Nothing and Everything
Go ahead guys! Just shove more onto the gargantuan, growing piles of stuff that no one needs — much of which will be dumped onto barges and sent to third-world countries after it fails to be sold on its “final mark-down sale” shelf in some flea market.
I may be exaggerating to make a point. But in fact, a company named Trans America Trading, the largest textile recycler in the U.S. collects more than 70,000 pounds of secondhand clothing a day – yes, day in and day out. That’s a whopping 25,550,000 pounds a year folks. About 45 percent of the items are sent to third-world and emerging markets, hopefully to be re-sold, 30 percent repurposed as rags, 20 percent into fiber materials and 5 percent is waste. And, Trans America is just one company that contributes to the 10.5 million tons of clothing that’s tossed into landfills every year. Can for-profit recycling companies turn those rags into riches?
So what? I’ll tell you so what. At the end of the day, Michael Kors, Under Armour and Bonobos, three hot, wonderful brands, are going to contribute hugely to the pile of third world offerings (at best), or to the garbage dumps (at worst). Of course the third world “fashionistas” would love to get their hands on free (or close to it) trendy brands that used to have enormous western world popularity before their meteoric race to the moon, followed by ubiquity, then the crashing explosion into the dustbin of history.
Michael Kors is now on the edge of ubiquity, arguably already there. And that’s the death knell of cool fashion brands among the millennial group. (See my previous article, \”The Coming Crash of Michael Kors\”). In fact, the brand is pulling out of some department stores — or being kicked out. They’re trying to regain the “scarce card,” to bring back the cool factor. Sorry, CEO John Idol, it ain’t gonna work. The ubiquity train has left the station. Bonobos and Under Armour are still in the “meteoric race to the moon phase.” Bonobos is just starting and has a much longer runway. But both of their recent strategies indicate they will follow the Kors path to ubiquity and death. There is probably time for Bonobos and Under Armour to reverse course, but I predict they will not. Because healthy, measured and disciplined growth most often turns into growth for growth’s sake (and for Wall Street and investors I might add). Just ask the once sizzling Gap, Tommy “rocket to the moon” Hilfiger or Lew “70 percent outlets” Frankfort about what the momentum to pursue growth for ever-greater growth does to one’s decision-making.
Why am I picking on these three brands? Because all three are implementing a strategy that envisions their brands as everything for everybody, which in the end, turns into nothing for anybody.
Let’s start with Kors, whose demise is most imminent. From $1 billion to $4.7 billion after they went public in 2011, the brand cannot sustain such growth. Kors was originally known for dressing Madison Avenue’s ladies who lunch, 35 years ago. Then through a not-so-cool marketing strategy, they set the brand on a course of chasing growth. And chase it they did. Not only did they pump huge CapEx into opening stores globally as fast as they could, they also opened lots of outlet stores. The issue for John Idol when he was in the middle of sizzling growth (that at some point reaches maturity), became how, where and with what would he grow the business once that happened? The answer was, why not slap the brand on as many product categories as possible? And, they did with handbags, small leather goods, and footwear, and licensed branded fashion jewelry and watches, eyewear, fragrance, and beauty. Oh, and let’s keep in mind that the core, affluent millennial consumer base is only so big, so if they decide to democratize the brand with affordable price points for everybody, it becomes a ubiquitous brand that offers everything for everybody. For millennials, that is a non-starter. So is children’s wear next? Beware of the grim reaper. Michael Kors is about to meet him on the “moon.”
