Posts Tagged ‘Billabong’

More on forward integration into online retailing

December 3, 2009

Yesterday’s post about Billabong’s forward integration into online retailing ended with a query about whether other such firms have pursued this strategy (and whether it has been a success).

Coincidently I have since stumbled upon this story reporting recent moves by various Italian fashion houses such as Armani, Roberto Cavelli, Valentino and Ferragamo, to build their presence online (link c/o State of Lux). This quote sounds pretty familiar:

“The cost of making a Web Site is not that big. That’s encouraging fashion houses,” said Stefano Sassi, chief executive officer of Milan-based Valentino, which opened its Web shop six months ago. “There’s a very interesting margin on e-commerce.”

It would seem these firms would face a similar issue with channel conflict (with potentially even more conflicts with respect to price parity maintenance).

Armani has also taken on the m-commerce challenge with an i-Phone application. Is this sort of customer engagement better suited to luxury goods?


Why don’t more producers sell on-line?

December 2, 2009

Last week, Aussie surfwear giant Billabong announced they had entered the online retail arena via the acquisition of California-based boardsports website Swell.com.

Swell carries a wide range of brands beyond the Billabong stable. Billabong’s argues “the purchase will allow the company to take advantage of higher margins”. This is certainly logical, but it begs the question why more consumer durable producers have not gone down this path.

Firms like Billabong carry an enormous range of products that are distributed in low quantities to a very dispersed (and individually pretty inconsequential) set of bricks and mortar retailers (presumably via margin-eating middlemen wholesalers). Building a front-end in the online world could give firms a much more direct, more responsive and more lucrative customer interface. One can imagine Billabong offering exclusive and limit-edition ranges through the Swell store, and also tapping into more insightful customer preference data.

The challenge resides in the perceived channel conflict. Will other retailers feel threatened by the firm as a competitor (leading to them cutting back purchases)? While Billabong feel restricted in its pricing at Swell?

Likewise, there may be hostility from competitor brands. Will these firms still want to offer product to Swell, given Billabong will be earning a big chunk of their profits?

Billabong have done a smart thing in buying a firm with proven technology, a functioning back-end and known brand rather than going alone with such forward integration.

What are some other examples of such moves in the e-commerce space? And have they worked?

From Threadless to Shredless?

January 13, 2009

This post was prompted by one from Steve over at Startup Blog. He suggested that surfwear (in particular board shorts) might be a fertile product market for a Threadless-like innovation.

For those of you unfamiliar with Threadless, it is a crowd-sourcing community where designers load up prospective t-shirt designs which are voted upon by the public with the most popular then made available for sale through the same website. There is an excellent discussion of its growth and appeal here. The firm has been a huge success. Based on the numbers mentioned in that article, the site is selling upwards of 5000 t-shirts a day, at a margin of 33% or more.

 

The business model makes an enormous amount of sense. Each new design has a limited run and has already been tested with the likely consumers (i.e. they have voted for them). The basic inputs and production processes are very standardised (blank t-shirts, screenprinting) while the more costly input (designs) have been sourced out to providers who are prepared to do the hard work on spec (presumably because the exposure to consumers, or community, happens whether or not their designs are winners).

As with e-commerce generally, the firm saves big bucks by not needing/supporting a “bricks and mortar” retail and distribution network. It also avoid most marketing costs through that wonder of community-based websites – word of mouth.

Here’s a video explaining more about Threadless: Vodpod videos no longer available.

So turning to boardshorts, could a similar model work?

boardiesIt certainly would need a lot of tweaking. I have no doubt that folks could come up some great and innovative designs and outperform the folks at Ripcurl, Billabong etc. But the issue is more to do with the business model.

Boardies are typically made from a microfibre polyester which is much more difficult to screenprint onto than cotton. Any design competition would probably need to be for the fabric print itself.

Now this is not impossible. There is at least one site that runs such a poll – Bonbonkakku. And Spoonflower offers custom printing. But, again, both are onto cotton, not polyester, and neither seem overly cost effective.

Running with new fabric designs as part of the model seems highly problematic, as this would necessitate large product runs, meaning the site would need to bare the risk of excess stock (and thus push up prices to protect against this risk). It would require a certain level of scale (in terms of consumer awareness, exposure) to be viable too. This contrasts with the much more scalable Threadless model.

Alternatively, the model could work around a palette of available fabrics and generating innovative patchwork style designs. This would require the firm to have access to good assembly (i.e. sewing) facilities. And the pool of prospective designers would presumably drop now (requiring a more specialised set of skills), and site would need to develop some capacity to communicate candidate designs effectively (3D rendering?, rotating images?). The big danger is that the market for these patchworked shorts might be much smaller too (surfers don’t usually want seams that rub).

As you can see, I am intrigued by the prospect of adapting the Threadless model, but I am not certain boardshorts are the right product. I am keen to hear your feedback. What have I missed in my discussion? How could this work more effectively?

Everybody’s going surfing… surfing R.U.S.S.I.A!

August 29, 2008

Aussie surfwear behemoth Billabong has announced it is opening stores in Moscow and St.Petersburg, Russia. This continues the expansion of this Australian firm into markets further and further away from the sun and surf of Queensland.

russian-hats

Russia is a BRIC and the 11th largest economy in the world. This certainly makes it attractive to any vendor of consumer products. As an economy embracing consumerism at breakneck speeds (after years of brand deprivation), it is clear why Billabong has entered the market. The question remains whether surfwear is an appropriate product offering to a cold country with little accessible (or warm) coastline.