Here is an Australian success story. What are the main reasons why they success their business to generate $1.5 billion??
According to The Australian Financial Review recently, Nigel Austin was studying business at university when, in need of cash, he started selling acid-wash denim jackets from the boot of his car at the markets in Geelong almost 24 years ago.
In the first week he sold just one jacket for $30, barely enough to pay for lunch and petrol. Undeterred, he went back to his supplier, who just happened to be his father, the late clothing wholesaler Grant Austin, and negotiated a better deal.
"The next week I sold all 20 and made $200 – I thought that was pretty addictive," Austin says.
Now 44, Austin is still selling denim jackets – as well as T-shirts, jeans, checked shirts, dresses, sweaters, bras, undies and homewares – but his Cotton On Group retail empire has grown from just two stores in 1991 to more than 1300 stores across eight brands in 19 countries including the US and South Africa.
Sales have risen more than 20 per cent a year for at least five years and are forecast to reach $1.51 billion this year.
"Cotton On is a true Australian new generation success story," retail expert and former David Jones chief executive Paul Zahra says. "It has a singular focus on every day, edited basics that are fashion focused at an exceptional price and quality. It's a relatively young and determined company who have no set boundaries and who know their customer intimately."
Over the next three years the group plans to open 570 stores around the globe, taking the total to almost 1900, while lifting online sales to $250 million.
"Basically what's made them such a success is they're a supply-chain business and a property business," Ferrier Hodgson's retail leader, James Stewart says. "They bring quality products to the market at the cheapest possible price and their supply chain and sourcing strategies are critical to them being able to offer the value proposition they offer in their stores. Their stores are relatively inexpensive to put together so the capital investment is not very high and their payback period is very fast."
The move to direct sourcing in 2000, when COG had only 60 stores, and the adoption of advanced replenishment systems in 2005, by which time store numbers had risen to about 140, were turning points for the group.
"We ended up having this perfect storm of comp sales growth through better replenishment systems and margin growth, so that was where the growth really kicked in," Austin says.
Products are manufactured by 170 suppliers at 330 factories, mainly in China and Bangladesh, and are sent by sea freight to seven distribution centres in Melbourne, Brisbane, South Africa, China, Singapore, California and New Zealand.
COG expands into new markets and builds its e-commerce and digital capabilities but it has struggled to attract the international expertise it needs.
Cotton On is also growing its own talent, investing $30 million establishing its own University, a four-module learning platform in conjunction with Deakin University aimed at improving retail and leadership skills.
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