Executive Summary

This report investigates the current fashion market situation and strategies implemented by

the Cotton On Group. It analyses the current environment factors (political, economic, social,

technology, environment and legal factors) that affect the fashion industry. It analyses the

strengths, weaknesses, threats and opportunities facing the Cotton On Group. It explores the

competition of the business using the porter 5 forces. The report researches the type of

strategies Cotton On Group could be using to find new markets and while keeping the current

one.

It gives recommendations on how Cotton On Group could improve by further expanding the

US and UK markets, releasing a higher priced and better quality range/collaborating with a

higher end designer, capture the childrens clothing retailing sector by being more inviting to

parents and their children and by divesting Rubi shoes and moving stock to mega store and

some core store. COG should look at more guerilla marketing strategies to capture the

attention of the consumer.

Table Of Contents

1.0 Introduction 3

2.0 Analysis 5
2.1 Analysis of Environment 5
2.1.1 Political Factors 5
2.1.2 Economic Factors 6
2.1.3 Social Factors 6
2.1.4 Technological Factors 7
2.1.5 Environmental Factors 7
2.1.6 Legal Factors 8
2.2 TOWS Matrix 8
2.3 Industry (porter 5 forces) 10
2.3.1 Competitive Rivalry 10
2.3.2 Supplier Power 11
2.3.3 Buyer Power 11
2.3.4 Threat of Substitution 11
2.3.4 Threat of New Entry 12
2.4 Portfolio 12
2.5 Strategies 13

3.0 Recommendations 16
3.1 General 16
3.2 Guerilla Marketing Strategy 17

4.0 References 19

5.0 Appendix 23
1.0 Introduction

This report was written by Jessica Johnson a student at RMIT university. The author was

given the task of analysing the strategies of a fashion organization. The author has chosen the

Cotton On Group.

This report uses primary and secondary research through journal articles, staff at Cotton On

and online reports.

The report is directed at Tarun Power and the Cotton On Group.

Cotton On Group (COG) is an Australian fast-fashion retail brand starting in Geelong in 1991

by Nigel Austin. It has grown to having over 1400 in 19 countries. COG is made up of

several brands including Cotton On, Cotton On Body, Cotton On Kids, Typo, Rubi, Supre &

Factorie. It is an omni-channel business operating online and in-store. COG currently holds

3.8% of market share in the Australian fashion retail industry. (IBIS World, 2017).

COG first launched Cotton On in Geelong in 1991 then expanding to Western Australia in

1994. Cotton On Kids was launched in 2004 because Austin felt there was a gap in the

market for children's clothing. In 2006 Cotton On launched in New Zealand. In 2007 Cotton

On Body, Factorie and Cotton On Foundation were launched. Cotton On expanded in

Singapore. 2008 Rubi Shoes was created and Cotton On expanded to Hong Kong. 2009 Typo

is created and Cotton On landed in the USA and Malaysia. 2013 COG acquired Supre.

COG are big believers in giving back to the communities they source from. They have three

major foundations The Cotton On Foundation, Supre Foundation & Planet Factorie. The
Cotton On Foundation focuses on empowering youth through educational projects, getting

clean water and reducing poverty in Australia, Southern Uganda, South Africa and Thailand.

Supre Foundation helps to empower women through projects like Kiwi Can Project, bullying

education & funding of reusable feminine sanitary packs in Australia, New Zealand & South

Africa. (Supre, n.d.). Planet Factorie founded in 2012 empowers communities in Southern

Uganda and South Africa through building infrastructures like schools, auditoriums and

classrooms. (Planet Factorie, n.d.). Donations can be done in-store or online simply by

purchasing a water, mint or a tote bag.

2.0 Analysis

2.1 Analysis of Environment

There are 6 factors affecting the industry these include political, economic, social,

technology, environment and legal. (see appendix A).

