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Industry Apr 18, 2013 5 min read

Retail Focus: Where did Billabong go wrong?

Billabong is in high waters. Founded in the 70s by Australian Gordon Merchant, the last 12 months have been a low in the company’s 40 year history. After a mass exodus of boa...

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Billabong is in high waters. Founded in the 70s by Australian Gordon Merchant, the last 12 months have been a low in the company’s 40 year history. After a mass exodus of board members, 2012 full year losses of $287m, store closures, assets sold and a chief executive replaced, Billabong now sees itself on the brink of a sale. A consortium led by the former US brand boss, Paul Naude, and Sycamore Partners is soon expected to snap up the failing brand for $300m; 45% less than Billabong were offered just four months ago.

So where did it all go wrong? It’s certain that Billabong’s expansion in 2011 was too gung-ho, a knee jerk reaction to the small independent retailers – who were once Billabong’s bread and butter – being bought up by larger players. Billabong dove into retail, making expensive acquisitions and opening stores globally, with spend expected to be recouped in 2012. That didn’t happen, forcing the brand to sell one of their strongest assets, the Nixon watch brand (a mistake according to many analysts).

But Billabong’s issues weren’t simply with the holder of the purse strings. We dug into our data to further understand what’s causing the downturn.

1. Missing trends
The surf, ski and skate scene moves with trends swiftly, adapting the younger, edgier styles to suit their customer’s aesthetic. They know that this trend savvy consumer is core to their success; as Gen Y’s fascination with newness drives them towards the latest style updates. Billabong however, seem to have forgotten this lately, missing out key trend opportunities in recent seasons.

Coloured denim was a huge trend globally, and one which Billabong arrived too late to the party, having only dropped styles into store in May of 2012. Their peach coloured women’s skinny jean arrived in Surf, Dive ‘n’ Ski on the 22nd May 2012 and held its AU$89.99 price point, selling out of the majority of sizes by September. By the time Billabong introduced their next round of colours (neons included) in December 2012, it was too late; their customers had got their fill of coloured denim and garments had to be discounted by 40% to sell through. With the correct data, Billabong would have seen this trend coming and could have reacted in time to maximise their return.

It doesn’t stop there; they were late with the coloured chino trend which has seen big menswear success, having only just dropped their £60 red men’s chinos into store at Zalandos. And for ladies, where is reference to the cropped top trend, sweeping through every layer of the market? In perfect keeping with their outdoorsy, beach-side lifestyle, this is a key garment they could have explored.

With their technical expertise, it’s near-criminal that Billabong have failed to take advantage of the neoprene trend which has filtered down to high street from high end. With designers such as Peter Pilotto experimenting with the fabric so familiar to Billabong this would have been a great opportunity for the surf brand to easily rack up some cool points. With their good knowledge of fit and their established supply chain, this tricky (for unprepared retailers), yet high-profile trend was theirs for the taking. Indeed, Urban Outfitters began stocking their standard line of rash vests and neoprene wetsuits in January this year, selling well at full price: just think how well a updated, fashion-forward line would have worked. Meanwhile, competitor Roxy reacted deftly, teaming up with fashion heavyweight, Diane Von Furstenberg on a neoprene and print heavy line, winning favour with both the surf set and fashion followers.

2. Lack of story
The internet is a busy place, and for many, internet shopping can be overwhelming, which is why products featured in edited selections sell so well. Billabong’s online offering is confusing, and lacks a common thread or theme. Take their women’s t-shirt selection; they have boho items sat alongside rock’n’roll sloganed tees and punky prints. Which would be passable if the offering was broad, but theirs is only 13 products strong, sending a very mixed message about what their brand is or who their customer should be. It is also confusing for stockists trying to buy into elements from within this range.

Their competitors don’t struggle with this. Take Quiksilver – their range across any of their stockists for womenswear, menswear or childrenswear has a unified story which aligns the brand with a customer and lifestyle. Their palette of washed out blues, navy, greys and pastels, their neat plaids and ditsy florals, the plaids and chambray, all adds up to a brand consumers can align with.

3. Confusing pricing
Digging further into our data brings a more concerning issue to light. Billabong appear to lack a clear pricing strategy. Focusing on Billabong and their two main competitors, Rip Curl and Quiksilver, we can compare the average pricing across key categories. Rip Curl are clearly defined as the cheapest price point, consistent across every category. Quiksilver aren’t trying to compete with Rip Curl on price, sitting higher across the board, yet consumers identify with their strong brand image.

Billabong, however, are awkwardly positioned between the two, never beating Rip Curl on price and certainly not offering their consumers as strong a brand image as Quiksilver. Most worryingly is that in certain categories (wetsuits and women’s jeans), their average pricing is higher than Quiksilver’s.

Billabong are still respected in the surf world as the best for technical gear, and their sponsoring of surf pros and events supports this. It also justifies their higher price point on sports items like wetsuits and rash vests. However, they’ve failed to captivate the wider audience with their non-technical product, with no enticing brand story or competitively aligned pricing.

4. Mixed brand messaging
The diluted brand message is further hindered by Billabong’s online persona. Or rather, personas. For every market and gender, Billabong has a separate Twitter and Facebook account (for example, ‘Billabong Girls Europe’, ‘Billabong Girls Australia’). Sure, seasons are different across their markets, but size of following is an important factor for the validation-seeking youth consumer. Their online voice should be unified and findable, not fragmented and confusing. Consumers in Europe most likely want to buy into a slice of the Australian surf lifestyle, so why keep that content from them? A global community is achievable, as market leaders ASOS have proven with their single presence, and more so than ever for a brand with dwindling sales figures.

We hope that in the coming months Billabong will be able to regain control, but one thing is for certain; the data is out there to avoid their pitfalls.