Corey Hrbacek

Professor Julie Haworth

Product and Brand Management
10 December 2015

WHAT IS COTTON ON?

Founded in 1991, Cotton On is a retail chain of Australian origin specializing in apparel.
The first store was opened in Geelong, Australia by founder Nigel Austin, and originally
specialized in women's clothing. Peter Johnson is the current CEO of Cotton On Group, and
Michael Hardwick is the Chief Financial Officer. Since it's creation the Cotton On group also
operates Cotton On Body, Cotton On Kids, Rubi Shoes, Typo, T-bar, Factorie, and owns an
Australian apparel chain called Supr. In the last five years, Cotton On's sales have risen by
20% yearly, and are expected to reach $1.51 billion in revenue this year. Recently, Cotton On
has announced that they will expand into New Zealand, opening eight new stores. Over the
next three years, COG plans to open 570 stores world wide, creating around 2000 jobs for
100 new stores in 2015. It is also projected that online sales for COG will increase to $250
million.

THEIR CLOTHES
The apparel itself is considered fast-fashion, meaning that the store aims to keep up
with catwalk trends and keep their items in the current fashion with quick turn around. The
apparel found within Cotton On is highly dependent on seasonal trends. Fast-fashion retail
saw its rise in the late 1980s as a result of a manufacturing model referred to as quick
response manufacturing, which put emphasis on reducing waste time and serving customers
more quickly. Distribution is handled through eight centers located across the world, made up
of a team of over 800 individuals. Cotton On competes with a number of Fast-fashion brands,
some of the more notable being Forever 21, GAP, H&M, and rue21. COG came under fire in
2011 when it was discovered some of their sleepwear violated Australian fire codes, due to
their flammability.

HOW THEY DO IT
Cotton On currently works directly with over 560 suppliers, and a team of more than
60 designer and trend forecasters. Cotton On's product appeal lies in their ability to react to
fashion trends quickly and produce clothing items that fit current fashion trends. With this in
mind, the designers at cotton on have a turnaround of two to eight weeks between design
and manufacture. New products are replenished in stores daily, while new ranges arrive on a
weekly basis. The majority of Cotton On products are manufactured in China and Bangladesh,
before being sent out to one of the eight distribution centers around the world. COG operates
through direct sourcing and a vertically-integrated business model. Cotton On offers season
clothing for men, women and children, as well as Jewelry and accessories offered through
their other stores like Typo and Cotton On Body. Due to the nature of global business, Cotton
On's business model was affected by their global expansion. As seasons co-exist globaly,
production and development no longer took place on a seasonal cycle, but in a continuous
manner.
Cotton:On Group is made up of eight brands, but Cotton:On is by far the most
successful. Having shown 8.6% growth in 2014 sales, Cotton:On is the largest fashion retailer
in Australia, and a fast growing international corporation. Cotton:On's relatively cheap pricing
in conjunction with their speed to market makes them a powerful company showing quick
growth. Overall, the fashion industry is showing strong growth in brands that sell solely
through online markets, as well as new international entrants, such as Cotton:On.

Source: CBA Fashion Retail Spending

(September 2013)

WHOSE WEARING IT?

15 to 33 years old, both male and female, make up the main demographic for
Cotton:On, across all races. The consumer of fast-fashion clothes is often described as
Hedonistic, and while they often have a preferred brand they are not committed, but rather
search for what they think is the most fashionable. The extent of someone's appreciation for
a brand in this demographic doesn't extend beyond its practical use. There is no emotional
attachment to the clothing brand, but rather a utilitarian approach. The psycographic
perception of Cotton:On is to recognize Cotton:On as a casual brand of high quality that
contributes towards a pleasant appearance. New research is suggesting that the modern fast
fashion consumer is changing in a way that could have a negative affect on Cotton On. In a
semiannual report on consumer spending released by Piper Jaffray, it was found that for the
first time in the report's history teens are spending as much money on food as clothes.

Source: Piper Jaffray Spring 2014 Semiannual Report

Analysts believe this could be a shift in mentality, were the consumer now wants to
buy less but buy higher quality items. This could have a profound impact on the fast fashion
industry, which operates under the pretense of having seasonal trendy clothes that are
quickly retired, but at a cheaper cost. That having been said, these same reports have also
found that in the fashion industry, people are spending much less money at stores like
Aeropostale, Abercrombie and Hollister, in exchange for popular fast fashion stores such as
H&M, Forever 21, and Urban Outfitters. All purchasing of Cotton:On Products is done through
the 1,200 stores found throughout the world. Their speed to market, backed by their
approach of understanding local customers and market dynamics keeps their customer base
coming back consistently to find new trends, but a shift in the spending habit of younger
consumers may be of concern.