CEO and founder of Under Armour, Kevin Plank, hit the ground running 20 years ago, so to speak, being the great athlete that he was. He dazzled the performance sports apparel space with his high-tech, sweat-wicking t-shirt that he placed in huge volume across the professional and non-professional world of sports, almost overnight. His contact network was impeccable and huge. So, another zero to $3.96 billion in 2015 and an IPO along the way, put Plank in the public eye, channeled through Wall Street, and growth expectations became super aggressive. Of course, Plank’s no “withering willy.” With his own outsized confidence and super aggressive appetite for growth, he even put Nike in his sights, which led him to launch into the athletic footwear business. Hey, okay so far. After all, UA is all about sports. Clothes, sneakers, and accessories fit nicely under the brand’s DNA and mission as well. Further growth was also envisioned through direct distribution, not only online, but also through opening Under Armour stores, now numbering 160 along with 146 outlet stores and 14 more upscale brand houses in the U.S, and still growing.
So the rocket’s speed increased, and in lockstep so did the expectations from the financial community. Growth, growth, growth – in a world of consumers whose closets are so full, they welcome Trans America Trading with open arms. So, Plank, the proud and aggressive father of one of the most powerful and rapidly growing sports-related brands in the world, is apparently so confident he believes the UA brand can be expanded into everything apparel. All of a sudden, we hear of a deal with Kohl’s to develop collections of men’s, women’s and children’s apparel called Simply Under Armour. Next, it’s UAS, a brand of premium sportswear, said to be technically infused (and what would that be and who cares?). Kicked off during Fashion Week in New York, the line is 60 percent men’s, 40 percent women’s, and has some space in Barney’s New York. What does Plank know about sportswear? I guess it doesn’t matter if he surrounds himself with a team that does. And, if you believe that, I’ve got a bridge…
So go Kevin! Keep slapping your name on whatever whimsical category you can come up with. And keep opening stores, full-line and outlets. It may keep your meteoric “moon shot” growth going for awhile longer. But, the reaper is waiting for you as well.
And now we have Bonobos and its co-founder and CEO, Andy Dunn, who, in my opinion, with his latest move is perhaps slipping into the growth for growth’s sake before the brand even reaches “lift off.” Worse, its recent launch of Goodsport athletic wear puts Bonobos at risk of drifting into being just another undifferentiated menswear line. And even worse from a tactical perspective, while Bonobos believes it’s capitalizing on the fast-growing athleisure trend, I question their homework regarding the lifespan of that trend and the fact that it’s no longer a huge “white space.” Every brand that could jump into it now seems to be fighting for share of a maturing, if not dying category. (See,\”The Demise of Athleisure\” by Jan Kniffen).
Anyway, approaching $100 million in revenues, but still burning through cash (said to be around $125 million), and with a bottom line that is still questionable, Bonobos still has a long way to go for consideration to be placed on a rocket ride to the moon. Mr. Dunn’s Bonobos brand was established and was well recognized as a custom-fitted pants brand. He then expanded into everyday wear and formal wear with a focus on fit and personal service. All of this delivered in Bonobos Guideshops, across the U.S. Shoppers interact with stylists who assist them with trying on the right size before ordering online. It was arguably the first internet pure play apparel brand, or digital native vertical brand (DNVB), as Mr. Dunn calls it. Its rapid growth in both sales and consumer awareness got Nordstrom’s attention: They acquired a stake in the brand and have been expanding Bonobos shop-in-shops across its fleet.
Bonobos is between a rock and a hard spot. It needs to reach scale or what some experts call “escape velocity” – or to reach the “sizzle” point that Kors and UA hit. The hard spot? It can only do so if it maintains a disciplined focus on the differentiated and unique DNA of the brand, for which consumers gave it growth in the first place. Don’t fall into the “everything for everybody” trap.
There is no organic growth in an over-stored, over-stuffed, over-websited industry, with more new competitive entrants than exits daily. Growth can only be achieved by stealing competitors’ share of market – a market that is stagnant at best and shrinking at worst. And you cannot steal share if the consumer gets confused about what your brand stands for, who it stands for, or what its real value is — especially if it is ubiquitous and appears homogenous with thousands of other choices.
In my opinion, this is the trap that Michael Kors fell into and cannot get out of; the trap UA is destined to fall into on its current course, and the trap that Bonobos is “wobbling” towards, but with time to change.