If the Billabong brand is worth nothing, which brand will be next?

Michael Bleby Reporter

If the Billabong brand is worth nothing, which brand will be next?

Published 28 August 2013 12:17, Updated 28 August 2013 13:25

Not quite washed up – but Billabong has some recovery work to do on its iconic brand. Photo: Glenn Hunt

Billabong is not the only Australian retail brand at risk of going under in an era when online and global competitors are circling the country’s traditional consumer businesses, as even iconic names need to support a business and make it profitable. The surfwear company’s much-reported $636 million writedown this week on the value of brands including Billabong and Element shows how far the business has fallen, even from as recently as May, when Billabong ranked at number #43 in a list of Australia’s 100 most valuable brands by consultancy Brand Finance.That marked a decline of $US174 million ($194 million) to $US406 million in the value of the Billabong brand from a year earlier, when it was worth an estimated $US580 million and enjoyed the position of 19th most valuable Australian brand. (Supermarket Woolworths has topped the list for the past two years, with a brand value this year of $US8.75 billion.)

Once international brands move into a market there’s no guarantee the Australian brands who’ve been there and existed for a long time are going to be able to maintain that position 

Of course, the Billabong brand itself isn’t dead – as recently as last week the company was using it to promote the Billabong Pro surfing tournament in Tahiti – but this week’s news shows that even a strong brand cannot stay afloat when the operational costs and business model it is trying to hold up become too heavy. In Billabong’s case, the expansion to become a global retail chain brought it down, and that is a lesson other indigenous brands must heed.

“The move to online sales is a paradigm shift and Australian brands are struggling to catch up with that,” says Xander Bird, Brand Finance’s managing director for Australia. “There’s no guarantee they will. Once international brands move into a market there’s no guarantee the Australian brands that have been there and existed for a long time are going to be able to maintain that position.”

Life in the old brand yet

Brands can reassert themselves. It’s not a one-way journey. FutureBrand Australia strategy consultant Victoria Berry cites the example of underwear brand Bonds, which has remained strong despite negative publicity and the lacklustre performance of its parent company Pacific Brands.

Billabong still lacks a punch, Berry says.

“They’ve got the heritage and once-iconic status that most brands would kill for,” she says. “With awareness levels around 86 per cent but conversion around 46 per cent (last year), Billabong has an opportunity to build preference and ultimately purchase.”

But, as consultancy Interbrand’s Australian managing director Andy Wright puts it, that brand isn’t worth much right now.

“If you’re not making a profit, the reality is zero brand value,” Wright says.

Who’s next?

So, which brands are most at risk in the new environment? Tim Heberden, a valuation director with intellectual property consultancy Griffith Hack, says those in the clothing retail sector are one category.

“It’s easy to buy offshore and source clothes from offshore buyers,” Heberden says. “But again, it’s one of those situations where the stronger your brand and the stronger your consumer loyalty, the more sticky your customers will be and the more inclined they’ll be to stick with you.”

But so far, Australian retail – particularly department stores, fashion retailer and electronic retailers – haven’t done a good job of responding to those changes, Wright says.

Australian department stores, for example, haven’t followed the lead of UK retailer John Lewis, which has done away with distinctions between online and offline shopping by extending its price-match guarantee to all products sold and changing incentive structures that make sales staff hesitant to recommend a customer look for a product online if they don’t have the exact match in store.

Examples to learn from

“When you see everything moving into the digital world, it’s not just about having a website or an app,” Wright says. “It’s about the ways of doing business where you can personalise choice.”

A further example he cites is electronics retailer Best Buy in the US, which has changed its business model to go for smaller-format stores that are more reactive and responsive to changes in demand than its traditional larger outlets. These innovations are still things Australian retail brands haven’t taken on board.

“At the moment, Australian retailers make people shop on their terms, not on my terms,” Wright says.