Can Patagonia grow by convincing you to

buy less?
Patagonia| Overview
Patagonia| Overview
Patagonia| Overview

https://youtu.be/tpwndvzzbWo
WHY PATAGONIA?
Patagonia| A case study in the outdoor apparel
industry
“I know it
sounds crazy,
but every
time I have
made a
decision that
is best for the
planet, I have
made
money”

Yvon Chouinard
US Outdoor Apparel| Competitive Landscape
US Outdoor Apparel| Industry Overview

Key Insights
34% of outdoor
consumers live in
cities, and those
consumers tend to be
young, ethnically
diverse, active, and
spend the most on
outdoor gear

17% of outdoor
consumers are
Hispanic - one of the In the United States, there are 198 million adults between the ages of 18-65
fastest growing and of those, 60% qualify themselves as outdoor consumers. Outdoor
demographic groups in consumers are defined as people who:
the country • Spend at least one hour per week outdoors
• Participated in traditional or non-traditional outdoor activity at least once in
the past year
• Purchase apparel, footwear, equipment, and/or technology for outdoor
activities
US Outdoor Apparel| Industry Overview

Sportswear Sales 2014

Performance Apparel: $36.5 Billion

Outdoor Apparel: $5.6 Billion
Outdoor Sportswear: $22 Billion
Sportswear Industry in the US: $64 Billion
US Outdoor Apparel| Industry Overview
Company Comparison| Patagonia vs The North
Face
Challenger| Patagonia
• Privately owned| strategic direction heavily
influenced by original owner
• Shareholder of 1
• Small but growing market share|above
average industry growth
• Controlled growth in line with founding
philosophy
• Sustainability & Quality
Incumbent| The North Face
• Stable of Brands| One of many brands by VF
Corporation
• Returns for Shareholders
• Dominant Player|nearly 50% of market share
• Blurring market categories|
active/performance/outdoor wear
• Performance and Brand Recognition
Industry Five Forces| US Outdoor Apparel
Five Forces| Industry Rivalry  High
• Highly competitive market (>45 brands mentioned)
• Quality driven segment
• Smaller companies with strong double-digit growth (Acquisitions)
• Smallest market within Sports apparel (9%)
• Sales forecast for next five years +14.3%

Challenger| Patagonia Incumbent| The North Face

• Focus on Quality Environmental
Impact and Innovation
• Founder of 1% for the Planet
• Educating rather than promoting
product (customers and competitors)
• Yvon Chouinard - “company
philosopher”
• Focus on shareholders (as part of VF)
• Collaboration, creativity, operational
excellence and financial discipline
• Funds to finance cutting-edge ideas /
internal projects (innovation centers /
Going Outside)
• Economies of scale
Five Forces| New Entrants  Low

• Difficulty with brand awareness

• Low costs to adapt production (i.e. Nike)
• Steady growth 2009 - 2014 (+10%)
• Attractive and growing market

Challenger| Patagonia Incumbent| The North Face

• Educating competitors / new entrants • Economies of scale
• Collaboration amongst companies owned
by VF
Five Forces| Substitutes Medium
• Other Brands
• Crossover appeal vs dedicated apparel
Challenger| Patagonia
• Keeping primary focus on quality
• Innovate in raw-materials to ensure
durability
• Differentiate in products (i.e. Surfware,
Fishing etc)
•R&D
Incumbent| The North Face
• Having ability to cross-sell
• Vast pool of knowledge across other
products / brands
• Means for rigorous customer research
•R&D
Five Forces| Suppliers High

• Many suppliers refuse to adapt to environmental friendly production

• Limited awareness of eco-friendly production

Challenger| Patagonia Incumbent| The North Face

• Reducing suppliers (200 down to 41) to • Economies of scale
remove power from suppliers (reducing • Flexibility as part of VF
number of products) • Demanding new technology
• Educating suppliers
• Demanding social and environmental
standards (participation in 1% for the Planet
/ Bluesign Technology
• No sacrifice on quality
Five Forces| Customers High

• Specific targeted customer group/segment

• Spoilt for choices
• High disposable income
• Demand for high quality products
• Willing to pay for quality

Challenger| Patagonia Incumbent| The North Face

• Educating customers to buy smart • Specific Marketing
• Accepting Customer’s power
Industry Five Forces| US Outdoor Apparel
Company Comparison| Resources

Incumbent| The North Face Challenger| Patagonia

Defend Market Position; Grow Margin; Grow Market Share (Responsibly);

Maximise Shareholder Returns Change Consumer Behaviours

• Brand & Marketing • Brand & Marketing

• Economies of Scale & Scope • Employees
• Knowledge & Experience • Recycling initiatives
• Innovation • Innovation
The North Face| Overview
“Never Stop Exploring”

1960’s| Climber & Trekker equipment

1980’s| expansion into swimming & skiwear

Branding| Amateur & Professional athletes

Sponsorship| the Ski Challenge, Ultra Trail du Mont Blanc,

Winter X Games, US Winter OIympic Team (Sochi 2014)
San Francisco| 1968
1990’s| expansion into leisure apparel in face of lagging
results, including bankruptcy

2000| acquired by VF Corporation

Distribution| 55 retail, 20 outlet + department & specialist

stores

2014 Revenue| $2B (^7%)

The North Face| Resources

Brand & Marketing| Brand association with races & events, as well as
athletes; blurring market categories

Economies of Scale & Scope| VF’s supply procurement, logistics, distribution, innovation,
quality assurance, & customer service

Knowledge & Experience| Employee & business-unit experience across VF companies, across
multiple markets

Innovation| Direct access to athletes via sponsorship, VF’s technical apparel innovation
centre
The North Face| Resources

Inimitability

Competitive
Durability
Superiority

Substitutability Appropriability
Patagonia| Resources

Brand & Marketing| Patagonia’s Mission Statement:

“Build the best product, cause no unnecessary harm, and use business to inspire and
implement solutions to the environment crisis.

Employees| Essential that employees share the company’s values. Employees are chosen
based on ‘dirtbag’ characteristics, environmental concern and entrepreneurial spirit rather
than traditional academic or business credentials

Recycling Initiatives| Introducing the Common Threads Initiative - Reduce, Repair, Reuse,
Recycle, Reimagine

Innovation| Industry leader in technological innovation. Regular investment in R&D,

maintaining a laboratory to develop and test raw materials.
Patagonia| Resources

Inimitability

Competitive
Durability
Superiority

Substitutability Appropriability
Proposition| Patagonia in US Outdoor Apparel
Industry

Can Patagonia grow by convincing you to

buy less?
Incumbent vs Challenger| Strategic Approaches

Patagonia believes that it can achieve it’s goal to grow

market share via reduced consumption per capita by
shifting some of the industry power from competitors
to consumers

Incumbent:
• Defend/Maintain Market position
• Not looking to change the market
• Effectively deploying resources
• Incremental gains
• Given size, may have difficulty pivoting
Challenger:
• Not looking to be better than market
leader/follow strategy
• Goal is to change market around The North Face
and other companies
• Looking to give some power back to customers
and suppliers
• Single Owner - greater decision making freedom