2.1.1 Political Factors

Political factors is the degree to which the government affects operations of businesses at

local, state and federal level. (Business Dictionary, n.d.). The main effects of this is political

instability, mitigation of risk, impact on economy and changes in regulation. The political

environment is the least predictable. In 2016 Britain voted in a referendum for Britain to

leave the European Union. This caused the Pound to drop severly and consumer spending

dropped. (Financial Review, 2016). COG only has 7 stores in the United Kingdom (6 Typo &

1 Cotton On store). Therefore the effect of Brexit was not immediate because they don’t have

huge shares in the United Kingdom however, the company still would’ve felt the drop in

consumer spending. For the Australian retail industry, Brexit really affected them because

trade became more expensive because of the drop in the dollar however, made it cheaper for

Australians to buy products from the United Kingdom. Therefore they were less likely to

purchase domestically online.

2.1.2 Economic Factors

Economic factors impact how an organisation does business and how profitable they are.

Factors include economic growth, inflation, interest & exchange rates and disposable income

of consumers. (Professional Academy, n.d.). Exchange rates has affected the Australian retail

industry both negatively and positively. The depreciating dollar has made it more expensive

for Australian consumers to purchase internationally resulting in an increase in domestic

online shopping. (Inside Retail, 2016). This is a major benefit for the COG because it results

in an increase of profit. The current Australian dollar is buying 0.77 US Dollars (RBA, 2018).

Inflation affects COG and the retailing industry because it makes the product more expensive.

Inflation creating consumers uncertainty therefore they are less likely to spend money

especially if the products become more expensive. This negatively impacts COG because

consumers are less likely to shop with them.

2.1.3 Social Factors

The socio-cultural factors are the values and attitudes within society that affect thoughts,

feelings and behaviours. (Psychological Wiki, n.d.). This has a major impact on the fashion

industry due to social corporate responsibility. In 2013 Rana Plaza in Bangladesh collapsed,

this claimed 1,100 lives this created major backlash towards the Bangladesh government and

Western companies that were operating these garment factories as it highlighted the human

cost of cheap clothing. (ABC, 2016). It ensured that from now on factories must be up to

standard or will face shutting down. Although COG didn’t operare in Rana Plaza they still

operate in Bangladesh and from this disaster they had to sign the ‘Bangladesh Fire and
Building Safety Accord’. From this incident it enforced companies to be more transparent

about where they operate and how they operate.

2.1.4 Technological Factors

Technological factors is the rate at which technology innovation and development could

affect the industry. (Oxford College of Marketing, n.d.). Consumer demand has allowed them

to redefine their shopping experience. This has caused companies needing to perfect their

omni channel strategies. Australian retailers have felt the effect of this as technology as

Australian technology is outdated. (Green, R, 2015). Not keeping up with technological

trends causes major damage for companies for example in the 1980’s seven out of eight

largest US companies had to fail for bankruptcy, be acquired or lose their place as a major

industry player by the 2000’s. (Deloitte, 2017). COG is behind in technology according to a

staff member as “Machines are outdated, only just started doing click and collect and being

able to order from in-store to home”. However, COG have teamed up with Amazon to help

launch Cotton On Kids in America. (Ehlers, S, 2016). Amazon is one of the leading

companies with technology.

2.1.5 Environmental Factors

Environmental factors is the influence of the surrounding environment and the impact of the

ecological aspects. (Oxford College of Marketing, n.d.). The fashion industry is a major

contributor to degradation of natural resources. Companies are over sourcing raw materials,

depleting natural ecosystems and causing global warming from high energy use. This has led

to government regulations to how much waste and energy suppliers can use. COG has teamed
up with the Better Cotton Initiative (BCI). (Cotton On Group, n.d.). BCI is a non-profit

organization that supervises global standards for cotton by working with farmers to the

retailers. COG teaming up with BCI means they are trying to lessen their impact on the

environment but still maintain their affordable prices.

