Posts Tagged ‘fashion industry’

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?

The curse of distance for Aussie shoppers

March 25, 2009

I was just reading a recent interview with the head of design for Swedish fast fashion retailer H&M that appeared in The Australian‘s glossy business magazine (The Deal – sorry can’t find online copy).  She (Margareta van den Bosch) reinforced the message that Australia is just too far and difficult for this very multinational player:

hm-logo“We’ve never really opened in a country where they are in a different season.  We are not in South America and although we have one shop in Egypt we are concentrated in Europe and North America, with some shops in Asia.  The next destination is Russia… To go somewhere like Australia, it’s far away from our production offices”.

A former prime minister of Australia infamously bemoaned our position at “the arse end of the earth”.  It would seem fashion retailers share that few.  H&M is not the only notable absentee from our shores.  So too the Inditex stable (Zara, Bershka, Massimo Dutti etc), Topshop and The Gap have not bothered to take on the logistic nightmare of trying to deliver constantly up-to-date trends that would be out of whack with the rest of their markets.

As a result I spent today buying bras for my wife from H&M, pants and shirts from Zara and a jacket from Bershka.  A happy bonus from being in Paris…

Putting a pretty face on internationalisation

March 20, 2009

There was a nice piece in yesterday’s paper on the international expansion by Aussie cosmetics wonder Napoleon Perdis.

It is chock full of value chain choices that appear to have made considerable difference to his firm’s success:

    napoleon-perdis-cosmetics

    1. Building a dedicated distribution facility in Los Angeles (thus cutting out the middle-man and accessing those rents)
    2. Tapping into the retail outlets of Target across US (and helping them to go upmarket)
    3. Jumping onto parallel value chains in terms of the beauty school, body and bath, skincare and now even health spa and hotel businesses (leveraging strong brand awareness and relatedness)

    In an international business sense, the firm doesn’t seem to have been hampered by any particular liability of foreignness. I guess it might be hard for a consumer to work out where the product is from anyway…. Greece? France? Australia? Austria?

    Justifying your jeans

    March 16, 2009

    I am not an expert in the area of consumer behaviour, but occasionally I stumble across a paper with currency.  

    A recent paper Harvard Business School addressed quite directly a question I asked back in October: how do consumers reconcile information about the likely poor working conditions under which their jeans are produced?

    jeansThe paper, snappily titled “Sweatshop Labor is Wrong Unless the Jeans are Cute: Motivated Moral Disengagement“, by Neeru Paharia and Rohit Deshpandé, argues quite convincingly that consumers shift their moral compasses considerably in the face of desire. 

    Put simply, we are willing to shift our views on the merits (or acceptability) of sweatshops if we desire an item sufficiently. This shift may include citing economic (or other) justifications for such work.

    The implications of such work vary depending on the audience I guess.  Campaigners against such working conditions need to make their arguments more sticky, while marketers of such products can perhaps maintain their strategies of pretending the issues isn’t there (or even offering more justifications for such labour usage).

    It ain’t pretty, but it is the real world!!

    Chasing up some retail tales

    March 6, 2009

    The last couple of days has seen topics of a few previous International BS Blog posts back in the news. In reverse order of when we last spoke about them:

    coles-logo1. The spotlight has been turned on supermarket bargaining power again. Instead of Belgian chain Delhaize, this time its Aussie giant Coles who is squeezing its long-suffering suppliers even more:

    “Buyers from Coles have been contacting suppliers to tell them of a 4 per cent increase in trading terms, the percentage of the cost of each item the supplier must pay back to the retailer. For many suppliers, this figure was in the mid-teens but it is being pushed closer to 20 per cent.”

    Not a huge surprise in a virtual duopoly, particularly when Coles is under so much more pressure to economise than Woolworths.

    logo-vanlaack2. Australian high-end menswear fashion house, Herringbone has been rescued by a German suitor. As we noted back in December, it is a lot harder to target this segment when incomes are under pressure. van Laack presumably scored these guys at a bargain, another instance of the scope to rationalise (and internationalise) in the current economic crisis.

    3. And finally a firm we’ve lauded as the prime mover in the electronics hardware and software retailing pace, JB Hi-Fi has made some waves this week, enjb-hi-fitering both the ASX100 (i.e. the largest 100 listed firms in Australia by capitalisation) and Australia’s top 20 most valuable brands, both for the first time. Being a highly efficient, low-cost producer in the current climate seems a winning strategy indeed.