury watch industry. Under Marcel’s leadership, the
company continued its focus on “Made in Switzerland.” Direct sales through Zimmerli
boutiques started in 2012 and soon included geographic expansion to China and the Middle
East. By 2017, the company had 15 mono-brand stores. Through e-commerce, Zimmerli
products were available in more than 50 countries. (Refer to Exhibit 2 for Zimmerli’s
geographic reach.)

Zimmerli’s growth strategy was exclusively financed by the company’s own cash flows. This
strategy was fully supported by its owner, v. Nordeck Group, 5 which focused on long-term
investments in companies with market or quality leadership in a niche market. The downside
of this self-financing strategy was that choices needed to be made when it came to growth and
investments.

In December 2014, Zimmerli launched its e-commerce sales and social media presence.

(A detailed summary of Zimmerli’s history can be found in Exhibit 3.)

Zimmerli’s Philosophy

Throughout its history, Zimmerli’s philosophy had been to offer top quality products in the
upper price segment. Quotes from Zimmerli employees bore out this aim. In the words of
Walter Borner, CEO from 1992 to 2008:

Zimmerli offers the finest underwear in the world. It has always worked with the finest raw
materials, the best yarns and silks available. And products are produced in Switzerland, to ensure
high quality.

Monique Fischer, VP of sales, noted:

We promise our customers that our products provide the best feeling on the skin. We charge for
the feel-good factor of our products.

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According to Esther Ember, director of product management, Zimmerli was not a fashion
label:

Our products are not high-priced because of marketing, but because of their great quality.
Zimmerli does not want to be mainstream, since in this segment there is always someone else
less expensive. Therefore, we do not follow every short-term trend.

Andrea Perrone, Zimmerli’s exclusive agent in the US, added:

Zimmerli is an authentic and serious-minded brand with a great heritage.

Underwear Industry Background

Global revenues from men’s and women’s underwear, bathrobes and T-shirts were estimated
to be $268 billion in 2018, with projected growth of 4.8% per year between 2011 and 2021.
Of this amount, $37 billion were generated by men’s night- and underwear, the segment
Zimmerli had traditionally focused on. Men’s undergarments (briefs and undershirts)
accounted for $10 billion of the $37 billion, with projected growth of 5.8% per year between
2014 and 2020. Far less than 10% of the segment was high-end or luxury. The women’s night-
and underwear segment was estimated to be three times bigger than that for men (global
revenues of $112 billion in 2018). 6

Underwear had traditionally been less trend-led than clothing. But recently, new competitors
from outside the underwear industry had entered the market. Fast-fashion giants like Topshop,
H&M and Forever 21 had launched their own lingerie lines, targeting millennials who were
less familiar with specialist lingerie brands or department stores.

Buying behaviors had also changed. Whereas buying lingerie online was almost unthinkable
a decade ago, now the barriers were significantly reduced. It was possible to offer
comprehensive size guides online, as well as efficient delivery and customer services. Most
professional websites offered specialist online bra-fitting videos. E-commerce had become a
great alternative for customers who felt uncomfortable shopping for intimates in physical
stores. Since 2012, worldwide online sales of lingerie had increased 207%.

Competitors in the Men’s Underwear Market

Besides Zimmerli, a number of brands offered men’s underwear in the high-end segment, such
as Boss, Calvin Klein, Dolce & Gabbana and Giorgio Armani. In the mid-range segment,
Calida and Schiesser were well known in Europe. In the US, Zimmerli’s direct competitors
were Jockey, Ralph Lauren, American Eagle and J.C. Penney.

Some brands focused on specific customer segments. For example, the French brand HOM
targeted younger male customers looking for “sexy” high-end underwear.

Although both Calida and Hanro advertised the Swiss origin of their brands, they no longer
produced their apparel in Switzerland. In particular Hanro, founded by Albert Handschin in
1884, advertised the Swiss heritage of its brand, without being “Made in Switzerland.”