2.1.6 Legal Factors

For an organisation to succeed they must understand the laws of the country they are

operating and selling in. Legal factors affect how a company does business through

employment, marketing, consumer, health & safety laws. Even trade regulations and

restriction. (Oxford College of Marketing, n.d.). United States President Trump has increased

tax for imports therefore, it is more expensive for countries to import goods into the United

States. The point of this is to decrease competition for American based brands however, this

negatively affects COG because COG are still relatively unknown in the USA it means their

survival in the USA market could be limited. (ABC, 2018).

2.2 TOWS Matrix

TOWS matrix is an analysis of a company’s strengths and weaknesses and external threats

and opportunities. (see appendix B).

SO - One of COG’s great strength is its community work. Social media is the new way to

capture an audience. With companies going viral for certain trends or being broken from

social media for not being socially responsible. COG could capture this by using more social
media influencers and advertising more their foundation work. This could bring in a larger

customer base and create a healthier picture of themselves in the eyes of consumers.

Influencers could be Kayla Itsines for Cotton On Body (9.4million followers). Kayla would

be great for Cotton On Body because she promotes a healthy lifestyle. Yan Yan Chan for

Cotton On (126K) as a lot of people go to her for fashion advice. COG are currently active on

social media however on their website it is not clearly shown. (See appendix C)

ST - COG has become a major force in the Australian retail market. With the huge influx of

international brands competition has never been tougher. However, in an uncertain political

climate it has resulted in Australian consumers wanting to support Australian brands.

Therefore, COG using their Australian heritage can help combat the threat of competition.

WO - COG is seen from the consumer standpoint as ‘low fashionability’ and being of low

quality. Therefore to overcome this COG should collaborate with a designer. For Cotton On

Body this could mean teaming up with Nike or Adidas. Cotton On could team up with a

fellow Australian designer like Bassike for basics or a higher end designer like Alexander

Wang.

WT - As mentioned before COG is known for being of lower quality and low fashionability.

With the increasing threat of international companies COG could invest more in existing

product lines to increase quality and fashionability. COG could release a small limited edition

range which, is at a higher price point and on-trend.

2.3 Industry (porter 5 forces)

Porter 5 forces is made up of 5 different forces being competitive rivalry, supplier power,

buying power, threat of substitution and threat of new entry. (see appendix D).

2.3.1 Competitive Rivalry

The Australian retail market is saturated, as many brands are selling similar products. In 2017

39 out of 250 of the world’s top retailers were operating in Australia. This is set to continue

with Australia’s strong economic conditions, high consumer demand for international brands

and the close proximity to Asia. (Deloitte, 2017). The main differences with big international

retailers like Zara, Uniqlo and H&M operating in Australia is they brought out more

innovative visual merchandising and consumer experience models. This meant for Australian

retailers to stay in the game they need to improve this. COG has followed their lead from

opening a flagship store in Melbourne city opposite H&M. This store includes Cotton On,

Rubi Shoes, Cotton On Body & Typo. The flagship store to make a point of difference

includes a barber shop, phone charging stations and has local artists create art installations.

(Inside Retail, 2016). The flagship stores shows COG’s evolution through the years making

them more interesting to consumers.

2.3.2 Supplier Power

There is a massive variety of suppliers. COG source their suppliers from Bangladesh, China,

Australia and India. (Cotton On Group, n.d.). The threat of suppliers is moderate as retailers
like COG have more of the power because they have the ability to switch suppliers if the

price/quality doesn’t match as suppliers can be dispensable. However, switching suppliers

still takes time and money and because of the fast turnover of product from all their brands,

time is a luxury they cannot afford.

2.3.3 Buyer Power

Individually buyers hold little power however, consumers are demanding lower prices for

higher quality. (Shirai, M, 2015). This is a threat for COG as apart of their strategy is having

lower prices with the sacrifice of quality. Loyal COG consumers know their prices and deals

so if they were to go up this could create severe consumer dissatisfaction and lose their

customer base. Therefore need to be wary of this new demand for consumers and need to find

a strategy to keep up with this demand.

