INSIDE RETAIL WEEKLY

Issue 2165

By Dimitri Sotiropoulos

After a busy year navigating a US takeover bid and battling a long list of macroeconomic factors fashion retailer PAS Group has sets its sights on a raft of growth opportunities.

In June earlier this year, the company received a second on-market takeover bid from US firm Coliseum Capital, which resulted in Coliseum increasing its ownership interest in PAS from about 49 per cent to circa 65 per cent. As a result, Coliseum managing partner, Adam Gray, was installed as chairman of PAS – which owns brands including Review, Black Pepper, Yarra Trail and JETS – a move that PAS CEO Eric Morris said did not change operations drastically, given both businesses share ideas that are “strategically aligned”.

“We’re looking at various different ways of investment and doing the best thing to create the best returns,” he told IRW.

Such investments will focus on digital channels, with PAS looking to implement a number of initiatives over the coming year, including the development of a new Review website on a tier 1 web platform; a refresh of loyalty programs for several brands, including Review and an Android version of is app; and most significantly, the launch of Review into China with Alibaba and the launch of selected company brands on Amazon Marketplace.

Contrary to the fear spruiked by media of Amazon’s impact when it launches in Australia, Morris said he views the US giant as a “great opportunity” with “very good operators”.

Drawing comparisons with local marketplaces already operating, including The Iconic and its own dropships run through Myer, Morris said Amazon is an important, far-reaching marketplace opportunity.

“We certainly will look at registering to get up another of our brands involved and I see there being a lot of good opportunities,” he said.

Commenting on its launch of Review into Asia through Alibaba’s T-mall platform, Morris said there were several synergies with its value proposition and the Asian demographic.

“We’ve always known that we’ve got quite a high Asian demographic in our loyalty base, and a very loyal customer at Review,” he explained, adding that about 75 per cent of total sales come from the Asia.

The new initiative will see the fashion brand operate on the T-mall platform ‘similar to a drop ship model’, where PAS controls everything bar the ‘shopfront.’
Morris noted “the amount of focus that the Australian media has on Amazon”, although “not many people discuss the enormous size of Alibaba”.

“We are starting to work on things like accepting Alipay in some of our stores, which is part of the ecosystem…and starting to work on things WeChat and Weibo [popular social media platforms in Asia],” he said. “It’s something new for us but we’re excited about the opportunity there.”

Review could potentially be followed by one of PAS’ swimwear brands, though Morris cautioned the retailer thinks the venture is “going to take some time, so I’m not expecting fabulous results in six to 12 months’ time. This is a process and if it makes sense for us to put some of our other brands on, then we’ll look at that as well”.

New-look physical stores, an increase in digital investments

Despite Morris describing the current retail market being “sluggish” and “the toughest I’ve known it in this industry for 35 years” due to both cyclical and structural changes, PAS remains in a strong financial position with no long-term debt and strong operating cash flows, boosted by its retail sales growing by 3.7 per cent driven by online and new stores.

Online sales now represent more than 12 per cent of retail sales and the group opened 16 new stores over and above the 31 new stores opened in FY16. PAS also refurbished a further 30 stores this past year, while investments in its digital infrastructure and customer engagement resulted in online sales growing by 41 per cent – over and above the 149 per cent growth achieved in FY16.

During the year, 220,000 new loyalty members signed up across PAS’ brands, taking the total memberships to over 750,000 customers. Loyalty sales now represent 76 per cent of total retail sales.

PAS has also just launched a new store concept for Review at its Melbourne Central store, which will eventually be rolled out to boutique and David Jones concessions.

“If you’re not a Review customer today, [Review is] general not on your radar as a brand,” commented Danny Lattouf, regional head of retail, Y&R ANZ who developed the new concept.

“Concessions in DJs and MYER certainly helped broaden the Review audience, but with a new platform to tell the brand’s story and a new physical experience to bring it to life, we believe there is a greater opportunity to welcome new customers into the #reviewgirl family.

“The Review product and people in the store are special, unique and highly differentiated from I’d say any other Australian women’s fashion retailer,” Lattouf added.

Looking ahead to further growth opportunities, Morris said a newly-formed footwear division within its sporting brands would be a focus, as opposed to being on the “sideline” as was previously the case.

“We’ve got some very good brands that translate to footwear so we’ve brought the expertise into the business and look forward to reaping some of those rewards over the new few years,” he said.

PAS will also look at growing its JETS swimwear division, both through its JETS wholesale division that has grown in the US, plus growing the new acquired Bondi Bather brand.