Source: Piper Jaffray Spring 2014 Semiannual Report

HOW THEY PROMOTE

Cotton:On often runs promotions, in store and online. Online, Cotton:On offers free
standard shipping on orders over $55, and have also begun offering express shipping for
those that want to get their clothes with quick turn around. They choose to promote
differently across different regions, for good reason, as it makes more sense for them to
choose to promote their winter and fall line in the United States, while they promote the
summer line in Australia. They also promote people signing up for an online account by
offering 30% off their first online order within 30 days of signing up for an online account.
Given that Cotton:On is a fashion brand with stores internationally, all their media is
seasonal and regional. This is to account for the fact that their fashion line in Australia, which

could be summer wear, won't necessarily sell well in the month of December in the United
States, where it is winter instead. Cotton:On provides itself on its understanding of its
demographics on a local level. CFO Michael Hardwick has said [Cotton:On's] approach has
been to understand local customers, understand local market dynamics and then great
product at a price people can afford. It's as simple as that.

WHAT THEY STAND FOR

Source: http://www.cottononfoundation.org/our-story/us-in-numbers
A core part of Cotton:On group's company philosophy is found in their Cotton On
Foundation, which is the philanthropic component of the company. Just as they strive to
understand the local markets and trends, they also actively participate and contribute to local
communities.

WHERE YOU CAN FIND THEM

Cotton:On's main website is located at cottonon.com/AU, given that the company is
Australian based. Despite this, they do have regional websites and upon entering
cottonon.com/AU through a Google search, one is asked whether or not they would like to
redirect to their regional website, which makes for easier online ordering. The site is used to
promote new product lines, product promotions, as well as offering people a chance to
purchase their clothes in a variety of sizes and colors. Interestingly, there are no links to
social media on Cotton:On's website, and this is not out of ignorance, but to focus the
attention of the consumer. At this point, its possible that Cotton:On has paid money to have
you click on their website, and they don't want you to redirect further to another social media
site. Cotton:On promotes themselves over most of the normal social media platforms,
including Facebook, Twitter, instagram and YouTube. Despite their vivacious growth,
Cotton:On's social media presence seems to be lacking. Their YouTube channel has only
1,200 subscribers with most of their videos only having views in the low hundreds. Their
Facebook and their instagram are definitely their strongest websites with 674,627 likes and
454,000 followers respectively. Even then, their instagram is somewhat ineffective as it
doesn't account for their regional differences, and thus they do not post promotions, due to it
not being representative of all regions. They currently utilize, Like2B.uy, which helps the
brand capture the amount of clicks and thus measure their revenue generated through their
instagram. On Twitter we see a repeat of the content posted on facebook and instagram,
often with the ow.ly URL attached. Due to the crossover in social media platforms we can see
that Cotton:On is utilizing hootsuite.

While this may be seen as a positive in the sense that they have a clear and consistent
message on who they are, I also believe it could be detrimental. Having pure crossover from
one social media platform to another may miss the target, because what works on Facebook
might not work on twitter, and vise-a-verse. At a measly 3,700 followers, pinterest is by far
the least popular of Cotton:On's social media channels. This is somewhat of a perplexing
situation because on the surface pinterest seems like the perfect platform for fast fashion
brands. It allows larger quality pictures, with direct links to the website, and a chance to pay
to promote. Furthermore, Pinterest has claimed to have 100 million monthly active users, but
despite this it is very unclear whether or not Pinterest is a good channel for a brand, as there
is no evidence of it providing a return on investment for other brands.

THE RESEARCH
Quantitative Research
In conducting the quantitative aspect of my research, I sought to poll people between
the ages of 14-35. I managed to poll a total of 44 people for the quantitative survey and the
results shed some light on Cotton:On's brand:
The survey questions where answered on a 5 point scale, with 1 showing no
association while 5 showed very strong associations.
The first question on the survey that I asked was: To what extent are you familiar with the
brand Cotton:On?