2.3.4 Threat of Substitution

The threat of substitution is low. Reasoning behind this is there is little to substitute for

clothing. The main threat of this would be if the consumer feels the unnecessary need to

purchase for clothing and buy something else like groceries. The main substitution COG will

face is if a new company came out with similar clothing for a lower price point.
2.3.4 Threat of New Entry

The threat of new entries is moderate because the fashion industry is already a saturated

market therefore there is little point of differences. Therefore for new companies to enter the

market they would need to sell a highly differentiated product to be a massive threat to COG.

2.4 Portfolio

The BCG matrix is a strategy to help with long term planning. (see appendix E). BCG matrix

is made up of 4 parts star, question mark, cash cow & dog. COG doesn’t release information

about each of their brands revenue wise, therefore secondary sources were used.

Star means brands in a high growth market with a high market share. Cotton On & Cotton On

Kids have been placed here because Cotton On is one of the leading brands in the Australian

retail market holding 3.8% of market share for clothing retailing (IBIS World, 2018). Cotton

On Kids is a star because no company is dominant in children's retailing therefore the market

has high growth.

Question Mark refers to brands in high growth markets with low market share. Cotton On

Body is not a major player in the activewear industry, however is still making profits.

Factorie is a clothing brand similar to Cotton On however, is not reaching the market as well

as Cotton On is, being a lot more outdated. Supre has a low market share but has grown over

the past few years since being acquired by COG increasing profits by 14.8%. (Mitchell, S,

2015).
Cash Cow is brands in low growth markets with high market share. Wesfarmers United hold

the most shares in the Australian Market holding 46.7%. Typo holds 4.9% (IBIS World,

2018). Typo are a rapidly growing business and giving more competition to the almost

monopoly of Officeworks.

Dog refers to brands with low growth markets and low market share. The footwear industry is

a mature industry, the major stakeholders are Accent (24%), Super Retail (8.2%) and Betts

(5.8%) (IBIS World, 2018). Rubi shoes is not a major player in the Australian market with

low growth and market share. Therefore COG should look to divest Rubi Shoes.

2.5 Strategies

Corporate strategy is the direction an company takes with the objective of achieving success

in the long term through goals and objectives, differentiating them from their competitors.

(Venture Line, n.d.).

Having a mission statement is apart of corporate strategy. Mission statement creates a

positive image for the brand, letting customers and employees be apart of the same vision.

For the COG their mission statement is ‘Our vision is to be one of the most loved brands in

the world and our values define who we are.’. This mission statement presents how COG

plans to be a well-known global brand and doing this in an ethical approach.

COG is successfully living up to their mission statement as they are now in 19 countries.

However, this is mostly Cotton On & Typo so they need to get more of their brands global.

Market Penetration Strategy focuses on selling existing products into existing markets to gain

a higher market share. For COG this could be done through increased promotions so through

advertisements on the television/cinemas or sponsoring an event like the AFL Grand Final or

fashion week. Another strategy would be to improve products while keeping prices therefore

increasing quality keeping current customers and bringing new ones in.

Market Development Strategy is selling existing products into a new market. This can be

done by entering new international markets like introducing Cotton On Body to the United

Kingdom. COG when entering a new market must ensure the product is culturally appropriate

and there is a demand for it.

Product Development Strategy is when a company creates new product lines or improves

current product lines by adding new benefits to it. This can done by COG by trading up in

Cotton On. Trading up can be done by collaborating with designers like Alexander Wang,

Stella McCartney or Bassike. Alexander Wang for the youth market, Stella McCartney for

sustainability and Bassike for Australian simple but high quality basics.

Diversification Strategy is developing a new product for a completely new market. For COG

this could be done through becoming a phone company offering plans on prepaid or contract

plans for Australian phones or becoming a supermarket like Woolworths or Coles. This will
widen their market and because they are already well-known in Australia they have a market

that is familiar with them and their ethos.