In terms of pricing, Zimmerli was at the top of the scale in Switzerland (CHF 70 for a pair of
men’s standard undershorts), considerably ahead of its nearest rival, Hanro (CHF 50). Refer
to Exhibit 4 for Zimmerli’s price positioning in relation to its competitors in Switzerland.

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Zimmerli’s Product Portfolio

Since company founder Pauline Zimmerli invented the first two-needle knitting machine in
1874, which enabled the creation of ribbed fabric, Zimmerli had produced very fine underwear
for men and women. It used only the finest raw materials including extra-long staple Egyptian
Mako cotton, superfine merino wool, the softest raw silk threads and even new materials like
Swiss-made Bamboofil®. This made the underwear extremely comfortable, and the careful
design meant that the wearer did not feel the seams. It took up to 45 minutes to make a single
ribbed garment.

Zimmerli’s product portfolio included a basic and a seasonal collection. Some of the basic
collection was kept for years (refer to Exhibit 5 for details), while the seasonal collection
changed twice a year.

Seasonal products for men Seasonal products for women

Spring 2018 Spring 2018

Basic products for men Basic products for women

(Example Sea Island) (Example Pure Comfort)

Source: www.zimmerli.com

Zimmerli’s product offering was almost the same everywhere in the world, but not every
mono-brand boutique offered the full product portfolio. For example, in the Middle East
Zimmerli sold men’s wear only. Small volume production was enabled by the fact that
Zimmerli manufactured its products in Switzerland. For example, it made a small line of red
underwear for the Chinese New Year, since red clothing symbolizes prosperity and courage in
China. Zimmerli also responded to the trend for increasing customization, a service it provided
free of charge. Once a customer ordered 200 pairs of customized underpants!

In 2017 underwear accounted for 65% of sales, night- and homewear for the rest. Men’s wear
generated 75% of the company’s sales, and women’s lingerie 25%.

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Moving from B2B to B2C

Back in 2009, soon after taking up the CEO role, Marcel decided to establish direct sales for
Zimmerli. Until then, the company had sold only through wholesalers, of which it had around
750 in 50 countries. They included department stores, such as Globus or Jelmoli, stores-within-
stores and independent retailers (refer to Exhibit 6). But Marcel was convinced that directly
knowing customers’ needs and expectations had become a key success factor in the industry.
The company had sufficient funds to open its own shops in the best locations, to convey the
luxury of Zimmerli’s brand and attract potential customers. These shops would complement
and strengthen Zimmerli’s existing channel of wholesalers, most of which had been Zimmerli
partners for decades. Marcel was convinced that having its own boutiques would add to
Zimmerli’s visibility and brand desirability, with a positive impact on the wholesalers’ sales
results. Wholesalers could also benefit from the company’s product promotions at fashion fairs
in Florence or Milan, which Zimmerli attended at its own expense.

Direct Sales

The first mono-brand store, with a surface area of 25 m2, opened in the mountain resort of
Zermatt in June 2012, followed the next month by a larger (50 m2) one on Rue St. Honoré in
Paris (refer to Exhibit 7). A store-within-a-store in KaDeWe was also launched in Berlin. New
mono-brand stores followed, including two in Moscow. Outside Europe, the first Zimmerli
boutique launched in Taipei in 2013. Two years later, in 2015, Zimmerli opened a subsidiary
in China, followed by a mono-brand boutique in Shanghai, inaugurated in October 2016.
Gedeon & Co in Lebanon owned the agency rights of Zimmerli of Switzerland for the Middle
East and opened a mono-brand boutique in Beirut in November 2017. This brought the number
of mono-brand boutiques in Europe and Asia to 15 (refer to Exhibit 8 for a map of mono-
brand stores.) In the US, Zimmerli products were distributed through e-commerce and
department stores such as Neiman Marcus (48 stores) and Barneys (20 stores). The US
business was managed by one agent, Andrea Perrone, working exclusively for Zimmerli.