Advocate (You shop their often)

Sporadic Consumer (You shop their occasionally)

Aware (You know what it is, but have never shopped there)

12

Unsure (You've heard of it, but don't know what it is)

Never heard of it
0

8 10 12 14

Many of the participants where completely unfamiliar with the brand and in total only
16 of the 44 participants had ever shopped at the store.

I then asked how the consumer would rate the uniqueness of Cotton:On's clothes by
asking How would you rate Cotton:On's clothes, in terms of their originality?

Very original

Somewhat original

No Opinion

Unoriginal

Unaware (You are not familiar with their clothes)

0

10 12 14 16

Surprisingly, majority of the participants seemed to think that Cotton:On's clothing

where unoriginal and lacked unique qualities. This was latter explained and expanded upon in
my qualitative aspect (and may largely be in part due to their lack of differentiation from the
Swedish brand H&M.)

For my next quantitative question, I wanted to know about the preferred clothing
styles of the people I was surveying, to see whether or not Cotton on would be a brand that
fits their profile. To do this, I gave them a list of 5 retailers and asked Given the choice,
which of these retailers would you be most likely to purchase from? What I found is that
despite the low awareness, these participants would most likely fit the consumer profile of
Cotton:On's brand, given that they showed a strong presence for fast-fashion brands (H&M
and Forever 21).

Hollister

Express

Forever 21

H&M
Gap

10

12

14

16

18

20

Qualitative Research
For the qualitative aspect of research, I sat down and interviewed six people. For this,
I had screened ahead of time to make sure that the candidates knew about the brand. The
age ranges for aspect of the study where between 14 and 27. I asked the following
questions: How would you describe Cotton:On?
What aspect of Cotton:On's clothing do you find most appealing?
How would you describe the clothes that Cotton:On sells?
What can Cotton:On do to increase their customer experience?
The answers I got for this aspect where very telling of many of the issues that
Cotton:On faces as a brand. In answering the first question, How would you describe
Cotton:On?, all six participants at one point compared the clothing store to the fast-fashion
competitor H&M (i.e. They're a clothing store in the mall that sells clothes kind of like

H&M). I believe this could also explain the unfavorable answers I got in terms of the
uniqueness of the brand in the quantitative section of research.
In the second question, What aspect of Cotton:On's clothing do you find most
appealing?, the answers where more varied. Two out of the six participants said that their
favorite aspect of the clothing was the simplicity; They liked that Cotton:On sold clothing that
was free of brand logos and was more streamlined in design. Another two of the participants
identified their favorite aspect as being the trendiness of the clothes, Cotton:On sells clothes
that are more current with the trends, and normally I can find a certain style there that hasn't
come to other stores yet. One participant identified their favorite aspect as the cost, saying
that he liked that Cotton:On often had promotions on their t-shirts, with deals like Buy two
shirts for $15. The final participant identified their favorite aspect of their clothing as the fit,
saying that the clothes had a nice slim fit that was current with modern clothing.
In asking How would you describe the clothes that Cotton:On sells?, I once again
received answers that mimicked what I had heard in the firs question. All participants
identified the clothes as being trendy, and modern, but a lot like H&M.
For the final question, What can Cotton:On do to increase their customer
experience?, 5 out of 6 of the people said that their biggest issue was the selection.
Currently, all cotton on stores in this area are small outlets in malls, and are about a quarter
of the size of an H&M and thus have a limited selection. One participant said that they would
prefer more online promotions, as they preferred ordering online in order to avoid interacting
with other people, but don't have the patience or desire to constantly check their website for
deals.

HOW THEY CAN GROW

Cotton On's rapid growth shows that they are on the road to being a large competitor
in the fast fashion industry. That having been said, there are many things that can be done to
improve their brand. One of the main issue's I have seen with Cotton: On is their lack of
social media awareness, and awareness in general, outside of Australia. In order to capitalize
on their brand's strengths I believe they need to reevaluate how they utilize social media
outside of their home country. I believe they should introduce regional social media accounts
to better fit the current seasonal trends of different geographic locations. For example, by
creating an Instagram account central to the United States, they could better promote their
fall and winter line of clothing as opposed to having pictures of summertime apparel, like they
would on their Australian accounts.
They should also look to diversify their social media further. While I believe that
crossover on social media platforms could be a good thing, I think it only truly works to an
extent. They should look to promote differently between Twitter and Facebook. I believe that
Twitter should be kept to short posts that advertise their clothes, much like it currently is, but
Facebook should aim for something different. Facebook allows for much more depth in
engagement then twitter does, given how Facebook works, and thus Cotton:On should
capitalize this by encouraging customers to share their opinions and strike up dialogue on
Facebook. Cotton:On should make sure that they have people on hand to quickly and
professionally answer and customer service complaints or concerns that are vented on
Facebook, all while matching the tone of their consumer. For example, if someone where to
complain about an online ordering being late, rather than replying with a generic script, have
the person reply with a genuine response that makes the consumer feel their answer is

actually being heard by a real person.

