February 19, 2014
Patagonia is a high-end outdoor apparel company founded in 1972 by Yvon Chouinard, a self-described ‘dirtbag’. The company remains private. Has experienced strong growth to date (6% sales growth Y-oY) while maintaining its commitment to sustainability and the environment Industry includes Columbia Sportswear, The North Face (VF Corp.), and many general retailers Strategy & Business Model:
Customers: median age of 38 years old, average household income of $160K Products (% revenue): Sportswear (47%), Technical Outerwear (30%), Technical Knits (12%), and Hard Goods (6%). High quality, priced 20% higher than other outdoor apparel. ‘Ironclad Guarantee’ to repair, refund, or replace any product that does not fully satisfy customers Financials: 50%-55% gross margin on goods sold
Production: High environmental and social standards for suppliers, though selectivity also leads to lower product defect rates Sales (% sales): Wholesale (44%), Retail (33%), Catalog + Internet (23%) – fewer distributors than competitors; retail stores and catalog play important role in communicating brand & connecting to customers Marketing: environmental / social stance often attracted free media attention; careful conscious effort to not exploit position for monetary gain Culture: strong culture, family-friendly workplace, environmental perks for employees, low employee turnover Questions
In spring 2010, Patagonia was in the process of implementing a new, radical environmental initiative called “Product Lifecycle Initiative” (PLI). This initiative represented a holistic commitment to lengthen the lifecycle of each product and reduce landfill waste. It constituted Patagonia’s efforts to take responsibility for the products it made, “from birth to death and then beyond death, back to rebirth.” The initiative consisted of a mutual contract between the company and its customers to “reduce, repair, reuse, and recycle” the apparel that they...
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