From the source: Andy Fallshaw, Bellroy
Inside Retail Weekly: How has Bellroy fared in the past financial year?
Andy Fallshaw: One of the things about Bellroy that’s different to most local businesses is Australia is a small part of our market. We’re a truly global brand that sells across most major economies in the world and even though Australian retail’s suffering some headwinds at the moment, we haven’t, I guess. We’ve had over 30 per cent growth and we don’t discount like most brands do, so it’s been good, strong healthy growth and it’s accelerating. It’s continuing to uptick.
We’re bringing on new product categories, too. We’ve always been interested in the carry space – the goods you use to carry your things – and our new categories of work bags, accessories and phone cases have grown really strongly. The net effect is the brand is in a stronger place than it’s ever been. Our lifetime value continues to improve. We’re just in a really good space that has us excited.
IRW: You guys have just gotten some extra funding. What’s that process like?
AF: It takes a lot of time. They’re our first external investors, so it’s been a really interesting journey for us. We have lots of friends who run businesses, so we were incredibly fortunate to have good advice from them and then we also brought on some advisers who were people we knew through our philanthropic circles, so we had good advice and friends through it.
The other difference in us raising [funds] compared to most people was that we didn’t have to raise. It was a deliberate decision we made. We could have continued to run Bellroy self-funded, except seeing the opportunity and growth of the new categories, we knew we could make a better, stronger business bringing on the right sort of partners. It was a long process, really teasing out the favourite potential partners we could find. We wanted some based in the US and some based in Australia, which we felt could give us the best mix of advice, networks, reach and experience.
We had also been approached [by potential investors] since the first year or two of Bellroy and we always said no, but we’d already had conversations, so we knew some interesting people already. It was a big project, but a fun one. We brought Silas Capital on in April – they’re NY-based, with incredible experience in consumer brands and they’re good, stable folks who are value-aligned and get what we’re trying to do with Bellroy. They understand that it’s different to many other businesses. We rounded that out with another US investor and some Australian-based investors as well.
We’ve now got “a quiver” of investors who bring skills, knowledge and networks to the table and they’re all excited by it. We’re incredibly fortunate that all our investors were all interested, so we feel like we’re in a pretty good space.
IRW: What do you think you’ll do with the investment?
AF: With the new categories growing quickly, that takes funding. There are three categories all growing at around 100 per cent, it just XXXX filling into the supply chain, it’s inventory, it’s putting more resources to keep the flow of product feeding into each of our countries, but then there are lots of things that we could do much better.
We’re also going to build our team more in the way we show up in physical stores. Our e-commerce is what many brands look to for inspiration, but the way we show up in-store hasn’t had the same level of innovation and pioneering spirit, so we’re trying to work hard on that.
We’re filling our team in and looking at much better POS and much better communications. We’re building more on the brand side rather than just the product side, so we can tell better stories that resonate and we engage more with our audience. We can do more things that bring the product to life in a consumer’s mind.
IRW: What do you think some of the major challenges have been for the brand in the past financial year?
AF: Being constantly willing to reinvent the brand and the business. When you grow quickly, you have to keep rechecking your assumptions, because what was right at one scale of the business may no longer be right at a new scale. You learn all these new paths that don’t feel right for the business, but then two or three years later under high growth, they might be right. You have to be constantly willing to reinvent and requestion things that you felt you had already locked away and made a decision – there are times when you have to remake that decision. I think that’s a challenge because sometimes you feel you’ve invested a lot in a decision and it makes sense, then two years later, you realise you have to change it.
For example, you saw how many wholesale distributed brands were so reluctant to get into e-commerce or how many said ‘no, we’ll never go onto a marketplace’ or they had all these rules that they didn’t requestion for so long. We were on Amazon fairly early on, but we could see that there could be rampant discounting if you allowed any of your retailers to sell there. We knew we would need to control it to keep Bellroy as a premium offering and we don’t suffer from rampant discounting.
It’s about trying to make decisions based on principles, rather than pulling them out of a hat. But then you still sometimes realise one of those principles didn’t get quite the emphasis quite right.
In the luxury space, approximately 40% of sales happen off-price, reflecting a rampant approach to discounting. For Bellroy, approximately 1% of our sales are off-price
IRW: Given Bellroy doesn’t discount much and you’re an international brand, how do you manage global sales events like Amazon Prime Day and Black Friday?
AF: In the luxury space, approximately 40 per cent of sales happen off-price, reflecting a rampant approach to discounting. For Bellroy, approximately 1 per cent of our sales are off-price. One of the ways we controlled that is our supply chain looks totally different to most businesses. We’ve built a lean supply chain, so we have a constant flow of product topping up our warehouses around the world. We’re aiming to build modern classics rather than seasonal styles, so we don’t put all this work into a design, launch it for a season then discount it three months later when we realise we’ve bought wrong.
