In this Ragtrader exclusive, Josh McDonnell spoke to Rodd and Gunn managing director Mike Beagley about the brand's plans for US expansion over the next 12 months.
Where did the initial decision to enter the US come from?
We started in the USA nearly six years ago purely doing wholesale. We only sell via our own retail, concessions, and e-commerce in Australia and New Zealand, but given the risks associated with long leases and high capex in the USA we decided to test our product and brand acceptance via wholesale. We learnt a lot and modified a lot of our business over the years, and now have a viable offer that resonates well in America.
The New York store was not initially planned but the opportunity arose, again what was the opportunity, what were some of the metrics behind this decision?
The space was occupied by our wholesale customer, who approached us about taking over the space. The build out was very good so the level of capital required by us was a lot lower than normal, and we also had the opportunity to open in an emerging part of Brooklyn straight across the Brooklyn Bridge from the financial district. All of these metrics meant a low risk, low capital opportunity something you don’t associate with New York or even Brooklyn.
Two new stores are planned on the west coast by third quarter 2017, where?
We are opening in Westfield Century City Los Angeles in August and Westfield UTC La Jolla in October, which gives us a nice spread of stores in Southern California including our Newport Beach store.
10 stores by the end of 2018, where can we expect to see these, is middle america an option? Will you look to remain coastal?
We have a lease signed to open in Dallas in early 2018 and we will be opening in the Bay Area in Northern California. We are also having great success online and in wholesale accounts in other markets such as Austin and Houston in Texas, and Chicago so we see store clusters in these markets plus a couple of stores in the North East to supplement our Brooklyn store.
What lines/products have worked well in the US so far, is there a change in offering compared to the US, if so what types of clothing work better?
The best sellers are the best sellers in all of our markets, but the categories that are performing disproportionately stronger in the USA are jackets, shirts, jeans, footwear and accessories.
How do the expansion plans impact areas such as supply chain and logistics?
Luckily our wholesale experience has helped mould our supply chain and logistics. We have moved our three PL three times as we have learnt more about where the logical place is to base it, and it could possibly move again in the next few years as our business realigns itself.
It is a constantly evolving situation and we need to have flexibility as the needs of our business grows dramatically. Sourcing is basically the same as Australia and New Zealand with a high level of Italian sourced fabric and factories in various countries based on a multiple of factors.
What type of customer are the US stores attracting? How do they compare to AU customers?
Our USA customer is slightly younger than our Australian, which is younger than our NZ. We are not chasing a young customer per se - but a discerning one who appreciates quality and has a casual approach to life. Our core demographic is 30 to 49 in the USA.
What has been the early response to both US stores, which is performing better? Why?
The difference in demographics and climate is extreme and the types of products they sell vary, but both stores have exceeded sales budgets and are profitable. We have a no discounting no promotion strategy so everything sold is at full price which is very refreshing when compared to the highly aggressive Australian market.