Sponsors
Billabong ▲ +0.005 | PPR ▼ -2.30 | American Apparel ▼ -0.015 | The Buckle ▼ -0.04 | Columbia ▼ -0.63 | Deckers Outdoor ▼ -0.38 | Dicks ▲ +0.20 | Foot Locker ▼ -0.67 | Genesco ▼ -0.03 | Iconix Brand Group ▲ +0.21 | Jarden Corp ▼ -0.34 | Nordstrom ▼ -0.12 | Luxottica ▲ +0.26 | Nike ▲ +0.31 | Pacific Sunwear ▼ -0.01 | Skullcandy ▲ +0.33 | Sport Chalet - 0 | Urban Outfitters ▼ -0.60 | VF Corp ▼ -0.13 | Quiksilver ▼ -0.06 | Zumiez ▲ +0.04 | Macys ▲ +0.39 | Tillys ▲ +0.22 |
Readers Say
Always a good daily read
Always a good daily read

Shop-Eat-Surf creates a good source of timely information about the industry. The site makes all types and size companies feel part of a community where everyone is stoked to hear about other companies successes and ideas. It is always a good daily read.

- By Ted Li, VP of North America, Oakley
Useful on a daily basis
Useful on a daily basis

It's well balanced information that is useful on a daily basis. I'm very satisfied with the Executive Edition. I start each day with SES and a big cup of coffee!

- By Tom Ruiz, EVP Sales, Volcom
Industry Insight

CFA, WELLS FARGO: Invitation to next "Crystal Ball" breakfast session, "Private Label vs Branded Manufacturing."

STOKES ME: SIMA Humanitarian Fund campaign kicks off this week with "Add-A-Buck" promotions in 76 core-store doors.

Details on Industry Insight.


Tiffany Montgomery
Print This Article

Billabong chairman on retail integration, evolution of strategy

By Tiffany Montgomery
October 25, 2011 9:15 AM

Billabong held its annual shareholder meeting in Australia yesterday and executives shared some interesting details about the reasons behind its retail strategy, how retail is performing and how business is going in general since the company’s fiscal year ended at the end of June.

 

Below are some highlights from the address by Chairman Ted Kunkel. This information comes from a transcription of the address provided by Billabong. I added headings to break up the text.

 

Click here to read highlights from CEO Derek O’Neill’s address, where he gives an update on Billabong’s current business performance.

 

Chairman Ted Kunkel discusses structural changes in industry

When discussing structural change it is important to understand the evolution of the boardsports industry. There are two key groups in the industry, being the brand owners and the specialty retailers.

 

The brand owners are the product innovators, the supporters of the athletes and events and the providers of the merchandise, while the retailers are the important interface through which the brands connect with the consumer.

 

Historically, these retailers have predominantly been independent operators of small businesses and, while servicing their local communities well, their capacity to reinvest into their businesses, particularly through an extended downturn in consumer sentiment, has been limited. Many of these retailers were the first generation of boardsport retailers and, given they had been operating their stores for most of their working lives, were looking at opportunities to exit their businesses.

 

Over the same period, there was also the emergence of several large chain retailers specializing in the boardsports sector. One particular trend among the larger mall-based retailers has been a transition to vertical product, thereby reducing the floor space available to authentic boardsport brands and, in many instances, watering down the appeal of the stores to the core boardsports consumer demographic.

 

This vertical product trend, where the retailer creates an own brand and sources goods directly from offshore, is more attractive when the purchasing currency is strong, as the AUD has been for some time. The historical model of the boardsports retail structure has therefore been undergoing rapid change and with it the traditional long lead-time indent system. Retailers, generally, were indenting less, ordering much later and preferring to rely on in-season buying.

 

Billabong develops a strategy 

The Billabong Group had observed these trends over several years, primarily in North America and parts of Australasia, but noted a sharp acceleration in recent years principally driven by the economic forces resulting from the global financial crisis. Left unchallenged these trends had the capacity to undermine the future growth prospects of the Billabong Group.

 

Following extensive market analysis, it was determined that the Billabong Group would, in some regions, look to gain greater control of its route to market. This led to a series of small retail acquisitions and, in the past year, the acquisitions of larger retailers including Canada’s West 49 and Australian retailers Surf Dive ‘n’ Ski, Jetty Surf, Rush Surf and Surfection.

 

While there were sound commercial considerations supporting each of the acquisitions, there was also an acknowledgment by the Group that there would be a year of transition when margins and profitability would be adversely impacted as the Group evolved from wholesale supplier to the stores to the owner of the stores.

 

At the time of the acquisitions, management stressed that the benefits of the retail acquisitions, primarily the capture of the vertical margins, would only start to flow from the second year of ownership. To the close of the 2010-11 financial year, the Group had owned the major Australian retail acquisitions for approximately seven months and the West 49 business for just 10 months. So, the message here is that the Group is now through its previously foreshadowed transition year and expects the benefits from the retail acquisitions to start flowing in the 2011-12 financial year.

 

It is worthwhile pointing out that the above dynamics are only apparent in markets that have been established for many years. In destinations such as Asia there is no wholesale channel and therefore the route to market is to build retail, which the Group has done very successfully and profitably to date and continues to do so. Markets such as South America and most of Europe, on the other hand, still have a developing wholesale account base so there is likely to be lower retail investment into those regions.

 

See Page 2 for an online update, and how West 49 integration is going

 

Previous 1 2 Next

More on: Billabong, Ted Kunkel

Articles You Might Have Missed