We’re trying to build a constant evolution of product, so we never need to get rid of product and that stops our push for the discount. As businesses become global, there’s a sales event almost every month somewhere and so we try to keep [our sales] to the market where it makes sense and we try to make sure it’s never a massive deal. It’s normally on the smaller side and restricted to certain things. There are still times when we’ll end up with an overrun of something, but we very rarely go site-wide with big discounts, like the big overreactions you see so many retailers depend on.
When you start to rely on discounts, you cloud market feedback, you make it really opaque for people to see value. We try hard to offer good value at the regular price and we try to understand where customers see value and what the right prices are for things. If something is overpriced in the market, we want to know about it – we don’t want it hidden behind constantly selling at 40 per cent off, so we try to refine our formulas to see where customers see value and then to have a compelling value offer every day.
If something’s not selling, then we look hard at it. Is it the price or the value equation? Did we get the feature set wrong, is the aspiration wrong? The clearer the information we have around reasons that things aren’t selling, then the better we can design product to meet what the market wants, and all that discounts clouds all of that. If you can only sell something at 40 per cent off, it was never designed [properly] to start with.
IRW: What is the impact of discounting on customers?
AF: It’s trained customers to expect it. I think it’s frustrating for them, because if they see something they want, it creates anxiety – do you to buy it now or when it’s 20 per cent off, 40 per cent off or when it’s at 60 per cent off but it’ll be out of sizes? I think it cheapens the experience.
When you speak to some brands behind-the-scenes, they resent customers who will only buy something for the heavily discounted rate, but brands have trained them to do that. It’s not the consumer’s fault at all – they’re responding to prompts and it makes sense, but it makes it harder for them to shop. When they see something they want, they can’t just buy it, because they know they should wait ’til it goes on sale.
IRW: What are your plans for next financial year?
AF: We are so excited by our product funnel. Our team is gelling the best it ever has, we’ve got some incredible people working out how to create compelling products and experiences, so I can’t wait to share more of that. I’m a total product geek – it’s the thing that gets me most excited and the stuff we have coming later this year and early next year is filling out categories in new ways.
Later this year, we had a massive overhaul of our materials coming into the bag space. We’re stepping up the sustainability game even further. We’ve finally been able to find the materials that have the sustainability and performance [we want] and that’s been hard to find. Often when you want the next level of sustainability, you have to compromise on the performance. Our number one environmental goal is that our products are used and loved for as long as possible. In products like ours that are not laundered and washed, 85-90 per cent of the energy, the emissions and the impact happen in the pre-consumer stage during the production of the materials. We weren’t willing to compromise the longevity and desire of the product to achieve the next level of sustainability, but now that we’ve found the [right] materials, we’ll be rolling out that out in the second half of the year and into next year.
IRW: Tell me about the Carryology community.
AF: Carryology’s mission is to inspire people to carry better and we’re trying to entertain in a way that lets you indulge your passion. So we interact with all the world’s leading brands, designers, users and retailers in a hub we created for learning, entertainment and inspiration. We review products, we share releases, we interview compelling figures in carry and we create collaborations with the best brands. We do an annual award range that recognises the best new carry from the previous year. We attend major trade shows and share the best stuff that we see. We share learning around sustainability, textile and fabrics design constructions.
It’s basically a massive geek space for carry. In the past, we’ve done physical paper zines and we’ll build them when we capture great stories. We’re essentially a publisher and we run it with a separate team, but most of Bellroy’s designers end up contributing to it in some way. I’ll still interview some of my heroes and write them up, I’ll review carry goods that I think are phenomenal, but a lot of it is run by contributors from outside Bellroy. We have contributors from all around the world who receive product, put their thoughts in, rate it, review it and share it.
Carryology is a strange concept for a lot of brands. When they first hear about it, they say, ‘Let me get it right, all your competitors send your product to the Carryology team to review and critique. How does that work?’
And the way we’ve achieved it is that we’ve always been motivated by moving the whole industry forward. When we started, there wasn’t a gathering place for bag geeks and carry geeks. There wasn’t even a term for ‘carry’ – it was luggage, travel, bags and accessories. So from the first day Carryology launched in 2009, even before Bellroy, it was always something we wanted to give rather than something we expected to get from. I think that permeated the culture – people could see we were here for the right reasons, we wanted a campfire for them to gather around, a place to talk and critique and learn from each other.
We’re friends with many of our competitors, because we all have different niches, we’re not trying to compete for the same space in the market, so we’re comfortable talking to each other, sharing ideas and discussing. The community can see the biggest bag geeks in the world, and industry people are involved in the community – they’re sharing ideas and being open and generous with learning, so that brings everyone along with it. They can see the community is engaged with major brands, designers and leaders – they can see there’s a genuine curiosity there. It’s meant that we’ve been able to win the trust of a lot of people.
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