Zimmerli organized training programs for sales staff in stores, and provided background
information about its values using apps. It wanted to make sure that the same message was
delivered through every channel and that the sales force could emphasize the quality, which
explained why a Zimmerli product was more expensive than those of its competitors.

Embracing E-commerce

In 2014 Zimmerli launched its own e-commerce website, www.zimmerli.com. In terms of

access and service, customers signed into the e-commerce shop with their e-mail address. Once
registered, they received monthly newsletters via e-mail. The site offered online payment
methods including credit cards and PayPal. Feedback from Andrea Perrone, the US agent,
indicated that retailers would like the e-commerce pages to be more emotional in
communicating the message of a luxury brand. Customers loved short movies showing how
products were made and hearing Zimmerli staff and opinion leaders talking about them. She
suggested creating a video of the manufacturing site in Mendrisio.

To Marcel’s delight, e-commerce sales had been growing constantly, with a peak of 25%
growth in 2017. 7 This channel counted over 5,000 online customers by year-end.

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 -6- IMD-7-1970

Differences with Wholesalers

Although Marcel believed in the benefits of a cooperative partnership with wholesalers, he

discovered that some of the latter perceived his shift as unfair competition. Notwithstanding,
Marcel stuck to his strategy. The differences with Zimmerli’s main wholesalers intensified in
2014, with the launch of www.zimmerli.com. Marcel’s idea was to have the wholesalers
participate in Zimmerli’s new online channel: If a wholesaler acquired a customer and this
customer bought online, the wholesaler would be rewarded. So far, this concept had not been
implemented.

Patrick Kuster of Schärer-Linder in Lucerne, the company’s longest-standing partner, had

warned Marcel that brands that delivered to online shops risked damaging their brand image, as
the brand message would not be transmitted correctly. Marcel had brushed off these opinions
and had even increased Zimmerli’s online presence on other platforms like www.mrporter.com
(since 2017), www.herrenaustatter.de, www.hirsefelt.de, www.michelangelo.ch and
www.zapmeta.de. However, he still remembered Patrick telling him: “Since we are a good shop
with good client relationships, we are able to influence brand preference.” The wholesaler
believed that it was the wholesaler who was responsible for the brand reference and convincing
the customer to buy the product. The customers only got to know Zimmerli thanks to the
wholesaler’s efforts and investment.

Launching a Cross-channel Concept Shop

The strategic shift and limited funds had stimulated innovation within the Zimmerli team. The
outcome was a new cross-channel concept shop, the “Touch Point Store,” which Zimmerli had
been testing in Zurich since September 2017 (refer to Exhibit 9).

The idea was to combine online and brick-and-mortar selling to boost Zimmerli’s cross-
channel strategy. The concept store displayed the basic and seasonal collections for customers
to try, feel the quality and buy. Customers benefited from first-class sales advice as well.
Guided by the sales associate, they could then order from the in-store terminal with a wide
choice of payment and delivery options. For example, they could have their shopping delivered
to their home, to another Zimmerli boutique, or their hotel. The Touch Point online terminal
offered access to the entire central warehouse, so customers had the full choice, but did not
have to worry about carrying shopping bags around town. If this concept was well received,
Zimmerli could rent smaller store locations. Both the customers and Zimmerli could benefit.
The company hoped to replicate the Touch Point stores worldwide.

Marketing to a Changing Customer Base

Although Zimmerli had seen ups and down in its history, it had never needed to advertise
much. Marcel remembered his predecessor Walter Borner saying that Zimmerli was a “cult
label for people who look for excellence and understatement.” The brand had been successful,
although it was not known by many people. According to Sonia Baumann, director of brand
communications, in Switzerland, where the company had its strongest market presence, only
23% of the population knew Zimmerli. In Germany it was as low as 6% (refer to Exhibit 10).
Outside German-speaking Europe, the brand was hardly known, except by some celebrities.
Although he had limited data on customers available, Marcel knew from contact with retailers
and customers that the traditional customer was male, in his sixties and very loyal to the brand.

