9. 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
fastest growing
demographic groups in
the country
In the United States, there are 198 million adults between the ages of 18-65
and of those, 60% qualify themselves as outdoor consumers. Outdoor
consumers are defined as people who:
• 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
10. Performance Apparel: $36.5 Billion
Outdoor Apparel: $5.6 Billion
Outdoor Sportswear: $22 Billion
Sportswear Industry in the US: $64 Billion
Sportswear Sales 2014
US Outdoor Apparel| Industry Overview
12. 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
14. Five Forces| Industry Rivalry High
Challenger| Patagonia
• 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”
Incumbent| The North Face
• 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
• 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%
15. Five Forces| New Entrants Low
Incumbent| The North Face
• Economies of scale
• Collaboration amongst companies owned
by VF
• Difficulty with brand awareness
• Low costs to adapt production (i.e. Nike)
• Steady growth 2009 - 2014 (+10%)
• Attractive and growing market
Challenger| Patagonia
• Educating competitors / new entrants
16. Five Forces| Substitutes Medium
Incumbent| The North Face
• Having ability to cross-sell
• Vast pool of knowledge across other
products / brands
• Means for rigorous customer research
• R & D
• 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
17. Five Forces| Suppliers High
• Many suppliers refuse to adapt to environmental friendly production
• Limited awareness of eco-friendly production
Challenger| Patagonia
• Reducing suppliers (200 down to 41) to
remove power from suppliers (reducing
number of products)
• Educating suppliers
• Demanding social and environmental
standards (participation in 1% for the Planet
/ Bluesign Technology
• No sacrifice on quality
Incumbent| The North Face
• Economies of scale
• Flexibility as part of VF
• Demanding new technology
18. 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
• Educating customers to buy smart
• Accepting Customer’s power
Incumbent| The North Face
• Specific Marketing
21. 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)
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%)
San Francisco| 1968
22. 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
24. 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.
26. Can Patagonia grow by convincing you to
buy less?
Proposition| Patagonia in US Outdoor Apparel
Industry
27. 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
