The North Face targets urban consumers as well as outdoor buffs to drive growth
today Apr 19, 2017
Higher and higher. In the last five years, The North Face (TNF) recorded an average annual revenue growth of 6%. Sales for the VF Corp. brand rose from $1.9 billion in 2012 to $2.3 billion in the last fiscal year. The growth was driven by increased penetration in its traditional market, outdoor articles, as well as by the deployment of a strategy targeting urban consumers, notably by opening TNF stores in major cities.
The US brand is now keen to build on this success and to think even bigger, as is clear from its ambitious 2021 plan, which forecasts an annual growth between 6% and 8%, to ensure TNF sales will top the $3 billion mark by the end of 2021.
In order to reach this objective, TNF's recently reshuffled senior management team, with Arne Arens now in charge of the Americas region and Kath Smith taking over from him as head of Europe, is determined to keep winning over new customers.
The key to this is TNF’s new range segmentation, identifying four brand landscapes, or segments: Mountain Sports, Mountain Lifestyle, Urban Exploration and Mountain Athletics. This segmentation is designed to better calibrate TNF’s relationship with consumers, and also to make a broader range of products available in-store all year round.
The Mountain Sports segment targets genuine outdoor aficionados, chiefly through specialist stores, and currently represents 61% of TNF’s business. In the next five years, the segment's sales are expected to grow by between 4% and 6% annually. It is worth pointing out that, though the sport industry in general is booming, the retail sector, especially in the USA, has recently taken a beating. TNF's senior management will therefore rely on new products to energise the range and continue to drive sales. For next winter, the brand is launching a new line, in addition to its Thermoball products, featuring its latest type of breathable synthetic insulation fabric called Ventrix, used in the jacket which won an ISPO Golden Award this year.
It is clear that growth for TNF will be driven by both innovation and design. "Our Mountain Sports range is positioned in a global market arena worth $22 billion. It is our main business, but one in which we still have several opportunities, said Arne Arens. Footwear accounts for one third of this market, but for us footwear currently represents only 10% of overall revenue." Expansion will therefore be product category-led, as well as engineered in specific geographical areas.
"China is ready to host the 2022 Winter Olympics, said Steve Rendle, VF Corp.'s General Manager, at the group's latest AGM, and President Xi Jinping is sure that this will bring 300 million new winter sport practitioners to the market. I can't think of any brands better than The North Face and Vans to help these new consumers make their first forays into winter sports." In terms of TNF's five-year plan, the Mountain Sports category will eventually account for 56% of revenue.
The North Face is instead forecasting an annual growth between 11% and 13% for Mountain Athletics. This fitness category, launched in 2015 on a global market estimated to be worth $63 billion a year and benefiting from the athleisure boom, will be reinforced this year by products from the Lucy fitness brand, which VF Corp. has decided to discontinue. By 2021, the segment is forecasted to account for 9% of total sales, compared to 7% now. The Mountain Lifestyle segment, featuring casual, outdoors-inspired apparel allowing the brand to target more generalist stores, is forecasted to grow between 8% and 10% annually in the next five years, generating the equivalent of one fifth of TNF's sales. Together, the Mountain Athletics and Mountain Lifestyle ranges are designed to give TNF a stronger presence in multibrand stores all year round, and not only in winter and/or for mountain sports.
Finally, the more fashion-oriented Urban Exploration range, addressing a market worth $72 billion, is forecasting a growth between 9% and 11%, carving out a 15% slice of the business in 2021 compared to 13% now. TNF has already opened Urban Exploration stores in China and Hong Kong, and claims these are among the most profitable of its entire retail organisation. "We are convinced there is the opportunity to open 100 new stores in Asia by 2021 and bolster our growth, said Arne Arens. Not in China alone, but also in Malaysia, Singapore and Taiwan." The North Face may well introduce Mountain Athletics and Mountain Lifestyle stores in specifically identified areas in major cities worldwide, in parallel with its Mountain Sports network.
The US brand is targeting growth between 8% and 10% in the Asia-Pacific region, and of between 7% and 9% in Europe and the Americas, the USA excluded. On the domestic market, growth is expected to be limited to between 4% and 6%. TNF is also investing heavily in digital tools and data analysis, and expects direct sales to online customers to eventually reach 16% of its overall revenue.
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