So far, Zimmerli had a very loyal customer base, attracted by Zimmerli’s quality and stable
product lines. But would this be the same in the digital age, when customers were exposed to
new brands on the internet and as millennials started to play a prominent role in luxury

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 -7- IMD-7-1970

consumption? Nowadays, it was easy to obtain an overview of brands, and some competitors
already had an impressive online presence, so existing Zimmerli customers might want to try
other brands. But what could the company do about it? What was the best way to keep
customers loyal? Would a loyalty program be a possible solution? It would help collect
customer data. But what type of loyalty program would be in line with Zimmerli’s image?
Would customers be willing to give away their privacy for price discounts? Were there other
interesting compensation schemes suitable for the luxury segment?

Investing in Marketing

So far, 10% of Zimmerli’s marketing budget was allocated to digital technologies. Marcel
wondered how many resources he could allocate to the online channel, since the expansion via
physical stores came with significant costs, especially when they were in expensive locations,
such as the one in Berlin Kurfürstendamm (80m2). Opening a new store cost around CHF 2,000
per square meter, yet a physical presence still seemed essential to support a luxury brand. At a
recent meeting, Claudia Utz, head of e-commerce, had tried to convince Marcel to put more
money into communication and marketing, and it had ended up in an argument. She had pointed
out how customer habits were changing and that this also affected the underwear industry. In her
opinion, customers expected to have access to a lot more information about the product than in
the past; they wanted to know the history behind a brand, the brand’s heritage. She argued that
Zimmerli should take this seriously and invest more in marketing and its online presence to
enable further growth.

However, Marcel sometimes asked himself: But why grow? Why strive for more brand
awareness? A recent unfortunate campaign with Swiss International Airlines (SWISS) was still
fresh in his mind. Since 2012, in an effort to increase brand awareness, Zimmerli had been
providing SWISS with dark blue 100% organic jersey pajamas – packed in a fabric bag – for
first-class passengers. It also advertised its products in the SWISS inflight magazine (refer to
Exhibit 11). Marcel was not convinced about the marketing return on investment (ROI) of classic
advertising for Zimmerli, so he usually did not invest in magazine or newspaper advertisements.
But this promotion was part of the deal with SWISS.

In 2017 Zimmerli included a 12% discount voucher with the pajamas (refer to Exhibit 12),
valid for any purchase in its online shop. But only five customers had redeemed it! Although
the pajamas were of slightly lower quality and not “Made in Switzerland” like Zimmerli’s
regular products, the company was not making much profit with this campaign. Maybe
Zimmerli had underestimated the quality expectations of SWISS first-class passengers.

One of Zimmerli’s core values was: “Customer needs are always at the heart of everything we
do.” It aspired to add to this value by “transforming into a cross-channel provider, focusing on
the habits, expectations and needs of our customers.” With an increasingly connected world
and people traveling more than ever, Zimmerli faced a new challenge. Everywhere in the
world, customers expected a consistent experience for the brand, product and service, in every
channel and place. But what was the best way to increase brand desirability and attract new
customers?

Before launching the online shop, the management team had discussed how to meet the needs
of Zimmerli’s traditional customers, and the increasing expectations of younger customers
who could afford its underwear. The “Touch Point” concept had grown out of that, too. But
what if it did not work? Would a focus on the online channel be a smart choice, given the
profile of Zimmerli’s traditional customers? Was this the right way to attract new customers?
How could Zimmerli become more appealing to younger customers?

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 -8- IMD-7-1970

Data on Customers

Marcel regretted that he had not invested in a high performing customer relationship
management (CRM) system earlier. Nor did Zimmerli have analytical tools to measure the
impact of any campaigns. The reasons were obvious: lack of time and resources. Zimmerli
could only track sales numbers through its enterprise resource planning (ERP) system, which
was outdated and not integrated with the CRM system or the e-commerce platform. Different
customer databases in different shops added to the complexity and opacity of finding out who
the typical Zimmerli customer was and what his or her needs were. The company definitely
needed to invest to gather more information on and from customers. Without more customer
insights, it would not be able to make the right choices in the future and strengthen customer
loyalty.

