Countries such as Korea and Taiwan have become very influential and complementary to the more traditional Western and Japanese sources of influence.
Aidan O’Meara, President VF Asia Pacific tells about growth in the region as he converses with Fibre2Fashion Correspondent Manushi Gandhi.
Synopsis:
VF Corporation is a $11 billion apparel and footwear powerhouse, with an incredibly diverse, international portfolio of brands and products. The company was established first as Reading Glove and Mitten Manufacturing Company in Pennsylvania in October 1899 by John Barbey and a group of investors. Today it owns various brands like Wrangler, Lee Jeans, Rustlers, 7 For All Mankind, 20X, Chic, Rock & Republic, Nautica and some more.
Aidan O'Meara was named President-VF Asia Pacific in March 2007 and had previously served as President of VF's Jeanswear - International coalition since May 2005. Aidan joined VF in 1992 where he had responsibility for the Wrangler business in Ireland. His background, prior to joining VF, was in brand marketing and sales management for a number of FMCG companies in the US and Ireland. Aidan has an honours degree in bachelor of business studies (BBS hons) from Trinity College Dublin and is also a graduate of the Marketing Institute.
Excerpts:
Revenues of VFC increased 15% in 2012 while the same is by 5 % in 2013. What factors are responsible for this?
VF acquired the Timberland brand in 2011, making 2012 the first full year during which Timberland’s revenues were included in our financial reporting. For 2012, the 15 percent increase in revenues was largely driven by the positive Timberland impact, which accounted for 9 percentage points, or $907 million, of the revenue growth reported in 2012. Therefore, by comparing VF’s revenues from 2012 to 2013, even excluding Timberland, it’s evident that our growth rate was healthy and steady.
How have the fluctuations in Chinese economy affected your business?
China has been, and remains, a positive growth story for VF - even with its slower growth on a macro-economic scale. We are very focused on increasing productivity in China to overcome the inflationary impact on operating costs. Despite our rapid growth and strong brand positions in China, our market shares are still modest and we are intent on growing these.
Do you feel that the US and UK will dominate the apparel market forever?
I don’t believe that U.S. and U.K. companies completely dominate the market today. Countries such as Italy, Japan and France also exert considerable influence on apparel and fashion trends globally. We have learned that faster-growing and developing markets, including many of those in Asia, have not experienced the level of growth and influence on the global apparel market that many were predicting some years ago. But it takes quite some time for local brands to build capabilities and to establish positioning in a credible way throughout different geographies. I believe we will see more and more brands from markets outside the U.S. and U.K. that gradually evolve on a more global scale over time.
What is the contribution of the Asia-Pac region in the total sales of VFC?
The Asia-Pacific region continues to be a source of strong revenue growth for VF. As we recently reported in our first-quarter 2014 earnings release, VF’s revenues in Asia-Pacific were up 16 percent. This growth was driven by 27 percent increase in revenues in China. Nearly every VF brand contributed to this growth; however, it is important to note that our Vans brand grew revenues more than 40 percent in the Asia-Pacific region in the quarter.
The Asia-Pacific region is a very important geography for VF’s international growth strategy and we will leverage our strengths to consistently perform and achieve our goal of doubling regional revenues to $2 billion by 2017.
What can be expected by clothing makers and sellers from the Asian markets in the next 5 years?
Asia presents a favorable environment for the apparel industry in the coming years, but it will not likely be as strong as we have seen during the past five years. There will be further consolidation at retail and with brands as the market gets more competitive and the rate of retail distribution growth slows. The emphasis is shifting toward higher productivity and share growth. VF is well positioned to succeed in this environment given our powerful brands and our financial strength.
What are some of the marketing efforts that VF’s brands have used to connect with consumers in the Asia-Pac region? What’s been most effective?
We place an emphasis on understanding the markets in which we compete and having a deep understanding of the target consumer for each of our brands. We strive to stay true to our global brand “DNA,” but to adapt our execution to connect in a deep and relevant way in local markets. For example, we emphasize the unrivalled performance attributes of The North Face in China as we do throughout the world, but the context there puts more of a focus on community and social aspects of the outdoors rather than on individual accomplishments. Beyond brand positioning and activation, we aim to be a leader in digital marketing and the emerging integration of the online and off-line “omni channel” world. This evolution is rapidly changing consumer behavior and the expectations they have for brands that seek to engage with them.
How receptive are Asian markets to the fashion changes?
Asian markets are quite receptive to fashion changes and trends. We see little difference between the pace of adoption of new trends in these markets. In some respects, they are even more dynamic as they draw from greater cultural influences than some of their Western counterparts. Countries such as Korea and Taiwan have become very influential and complementary to the more traditional Western and Japanese sources of influence. It is dangerous to operate under the old assumption that Western markets establish the trends that are then followed by emerging markets. Trend adaptation evolves much more quickly now with the advent of the connected, digital world in which we live, and the trends are then often reinterpreted and customized locally.
You are associated with VFC since 1992. During last 21 years, which market/economic situation has been the most challenging?
The most challenging period occurred in the early years of the millennium when the European denim market suddenly slowed as consumer trends shifted temporarily away from denim to flat fabrics such as cargo pants. With the benefit of hindsight, it was clear that denim brands, including ours, had become complacent following more than a decade of strong growth driven by basic jeans and strong marketing. Consumers became bored with the lack of product innovation in jeans and looked elsewhere for excitement. At VF, this forced us to rethink our business model, increase our focus on innovation and redefine our distribution strategy as many of the traditional multi-brand retailers closed. The denim business was ultimately revived as brands brought fabric, wash and features innovation to consumers, but the market had fundamentally altered in the interim. Personally, I learned a valuable lesson about the need to continuously ask ourselves whether we are doing enough to excite our consumers, and I learned to never be complacent. Innovation is critical to enduring success; it is also the best way to put yourself in a position to overcome macro-economic challenges.
While talking about the growth in Asian countries what points should be kept in mind? What are the risk factors in Asian markets?
There is greater volatility in Asia than elsewhere in the world. It is a very dynamic region that is susceptible to sudden changes that can impact businesses. Some of this volatility stems from policies that can have significant effects relatively quickly. One example is India’s rapid devaluation of the rupee and the sudden introduction of an excise tax on branded apparel which, thankfully, was withdrawn. I think companies such as VF best minimize the impact of this volatility by having long-term commitments to the market, and by localizing key elements of the business model, such as sourcing for example, within the domestic market.