Their general strategy is a cost focused strategy. They use economies of scale to get their

competitive advantage. COG reduce prices by using ‘bulk-purchasing’. This means they

order large quantities to keep unit prices low. Therefore passing the savings onto the

customer and increasing their profit margin. This brings, in a larger customer base because

people are attracted to lower prices. COG are are known to be ‘basic’ rather than on-trend.

This means they can continue to satisfy their customer base by releasing the same style of

basic products.
3.0 Recommendations

3.1 General

Recommendations for COG is to expand more in the USA and UK market. There is

only a small number of stores in these countries, therefore if COG released more

stores it would make them a bigger competitor overseas. USA and UK would be

easiest markets to break into because it is a similar market to Australia therefore, the

product wouldn’t have to differ too much just seasonal products.

Cotton On has a reputation for being ‘tacky’ therefore to break this stigma Cotton On

should trade-up and release a product line of more upmarket and on trend items. This

can be done through collaborations with higher end brands or simply releasing a new

product line. This will bring in more consumers while still holding onto their current

customer base because they are still selling their normal stock. It invites their current

consumer to ‘dabble’ with more luxurious clothing and invites consumers who can’t

normally purchase the higher end designer brand to purchase the collaboration.

In Australia no company has a major market share of children's clothing. COG should

use this to its advantage and increase marketing to parents and children. Having stores

that look inviting for parents and with lots of bright colours to target the child so they

also want to enter the store. Cotton On Kids already has parts of the store that will

entertain children while the parents shop but also having an in-store nanny will also

ease the parents mind while shopping so someone is always looking after the child.
 Rubi shoes doesn’t hold any significant market share in the footwear industry in

Australia. COG should close Rubi shoes stores and move all current stock to mega

stores and some core stores. This will allow COG to still be in the footwear retailing

market but will also increase their KPI’s for the mega and core stores because the

consumer will have more choice in-store.

3.2 Guerilla Marketing Strategy

Guerilla marketing strategy is a marketing method used by companies to advertise their

products in an unexpected way. There are several ways to do it including ambient, sensation,

viral, stealth and ambush marketing.

Ambient marketing is placing advertisements in unusual places or items. (Panwar, T,

2018). Ambient marketing is effective because it has a lasting impact on the

consumer. Examples of this is Big Pilot Watch in Germany. (see appendix F). The

company used watches instead of bus straps so people using the straps could see what

the watch looks like on. This advertisement is clever and would’ve made the

consumer think about the watch however, the watch retails for $20,000 and assumably

a person riding the bus wouldn’t be after a $20,000 watch therefore making the

advertisement ineffective. COG could use this for advertising Cotton On Foundation.

For example the showers at the beach could be in the shape of the water bottles you

purchase in-store.
Viral marketing is when people help spread the advertiser’s message this is done

through social media. For viral marketing to work it must be free and easily

accessible. The Old Spice advertisement ‘The man you could smell like’ is an

example of viral marketing. (see appendix G). This advertisement was hugely popular

and was heavily talked about. Old Spice sales went up 107% because of this

advertisement. (O’Leary, N, 2010). This shows the power of viral marketing and

COG should look to use this in short 30 second advertisements.

Stealth marketing is a strategy used by companies when they want to advertise a

product but without the public knowing they are being persuaded. (Panwar, T, 2018).

Coca Cola is famous for this as they often show actors drinking it with the label

clearly shown. (see appendix H). An example of how COG can use this is in film. By

placing a product from one of their brands or having an actor/actress mention them

wearing Cotton On Body, Cotton On etc.

Ambush marketing is advertising an event without paying for it. (Panwar, T, 2018).

COG could use this leading up to the Australian Open by having posters up of Cotton

On Body near the stadiums and show courts therefore, getting the public to see the

products and wanting to purchase. Another example would be flying over a festival

like Splendour in the Grass (Australia’s biggest festival) and releasing cold towels

with their logo on it. The towels is a good idea because the attendees of the festival

would hold onto the towels and they will keep Cotton On in mind. Rona has used

ambush marketing before by placing a banner underneath Apple nanos and showed

them recycling Apple’s paint. (see appendix I).

