Cotton On announced last week it will add 500 jobs to its international headquarters in Geelong, Victoria, in a move that no doubt has retailers scratching their heads as the rest of the industry gets knocked about by poor consumer confidence.
Victorian Premier Ted Baillieu announced the expansion, saying the clothing retail chain was a “Victorian success story”.
The company started 21 years ago and has grown to more than 1,000 locations in 11 countries, rocketing its founders to the Rich List.
And yet the announcement comes as companies in the retail industry are continuing to fall over. How has Cotton On, which has historically operated on thin margins selling cheap clothing, managed to survive?
We’ve delved into the company’s business and have come out with five lessons that keep Cotton On going strong:
Cotton On isn’t shy of a good controversy. Every year it seems the company is in trouble over a slogan printed on one of its products that gets parents up in arms. Baby clothes featuring sayings like “they shake me” haven’t helped matters.
But the company doesn’t do too badly from this controversy. Every time one of these controversies occurs, it ends up going the same way: the offended parties cry in protest, and Cotton On backs down. Meanwhile, they’ve had the company’s name spread across the mainstream media, and the core part of the retailer’s demographic stays local.
Controversy is a publicity strategy for Cotton On – and it continues to work in its favour.
A good retailer understands technology and how it affects shopping. While the biggest retail companies in the country have only just gotten their digital footprint off the ground, Cotton On has had a solid online presence for years.
The site is a snappy, well-designed and easy-to-use shopping portal. Social media integrates and complements the website – it doesn’t just copy it. Posts about fashion and clothing offer value to fans, rather than parroting sales and marketing speak.
Cotton On has also shown it’s able to investigate new ideas, like integrating music into dressing rooms. A good understanding of tech has kept this chain on the straight and narrow.
Cotton On began as a single store in Geelong. Now it has hundreds of stores in countries like the United States, China, Singapore, Germany, and South Africa.
The global expansion represents two key lessons. The first is that Cotton On understands the benefit of global growth in retail and the second is that it understands and accepts whatever assistance it can get.
The Victorian Government has assisted Cotton On in expanding its footprint overseas, and why not? Any business should be open to free money when it can get it. Too many SMEs forego government grants because they “can’t be bothered”. Cotton On may not have gained the majority of its funding from public coffers, but when you have the opportunity, you should go for it.
Too many retailers have entered the discounting game in the past few years, and it’s been their downfall. Cotton On, on the other hand, understood the low-margin high-volume business from the beginning and has based its entire operation around that.
That means it has worked with its supply chain to get costs down, creating a well-oiled retail machine that can withstand low margins.
At the same time, the brand proposition is simple. Customers will buy a few cheap t-shirts knowing they won’t last long, because Cotton On doesn’t promise they’ll last you forever. The company knows exactly what it is, and doesn’t lie about it.
A good retailer knows when and where to diversify. Instead of pumping Cotton On with more products and bloating the original proposition, the company has moved into new stores for footwear and even stationery products through its Typo brand.
This ties into the previous point about brand positioning: Cotton On knows exactly what it is. Different brands ensure separate elements of the business don’t mix to its detriment.
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