This would mean Marcel had to invest resources in internal processes, rather than on
improving the brand’s visibility. Did this really make sense?

Changing Customer Behaviors

Marcel had recently attended a conference on how customer behaviors were changing. A
number of points were raised:

• There had been an explosion in the number of men’s underwear brands during the
previous five years. The biggest drivers were performance and luxury, but style was also
important.
• Millennials behaved differently than older customers. They were constantly looking for
new experiences and used digital technologies like the internet and social media to
gather information, allowing them to evaluate and select the desired product. They
tended to be less loyal to brands than older customers.
• Wealthy customers buying luxury goods tended to be younger than in the past.
• There was increased demand for personalized products (e.g. initials, special colors or
personalized fit).
• Younger people had less disposable incomes and faced more underemployment than
previous generations, but they tended to have better education on health and ethics and
placed more emphasis on their lifestyle.
• Customers in their sixties today probably behaved differently than customers who
would be in their sixties 20 years from now. For example, people tended to remain more
active as they got older.

The conference had been interesting and the speakers had confirmed what Marcel had recently
read in various magazines and publications. Social media platforms such as Instagram and
YouTube were becoming increasingly important, particularly for the fashion and beauty
industries. People shared their habits and preferences and were more interconnected. Thanks
to mobile phones, customers had access to the internet everywhere at any time, even in
emerging markets.

Zimmerli’s Social Media Presence

Zimmerli already managed its presence on various social media channels. So far, its success
on Facebook, Twitter, Pinterest and Instagram was moderate – around 2,000 followers,
compared with Hanro’s 10,000 (refer to Exhibit 13). Zimmerli had made some progress with

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 -9- IMD-7-1970

its e-commerce sales since it started used Google AdWords to guide visitors to the shop, but
it still needed to increase traffic to the site. Marcel wondered whether Zimmerli should engage
more with customers – and if so how – or get customers to engage more with the company,
but at a reasonable cost. It was said that bloggers would become the new gatekeepers to access
millennials. Active loyal fans on social networks recommend products to each other, with a
proliferating effect. Perhaps Zimmerli could start by asking customers for feedback on social
media? But then did it risk losing control over its brand image? Or would it be better to start
blogging itself?

Zimmerli’s Chinese subsidiary was the most advanced in the company at using new digital
technologies to increase brand awareness. One reason for this is that China was at the forefront
of e-commerce and e-payments, with an estimated 663 million mobile phone users in 2017.
The subsidiary employed digital technologies and apps commonly used in China, such as
AliPay or WeChat (a Chinese multi-purpose messaging, social media and mobile payment app
with a wide range of functions). It used influencers, who published their editorials and
experiences on social media. According to the local business operations manager, Walther
Bücklers, this allowed Zimmerli to reach many people in a short space of time for little cost.

Would this be a promising approach in Europe, too? Or even in the US? Marcel was proud that
Zimmerli was so well known among US celebrities, but he also thought that Zimmerli had not
fully capitalized on this. Obtaining testimonials from celebrities was too expensive considering
Zimmerli’s budget constraints. Could social media help? Becoming established as a European
brand in the US was not easy. Andrea Perrone, Zimmerli’s US agent, had told Marcel that many
fashion companies that had tried to enter the market in the past had underestimated the effort
required. According to her, it took Giorgio Armani more than 30 years to establish its label in
the US, although the internet was not yet widespread. Andrea was convinced that Zimmerli
should try to reach younger customers, who were going to buy Zimmerli products for the next
25 years, without putting off the current loyal, regular customers.

Made in Switzerland: USP or Brake on Development?

The Swiss landscape and quality of life was a brand in itself. For Zimmerli, “Made in
Switzerland” was an important heritage, promising high quality. Moreover, since Zimmerli
was now the only company producing underwear in the country, “Made in Switzerland” had
become a unique selling point (USP).

