Everywhere you go around Israel, you are likely to meet people wearing Fox clothes – including actors Yael Bar-Zohar and Yehuda Levy.Israel doesn’t have the Gap, Old Navy, or Banana Republic. Instead, when it comes to shopping for casual and trendy clothing at relatively low prices, young Israelis head in droves for the mall, and into the stores run by the Fox fashion chain.
Now, as Harel Weisel, the founder and CEO of Fox knows full well, the company has reached a turning point. With 120 shops across Israel in men’s, women’s, children’s and baby’s fashion, and another 30 or so expected to open in 2004, is nearing saturation point in the small, but lucrative Israeli market.
Weisel, and his two brothers, Iftach and Assaf, who jointly own the chain all understand that the only real future for this rapidly growing company, is overseas. The question is just where and when they will start.
Weisel, 37, looks a little like a bulldog. A large man, wearing an extra-large red Fox t-shirt, he sits in state behind his desk in the corner office of the Fox headquarters in Lod. It is a bit of a mess, there’s next year’s spring line hanging on a railing in his office, papers scattered on his desk, and outside beside his secretary a couple of suitcases lie in the middle of the floor, ready for any quick departure. The whole atmosphere is of haste and bustle. Downstairs, in the warehouse, dozens of men and women ferry clothes here and there in supermarket trolleys, preparing them for the stores around Israel.
Fox is one of the most successful fashion chains in Israel today. In the last few years, turnover has increased rapidly. Everywhere you go around the country, you are liable to meet people wearing Fox clothes.
The whole story of the Fox chain began in 1990 when Weisel’s father began work as an agent for the Fox clothing factory. The factory was owned by Avraham Fox.
The elder Weisel delivered the clothes – mostly brightly colored T-shirts, to about 20 or 30 shops around the country. In 1992, Weisel’s father died unexpectedly of a heart attack. After the shiva (the seven day period of mourning), the brothers opened their father’s accounting book and discovered that a number of shops still owed him money. When they went to the shops to pick it up, however, the shop owners asked if they could deliver more clothes. At the same time, Weisel’s mother asked her sons if they would open a shop for her selling Fox clothes, because she did not want to spend the rest of her days twiddling her thumbs at home.
The brothers opened a small shop in Ramat Gan underneath the building where their mother lived. They used it as a wholesale base to send clothes out to shops in the area, but also sold the items to the surrounding neighborhood. It was an instant success.
Buoyed by their success, the family decided to start opening more shops. By the end of 1992, they had opened three stores. Within two years, that figure rose to 10.
The first few years were difficult. The brothers worked around the clock, filling in whatever jobs needed to be done.
For Weisel, himself, it was not an easy decision to join the company. He was 26 at the time, and worked as the sales manager of a textiles company, selling fabric to Israeli fashion chains like Rosh Indiani, and Castro. It was an extremely well paid job, and Weisel knew that joining Fox would mean a substantial cut in salary. Despite this, he decided to go ahead with the move, a decision he has never regretted.
Initially the Weisel brothers decided what clothes to sell on their own. The travelled to fashion shows in Europe, the US, and the Far East, and window shopped extensively in Europe and New York, where fashion tends to be about one year ahead of Israel. In 1996, they brought on their first designer. They now employ eight.
They still travel widely, however, attending fabric and fashion exhibitions around the world, and all the clothes that appear in the chain’s stores must be approved by both Harel and Iftach. Collections are finalised eight months before the season begins.
In 2000, the Fox chain merged with the Fox factory to reduce costs.
The company’s real breakthrough occurred in the late 1990s, when the store began regular advertising campaigns on television, featuring the popular model and actress Yael Bar-Zohar. The women’s chain was followed by children’s clothing in 1999, then men’s, and finally in the last couple of months, Fox has moved into baby clothes.
At the same time the company has started expanding into brand-name accessories, like socks and underwear – manufactured by Delta, stationary, watches – produced in conjunction with Gallery, and a cellular phone – launched with Cellcom. There is even talk about entering the swimwear field.
Sales have been growing steadily. In 2002, they stood at NIS 362m. ($80 million), of which NIS 30.4m. ($7 million) was profit. This year, Fox expects to see more than $100m. in sales (some NIS 450m.), of which $10-13m. will be profit. The company sells one million items of clothing a month, including accessories.
So what makes Fox such a success? “It’s a combination of things,” says Weisel, leaning back in his chain. “It’s the right collections at the right time for the right value for money. It’s the right brand, the right advertising, the right location in the mall, and the right management.”
The only problem now is that Fox is reaching its limit in Israel. The company has been considering Eastern Europe for some time, specifically the Czech Republic. A recent market survey there was not promising, however. Fox is also examining Europe, the US, and the Far East.
“In the future, we must go out of Israel,” Weisel says emphatically. “The US and Western Europe are attractive markets, but they are also the strongest markets with all the big players in the same game.”
Weisel admits that competition in these markets would be especially fierce in men and women’s clothing, since these are already well catered for. He is more optimistic about Fox Kids. “Fox Kids is better than every chain out there,” he asserts. “It’s 10 times better than Gap or Old Navy. The clothes are more interesting, more fashionable. In kids we are better than everyone.”
To move abroad, Fox is considering three options, either going it alone, in a franchise, or in a partnership. “It all depends where we go,” says Weisel. “We haven’t yet decided how we will build the brand abroad.”
Back home, Fox faces stiffer competition than it did in the past. The entrance of international chains like Zara, Polo, and Mango over the last few years, have increased the stakes. Fox also faces stronger competition from local chains, like Castro, Golf and Honigman, which have revamped their look in the last few difficult years and begun attracting larger sales. While none of these companies can be considered real competition to Fox by itself, together they do put a squeeze on the market.
The company is responding by planning on introducing more designs to its stores. Currently the company makes about 500 different designs in each collection – about 2,000 designs a year. In future it aims to increase this to 4,000 designs a year, but to make only 5,000 items per design.
“We don’t want to see all of Tel Aviv wearing the same clothes,” says Weisel.
Over the next couple of years, Fox expects its strongest growth to come in the baby clothes segment. “In three years we expect to have the baby market to ourselves,” Weisel predicts. “Currently there is no-one very strong in the baby market. The biggest player is Shilav, but they only hold maybe 20% of the market. We hope to get 40% of the market – some NIS 70m. in sales.”
So what does Weisel think when he looks back at how Fox has developed over the last decade? “I don’t think about the past,” he says without hesitation. “I only think about the future. If you don’t always think about the next few years ahead your business will collapse.”