Surf brand Billabong may have paddled too far into the impact zone just as the 2008 financial tsunami hit.
The surf, skate and skiwear brand has reported its first global loss since 2001—US$287 million for the year ending 30 June, compared to a net profit of $123 million a year earlier. The company lost nearly half of its market value in six months after rebuffing private equity firm TPG Capital’s offer of $3.40 a share in February. TPG and Bain Capital reportedly made acquisition proposals of about $1.50 a share.
Billabong has been struggling with weak sales after it launched an aggressive expansion just as the global financial crisis hit. It has already closed 58 stores and plans to close another 82 in the upcoming financial year.
The brand clearly remains a major player, but will it manage to ride out the storm?
DIAGNOSIS 1
Karl Bates
National planning director
McCann Worldgroup Australia
Billabong has suffered from too much stretch across too many brands and it has lost us. Even for die-hard fans, it is now nigh on impossible to navigate its offering.
The product is great. The designs are cool. The quality is bang on. But there are so many other companies out there that can offer me the same. And these are alternative brands driven by a clearly defined belief and purpose, which I share with them.
Right now, I don’t understand what the Billabong brand brings to the game. What is its thing and why should I identify with it?
It is not an uncommon conundrum within the fashion/sportswear category. Levi’s, Pepe, G-Star, Ksubi—there are so many examples of fashion brands losing their edge due to overextending and neglecting their core competency and raison d’etre.
But there is a way out. Not so long ago, Puma was lost without a cause. Rather than continue to try to out-Nike Nike, it created a playground of its own, dedicated to the after-hours sportsman, focusing on streetstyles rather than performance. Brilliant.
Like many others, I still feel something for the Billabong brand. But not enough for me to embark on a relationship with it. Who are you? Why should we hook up? Respond in a way that only Billabong can and I am up for anything.
DIAGNOSIS 2
Jules Hall
Managing Partner
The Hallway, Sydney
Very few brands have managed to capture the exhilaration and sense of individuality that surfing embodies like Billabong has. The brand has grown exponentially from its very modest inception as makers of handmade top-quality boardshorts for local surfers on Australia’s Gold Coast in the 1970s to one of the world’s largest surf, skate and ski house-of-brands and retail conglomerates.
Back in the 1970s, when surfing was taking off as a countercultural pastime, Billabong rode the wave masterfully by being strongly focused on quality and pro surfers’ ambitions. This focus was critical: selling great products to support an authentic dream. But as great brands march towards bigness, they take on a shallowness, lose focus and drop their authenticity.
Billabong surged as the surfing movement grew and quickly became a mass-market clothing staple. But those in the counterculture don’t want to be part of the masses. So the challenge is to move to be a brand that connects on a mass scale, but in a perceived niche way. Not easy, but also not too hard if it is clever distribution channels and marketing. This is where fragmentation can become an advantage. It enables brands to reach large numbers of niche groups with very personalised messages, giving scale and authenticity on a mass-niche basis.
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