But this brought with it increasing challenges. According to Urs Schellenberg of

E. Schellenberg Textildruck, who was also a managing board member of Swiss Textiles, the
Swiss textile industry had been shrinking dramatically. In 1970 more than 1,800 textile
companies were located in Switzerland, whereas by 2016 there were only 250. Fabrics made
using the highest-quality yarns – indispensable for Zimmerli’s luxury products – were
available from only a few textile providers. Zimmerli had five fabric suppliers: one in
Switzerland, one in Germany and three in Austria. Throughout Europe, the number of textile
companies had declined significantly, leading to a shortage of suppliers. Poland and Italy were
among the countries with the largest remaining textile industry.

In addition to the problem of supply, there was the challenge of manufacturing in Switzerland.
The capacity of the manufacturing site in Mendrisio was limited to 400,000 items a year. And
customers’ changing expectations also created manufacturing challenges. Alex Frei, director
of operations, noted that the speed with which customers asked for certain products had
changed. People expected them “right here, right now,” which made capacity planning very
difficult. An additional challenge came with human resources: Finding skilled employees for
Mendrisio was becoming increasingly difficult. To handle the finest material, workers needed

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 - 10 - IMD-7-1970

specialist knowledge about textiles. Many of them had trained in the fashion industry in
northern Italy, but very few young people wanted to learn professions like sewer or operator.
Some of Zimmerli’s long-standing employees would retire in the next few years, and finding
replacements would be difficult. Finally, manufacturing in Switzerland was expensive, and the
company was exposed to fluctuations in the value of the Swiss franc.

As a result, Zimmerli had recently started evaluating alternative manufacturing sites in Italy
and Poland. But if it went ahead with such a move, Zimmerli would lose its “Made in
Switzerland” label. Was this label really a USP, or was it rather a legacy? Swiss law clearly
stated that industrial products could only be called “Swiss made” if 60% of the manufacturing
costs and the essential manufacturing steps happened in Switzerland. Zimmerli’s competitor
Hanro promoted its Swiss heritage, but did not advertise “Swiss made.” Hence, it did not have
such legal constraints. What if Zimmerli adopted the OEKO-TEX® “Made in Green” label,
which certified sustainable, ethical and environment-friendly manufacturing methods? Could
it compensate for the potential loss of “Made in Switzerland”? The area sales director, Sylvia
Zankl, saw that transparency and ecological and ethical aspects were becoming increasingly
important for customers and that the OEKO-TEX label might be able to meet this need. What
was the better choice for a luxury label: “Made in Switzerland” with its constraints, or
unlimited growth with Swiss heritage?

The Way Forward

Marcel now had even more questions buzzing round his head. He had three hours left to
structure his thoughts and come up with a final proposition for an investment plan that would
be decisive for Zimmerli’s future. He took a blank sheet of paper and wrote down the four
guiding questions:

How has Zimmerli established the desirability of its brand so far?

What are the new success factors that Zimmerli needs to master to protect its brand
desirability? How is the brand trying to respond?

What are the difficult choices that Zimmerli needs to make to respond to the new rules
of luxury brand desirability?

Given the present budget constraints, how can Zimmerli increase its brand desirability
and move into the next phase of growth?

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 - 11 - IMD-7-1970

Exhibit 1
Zimmerli’s Sales by Geography

Source: Company information

Exhibit 2
Stores Selling Zimmerli Products
(including wholesale and retail network)

Source: http://www.zimmerli.com/ch_de/shops

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 - 12 - IMD-7-1970

Exhibit 3
Zimmerli’s Timeline

Early days 1
• 1871: Pauline Zimmerli starts knitting the finest hosiery and men’s socks and sells them outside
Switzerland.
• 1874: Pauline hires employees and invents the first two-needle knitting machine, which marks the
beginning of ribbed fabric and underwear and the foundation of an entire industry.
• 1876: Together with her sons Adolf and Oscar Zimmerli, Pauline expands the company to Paris
and attracts clients from all over the world by going on business trips.
• After 1899: Zimmerli fine knitted products win a Gold Award at the World Expo (1889), the Grand
Prix (1900) and a Gold Medal at World Expo in Brussels (1910).
• 1965: The production sites in Aarburg and France are complemented by a production site in
Mendrisio, in the Swiss canton of Ticino, currently Zimmerli’s main production site.

