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This Little-Known Australian Retailer Wants to Conquer the US

Australia’s Cotton On Group opened an impressive 151 stores around the world in the 120 days leading up to Christmas last year—that’s more than one per day. Such rapid brick-and-mortar growth begs the question: given the current climate, what does this privately owned, Down Under-wonder know that the rest of retail doesn’t?

According to CEO Peter Johnson, the answer is simple: the group gives customers what they want.

Since the first Cotton On store opened its doors in East Geelong in Australia in 1991, it’s grown to offer casual apparel, intimates, swimwear, activewear, accessories, footwear, home goods and stationery at inexpensive prices for men, women and children through seven brands: its namesake, Cotton On Kids, Cotton On Body, Typo, Supre, Factorie and Rubi.

Today, the company has more than 1,400 stores in 18 countries worldwide, including the U.S., where it went from one location in Los Angeles in 2009 to more than 120 in the past seven years. Cotton On, Cotton Kids, Typo and (since April) Cotton On Body all have a presence stateside.

“We’ve found that the Australian aesthetic has really taken off here,” Johnson told Sourcing Journal, speaking recently at a company event held at Industria Superstudio in New York’s Meatpacking District. “We’ve been here learning about the American customer and learning about the differences between the East Coast and the West Coast, and that Aussie style is really starting to take traction now.”

“It’s a brand that’s been very accessible across A, B and C shopping centers, and even major cities versus regional locations,” Michael Hardwick, chief financial officer, added.

Cotton On 2While the company does not disclose earnings, it has revealed that global sales reached $1 billion last year (about 1.5 billion Australian dollars) and that it’s achieved its target sales growth of 20 percent year-on-year for the past six years.

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That’s no mean feat, and Johnson said Cotton On’s supply chain has a lot to do with it.

“We’re really proud, not only of the speed of our supply chain, but the strength of our supply chain. The relationships we’ve had with some of our suppliers date back 20 years,” he shared. “We can produce a garment in anywhere from six to 12 weeks, but we can do that because we have a really close relationship with the supplier, and when something takes off we can respond and go back to our supplier base and change an order mid-stream.”

Listening to the customer—another attribute that Johnson credits—comes into play here, as well as speed and agility.

“Our DNA and the history of our business has always been about listening to the customer and reacting really quickly. So we think our point of difference is our ability to respond and our ability to get product into the market quickly and directly from our supply base throughout Asia,” he said. “We don’t talk collections, but do have new product landing multiple times a week. It might not be every day, but certainly two to three times a week. We don’t wait for a collection to arrive. We believe if an item is here and it’s great, let’s get it to stores and let’s get a read on it. The sooner we can get it into a store and the sooner we can get a read on something, the sooner we can do something with it.”

Planning is paramount, too.

“Not everything needs to be done in six to 12 weeks—it’s far better to have a supply chain that’s well planned so if we get the right product at the right time, we can then react to it and do things faster,” Johnson said. “It’s more important to be well planned so we’re not putting pressure on our supplier with a request that blows up their capacity.”

But while some of Cotton On’s competitors, like Zara and H&M, have been trying to reposition themselves as ethical companies, this Aussie import has been touting its sustainability since the early days. In addition to being a signatory of the Bangladesh Accord on Fire and Building Safety, the group said it follows an ethical sourcing program that includes 700 audits annually, to ensure all 367 of its suppliers (mostly located in China and Bangladesh) operate responsibly. Not to mention, Cotton On Foundation (the company’s philanthropic arm) has been developing and supporting projects in Southern Uganda, South Africa, Asia and indigenous Australia since 2007.

Among other things, the foundation is currently educating thousands of students in Southern Uganda and has built health centers, classrooms and water towers.

“We often get asked why [we do this] and the reasons are: we felt it was  important, but over the journey it’s actually added value to everyone’s lives working on it,” Johnson said. “We have empathy for people in different situations and, again, it’s just another way to teach our guys to listen and look at what’s going on in the world, to take a wider look at the world and what we can do.”

Hardwick added, “Outside of the foundation element, there’s a really warm sense of giving back to those communities where we also operate in, whether it’s mobile help units that we operate in Bangladesh that visit the factories and provide healthcare to factory workers and their families, or a project with Kenyan farmers that helps them grow cotton that we’re hoping will be used to make 14 million garments by 2020.”

Cotton On BODY 1

Despite building up its business globally, Cotton On still thinks locally. Namely, that Australian aesthetic is still woven into everything the company makes.

“It’s casual sort of clothes that you can dress up, you can dress down, that are accessible to everyone,” Johnson explained, adding, “We always say if you can’t wear it with a pair of thongs or flip-flops, or from the beach to the bar, why bother. We make products that you can wear everywhere and anywhere and feel comfortable in. They’re often iconic styles done with a twist, always a little bit irreverent and fun and not too serious or too structured. They’re clothes for the everyday girl and guy, accessible to everyone.”

On Cotton On’s website, a curated selection of summer items range in price from $4.95 flip-flops to a deluxe denim jacket for $49.95 for women, while the men’s grouping rounds out at $34.95 for cargo shorts.

Hardwick pointed out, “We are producing three separate ranges simultaneously, so there’s a northern, southern and tropical range (that’s mainly for the Asian market today, but at times that can expand down to Queensland as well). It’s not just last season’s product for sale in one hemisphere six months after it was in the other hemisphere.”

In addition, as the business has evolved, so too have the systems and processes in place. While the company’s head office is still based in Australia, it also has country hubs in South Africa, Singapore, New York and Brazil.

“We operate on a principal of ‘freedom within a framework,’ so the guys here will have full autonomy and be empowered to make decisions and affect the assortment, but ultimately they will run their own businesses,” Johnson said. “That’s allowed us to keep growing without putting too much pressure on the central office.”

And Cotton On Group has no intention of stopping that growth anytime soon. While Johnson stayed silent on how many stores it plans to open in the U.S. in 2016, reports this time last year pegged the company’s size at nearly 1,900 locations worldwide by 2018.

Hardwick said, “It’s not about today, tomorrow or next year. We’re looking to grow a long-term, sustainable, profitable business here in the U.S. that’s going to outlive all of us. And we’re making sure that we’re laying that foundation that will take us to that next level every single year.”