Furthermore, they need to increase awareness for their brand by encouraging their
consumers to become brand advocates. I would implement a loyalty program for returning
customers, with promises of discounts, or buy one get one half off type offers for people in
their loyalty program. This would help strengthen the ties that the consumer has to
Cotton:On, but also help fight the problems noted earlier, that young people want to buy less
but spend more. By creating brand advocacy in younger people, they would still feel
compelled to shop at Cotton:On despite the clothes being more trendy and seasonal as
opposed to very high quality and long lasting.
Also, as the study noted earlier (CBA Fashion retail spending) had reported, we are
seeing a shift towards people preferring to buy online. A good way to further promote their
online store would be via a referral program. What Cotton:On should do is allow people to
refer their friends to their online store through their email address. Once a referral gets this
email they would receive a discount code that can be used within a certain time frame of
receiving the email. IF the referee completes a transaction, the person that sent the referral
would get a certain amount of their money spent back as a gift card. This would promote
brand advocacy without having people spam every contact, as they would only benefit from
those who would potentially buy something from their store. To further strengthen their ties
with brand advocates, Cotton On should look to keep their customers more in the loop, via
updates through email and regular mail. This would allow them to send coupons and
promotions to advertise seasonal discounts, such as at Christmas time or for Black Friday.
One other big problem that the company is currently facing is that they are unable to
differentiate themselves from the fast fashion giant, H&M. One way that I would suggest

Cotton On differentiates themselves is by better advertising their ethical sourcing system. In a

world where people are more socially conscious, I believe that people would be more
attracted to Cotton On's brand if they where to make their ethical sourcing standards more
apparent to the consumer. This would differentiate the brand from H&M who does not have
strict ethically policies for their sourcing. Furthermore, Cotton On introduced an Ethical
Sourcing Audit in January 2014 that provides more robust description of the ethical standards
of Cotton On's suppliers. While this may not be something the consumer would read, it does
provide backing to claims Cotton On would be able to make about their ethical standards, in
defense against any possible scrutiny. They should start by adding signs in their stores that
advertises their ethical sourcing policies, near the cash register so that people are able to see
it as they stand in line to check out.
To further differentiate themselves from H&M, Cotton:On should look to take a Redbull
like approach to their marketing campaign. Cotton:On is an Australian brand, and to many
people they feel like they are a foreign brand. Redbull is a company that does a great job of
feeling domestic despite the fact that they are actually an Austrian company. Cotton:On
should look to become more involved in regional communities in order to build the association
between their brands and local environments. While it may not be in their Company's Culture
to support extreme sporting events like Redbull does, they should instead to promote and
sponsor music events in the alternative and indie genres of music, which would better fit their
target demographic.

Works Cited
Colucci, Mariachiara, and Daniele Scarpi. "Generation Y: Evidences from the Fast-Fashion Market and
Implications for Targeting." Journal of Business Theory and Practice 1.1 (2013): n. pag. 1 Nov.
2013. Web. 20 Nov. 2015.

"Cotton On Foundation - Empowering Youth |." Cotton On Foundation - Empowering Youth |. N.p.,
n.d.

Web. 25 Oct. 2015.

"Ethical Retailing." Cotton On Group Corporate. N.p., n.d. Web. 2 Nov. 2015.

Lutz, Ashley. "This Consumer Trend Could Be Terrible For Fast Fashion Brands." Business Insider.
Business Insider, Inc, 04 Sept. 2014. Web. 7 Dec. 2015.

Peterson, Hayley. "Everything You Need To Know About How Teens Are Spending Money, What They
Like, And Where They Shop." Business Insider. Business Insider, Inc, 09 Apr. 2014. Web. 7
Dec. 2015.

2014, 7. April. "Cotton On To This!" Retail Postcard (n.d.): n. pag. Ferrier Hodgson. Ferrier Hodgson,
7 Apr. 2014. Web. 20 Oct. 2015.