Era of CEO Walter Borner 2

• 1992: During a period of structural change, the cousins Walter and Hans Borner buy the production
company Zimmerli Coldrerio SA, which was experiencing financial distress.
• 1997: The two cousins also buy the company Zimmerli Textil AG and start repositioning Zimmerli
as a luxury underwear brand made of the noblest fibers with the finest manufacturing.
• After the turnaround in 1997: Zimmerli removes female underwear from its portfolio to focus on
men’s underwear, its traditional market segment.
• After 1998: Zimmerli reintroduces women’s underwear under the name Donna, which is well
received by its international clientele. Nicole Kidman wore Zimmerli in Stanley Kubrick’s movie
Eyes Wide Shut. Zimmerli stops its third-party manufacturing for other brands such as Michel Jordi
and Navyboot.
• 2004: Zimmerli is nominated for the Brand Excellence Swiss Trophy.
• 2006: Zimmerli’s CEO Walter Borner is elected Swiss Entrepreneur of the Year.
• 2007: Von Nordeck Holding GmbH & Co acquires the majority of Zimmerli shares. At that point,
Zimmerli has around 750 wholesale customers in 50 countries.

Era of CEO Marcel Hossli

• 2009: Marcel Hossli becomes CEO of Zimmerli of Switzerland
• 2011: TV report in Germany (Galileo): Zimmerli is the secret tip of Angelina Jolie, Brad Pitt,
Sylvester Stallone, Will Smith, Meg Ryan, Robert de Niro and George Clooney.
• 2012: Zimmerli goes retail and opens a mono-brand store on Rue St. Honoré in Paris and a store-
within-a-store in KaDeWe Berlin. Supplies pajamas to SWISS airline’s first-class passengers.
• 2013: The company repositions of the traditional Swiss brand Zimmerli of Switzerland, including
new packaging and more focus on Swiss made. Opening of Zimmerli spaces in Jelmoli Zurich and
mono-brand boutiques in Interlaken, Moscow, Taipei, Salzburg, Macau and Basel.
• 2014: Launch of online store/e-commerce B2C and presence in social media.
• 2015: Zimmerli launches day- and loungewear. It founds the Zimmerli (Shanghai) Trading Co. Ltd
subsidiary and opens its first boutique in Shanghai. Other boutiques open in Mendrisio, Berlin and
at Harrods (store-within-a-store) in London. Starts advertising campaign through Google. 3
• 2016: Pop-up store in Tschuggen Hotel, Arosa, Switzerland, is open for four months.
• 2017 Opens its first Touch Point store in Zurich, in addition to the 15 mono-brand boutiques already
opened. 4

1
www.zimmerli.com
2
Aargauer Zeitung 12.9.2011: Aargauer Unternehmen strickt Unterwäsche für Hollywoodstars
3
Google Campaign, see https://www.youtube.com/watch?v=10UMLgNgNBY (Film in Swiss German)
4
https://de.wikipedia.org/wiki/Zimmerli_(Unternehmen)

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 - 13 - IMD-7-1970

Exhibit 4
Zimmerli’s Price Positioning in Switzerland
Standard Undershorts for Men

Zimmerli
CHF 70
Hanro
CHF 50
Boss
CHF 40
Ralph Lauren
CHF 35
Tommy
Calida Hilfiger
CHF 25 CHF 30

