Rapid growth as Kiwis cotton on

JAZIAL CROSSLEY
Last updated 05:00 23/01/2013
BARGAINING POWER: Cotton On’s collection of stores in Manners St, Wellington.
CRAIG SIMCOX/Fairfax NZ
BARGAINING POWER: Cotton On’s collection of stores in Manners St, Wellington.

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Australian retail chain Cotton On entered the New Zealand market in 2005 but it already has more than 80 stores across the country.

The cheap and cheerful retailer has appealed to Kiwi consumers, with rapid stock turnover, promising new on-trend looks every week in its stores and low prices on goods mostly made in China. In 2012 alone, it opened 22 new shops here.

Founded by businessman Nigel Austin in 1991 with just one shop selling women's fashion in Victoria, the Cotton On group has grown to a chain with more than 600 stores around the world employing 15,000 people.

It has a strong presence in most New Zealand retail centres with flagship adult clothing brand Cotton On, children's clothing store Cotton On Kids, knickers and nightwear arm Cotton On Body and youth fashion brand Factorie. It also owns stationery and giftware concept store Typo, peddling everything from book ends to hot-pink bulldog clips, notepads imprinted with photos of Paris, iPad cases and luxury pens.

"Notoriously media shy" Austin shares a fortune reportedly worth around A$156 million with former wife and Cotton On co-founder Tania Austin, who now owns fashion brand Decjuba in her own right.

All Cotton On group's products are designed at Geelong in Victoria. Its international growth strategy clearly has an aggressive phase under way because in November its headquarters expanded to create 500 new jobs. It has around 20 stores in the United States, 12 in Germany, six in the United Arab Emirates and more in Thailand, Hong Kong, Singapore and South Africa.

First Retail managing director Chris Wilkinson said Cotton On had built a dominant and highly influential position in a segment occupied by stores such as Glassons, Pagani and Valley Girl, also crossing in to the lower end of the market held by The Warehouse and Kmart.

"Cotton On leverages economies of scale on an unprecedented basis," Wilkinson said. "Their portfolio of stores and global operation is highly systemised and run by a surprisingly small number of people in Geelong, Australia."

In Manners St it leased out several adjacent stores for its various brands including Typo, Factorie and Cotton On Body.

Clustering stores together to put the brand in a position of bargaining power with landlords was common for Cotton On, with the same strategy played out in Melbourne.

"Low prices have driven new affordability. Take, for example, recent sale periods where T-shirts were all $10 and under. Go back a decade, and you'd never have seen across the store pricing such as this from retailers."

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Coriolis Research director Tim Morris said one of the drivers of Cotton On's success was its value for money.

"It's not just cheap stuff. I think it doesn't look downmarket. Just as an observation of their stores and consumers, it is cheap without looking trashy. There is nothing unique about their model, they are just moving clothing through as styles change. It's a sign of a good retailer to watch the market closely. They're constantly bringing in new products.

"It is designed out of Australia so stylistically it is going to be closer to the New Zealand ideal than, say, some of the American or European-derived fashions."

Austin also runs charity Cotton On Foundation.

- BusinessDay.co.nz

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