Sensation marketing is the irreproducible one time action that catches the attention of

people passing by. (Panwar, T, 2018). In 2012 Nivea used sensation marketing by

doing a ‘flash mob’ of men going up to a woman after she used a sample of Nivea

moisturising cream. This is unexpected and captured the audience of people around

the street. (Ambientising, 2015). COG could use a similar technique by creating a

flash mob in Bourke st Mall, Melbourne. Everyone in the flash mob should be

wearing identifiable symbol of Cotton On; example being a red top with the cotton on

logo on it.
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retail trends’, D
5.0 Appendix

A.

Environmental Trends Opportunity/Threats Impact

Factors

Political ● Political instability Threat High Impact

● Brexit ● Increase
● Trump difficulty to
● Regulations trade
● GST ● Tax, quotas,
boycott

Economic ● Inflation Opportunity & Medium Impact

● Exchange rate Threat ● Decrease
● Chinese Economy consumer
● Unemployment spending
● Higher focus
in Asian
countries
● Different
marketing
plan

Social ● Ethics Opportunity & threat High Impact

● Sustainability ● Consumers
● Social demand for
responsibility better can
(acceptance of bring
minority groups) businesses
● Buying habits down
● Population ● Different
● Education marketing
schemes

Technology ● Rapid rate of Opportunity & threat Medium Impact

innovation in ● Companies
technology have to
● Consumers evolve
wanting more strategies
streamless/faster
ordering/deliverin
g
● Access to internet
● Access to new
 technology

Environment ● Move to organic Opportunity & threat Low Impact

fabrics ● Consumers
● Climate Change becoming
● Global Warming more aware
but does it
actually
affect
shopping
habits?

Legal ● Manufacturing in Threat Medium Impact

China becoming ● Increased
too expensive cost of
● Laws involving production
manufacturing ● Consumers
practices becoming
● Employment laws more aware
of
manufacturi
ng practices
B.

Strengths Weaknesses

-Australian Brand -Low Quality

-Social Contribution -Low fashionability

-Economies of Scale -Employees

-Product Diversity

-Global Brand

-Perks Program

-Strong Brand image

Opportunities -Having all their products on the -Trading up - collaborate

-Online Shopping one website with designers, make a

-Social Media -Being a global brand and product line that is more

-Collaborations optimising their online website expensive/higher quality

-Acquisition of brands means can capture more of a -Train employees up more

-Vertical Integration broad audience and provide more benefits

-Trading up -Social media is on the rise so for them to increase morale

-Product Mix using more influencers can

capture an increased audience

-Using social media more to

promote Cotton On Foundation

-With perks program get to know

customer more + increase

 customer base

Threats -Being a known Australian brand -Invest more into existing

-Competition helps overcome overseas product lines to remain

-Economy competition above competition

-Political -Diversifying product further to

-Environment fit culture of the country going

-Sustainability into

-Discount shoppers -Cotton On known for

-Suppliers bargains/deal so with discount

shoppers on the rise this is good

for the COG

C.
D.

Forces: Barrier to Substitutes Buying Supplier Rivalry

Entry Power Power

Impact Level Moderate Low Medium Medium High

Detailing - Capital cost -Little -Individually -Huge -Increasing

in Australia substitute for not huge variety of number of
-Lots of clothing threat suppliers competitors.
access to -High need to make -Saturated
supply/distri demand for sure getting market
bution low price but right -Mature life
-high for higher price/quality cycle
economies of quality for the -Product
scale -COG product differentiatio
already at a -Must be n low
low P.P transparent

E.

High Star Question Mark

Cotton On Cotton On Body

Cotton On Kids Factorie

Supre

Low Cash Cow Dog

Typo Rubi

Strong Weak
F.

G.

H.

I.