Schiesser
CHF 25

Migros
CHF 10

Brand
Reputation

Source: Company information

Exhibit 5
Zimmerli’s Basic Product Offering

Zimmerli brands (men) Products Raw material

Richelieu, Shirt, undershirt, boxer 100% cotton, single jersey
Business Class shorts, underpants quality, double mercerized
Royal Classic Underpants, boxer shorts, 100% Egyptian cotton
undershirt, pajamas, or shirt
Sea Island Shirt, undershirt, boxer Most rare and precious
shorts, underpants cotton in the world
Pure Comfort Cotton and micro modal
Pureness with Lycra
Silk de Luxe 100% silk
Wool & Silk Long sleeved shirt, long Merino wool and silk
underwear

Source: Company information

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 - 14 - IMD-7-1970

Exhibit 6
Examples of Wholesalers in Switzerland

Independent Haberdasher Schärer-Linder in Lucerne

Zimmerli at “Herren Globus” in Bern

Sources: Schärer-Linder (top); Zimmerli (bottom)

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 - 15 - IMD-7-1970

Exhibit 7
Examples of Mono-Brand Boutiques

Zimmerli’s first shop in Western

Switzerland, opened in Geneva in
January 2016

Zimmerli’s first shop in China,

opened in Shanghai in
October 2016

Source: Company information

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 - 16 - IMD-7-1970

Exhibit 8
Zimmerli’s Flagship Stores
(15 Mono-Brand Boutiques and One Touch Point Store)

Source: Company information

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 - 17 - IMD-7-1970

Exhibit 9
Zimmerli’s “Touch Point” Store in Zurich

“Touch Point” store in Zurich, including a terminal for ordering online

“Touch Point” store in Zurich, opportunity to “Touch Point” store in Zurich

“touch and feel” products

Source: Company information

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 - 18 - IMD-7-1970

Exhibit 10
Zimmerli’s Brand Awareness

Switzerland Germany

Top of mind 2% 0.2%

(Zimmerli is the first brand mentioned)

Spontaneous 2-6% 1%
(Zimmerli is mentioned among other brands)

Publicity 23% 6%
(heard of Zimmerli brand before)

Source: Company survey

Exhibit 11
Pajamas for SWISS First-class Passengers

SWISS first class pajamas Packaging for pajamas

Source: Company information

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 - 19 - IMD-7-1970

Exhibit 12
Zimmerli Voucher for SWISS International Airlines

Source: Company information

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 - 20 - IMD-7-1970

Exhibit 13
Zimmerli’s Social Media Presence and Activity
Facebook, Twitter and Instagram

Comparison between Zimmerli and Hanro

Social Media Presence, Activity and Followers’ Responses to Activities

Zimmerli Hanro

Facebook Twitter Instagram Facebook Twitter Instagram

Followers >2,000 >200 >1,300 >10,000 >1,600 >8,000

Average posts per month 5-6 5-6 5-6 10-12 10-12 10-12

Average likes per post <10 <5 <100 <50 <10 <300

Average UGC reaction per post <5 <5 <5 <20 <10 <5

Source: Company information

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 - 21 - IMD-7-1970

References

1
https://www.youtube.com/watch?v=Gys-ZLy8lD4.
2
TV Report Euromax 2012, see https://www.youtube.com/watch?v=4cjTDtGrAZg
3
https://www.aargauerzeitung.ch/aargau/wyna-suhre/made-in-aarburg-ganz-hollywood-will-diese-
unterwaesche-127603655
4
Deloitte Report, Global Powers of Luxury 2017 - The new luxury consumer, p. 3.
5
http://www.vonnordeck-holding.com
6
https://www.statista.com/outlook/90040000/100/underwear/worldwide#
https://www.persistencemarketresearch.com/market-research/underwear-market.asp; 8bn in 2014,
growing to 11bn in 2020.
https://www.prnewswire.com/news-releases/global-mens-underwear-market-is-expected-to-be-
valued-at-us-11-bn-by-2020-persistence-market-research-523410721.html
7
https://www.s-ge.com/de/article/aktuell/20181-ict-zimmerli-erfolg-digitalisierung accessed
18.02.2018.

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2022 to Dec 2022.