Climb every (retail) mountain

By Fiona Rotherham

Saturday 1st May 2004

The story of Kathmandu began with a sewing machine in the back room of a med student's flat where it was being used to make outdoor clothing and equipment for friends and family. The medical studies were soon left behind for the real passion - climbing and mountaineering - and it was through expeditions into the mountains that the need for a better range of quality outdoor gear became apparent. That was a while ago, 30 years in fact, and in the years to come the idea of making outdoor gear for friends evolved in various forms and locations to become what it is today - a company of 35 stores spread across New Zealand, Australia and the UK providing quality outdoor clothing and equipment for travel and adventure.

Well, that's the blurb on Kathmandu's website. Notice anything missing in this quaint story of an outdoorsy med student who was pretty handy with a sewing machine? Yep, you got it. It doesn't tell us who this talented multi-tasker is.

The "who" is company founder Jan Cameron, an Australian entrepreneur who's spent the past 17 years building a niche brand into a household name, yet managed to keep her own name well out of the limelight. The camera-shy Cameron refuses interviews - she wouldn't talk to Unlimited for this story. Why? Business associates say she's a quiet, reserved person who doesn't see the need to push her own profile to make money.

And she's made plenty. Cameron was reported to be New Zealand's richest woman - worth around $75 million - in the Sunday Star Times 2002 list of the top 100 rich and powerful. She's absent from NBR's Rich List - not that NBR hasn't considered her, but rather because it hasn't been able to pin down exactly what she's worth. As a private company - Cameron is the sole shareholder - Kathmandu doesn't have to report its financial details. And she wasn't about to tell us.

She's invested some of her wealth in property, spending around $3.8 million on 30 residential properties in Christchurch, including a 4.3ha lifestyle block at Pigeon Bay on Banks Peninsula. For some years Cameron lived in the Christchurch suburb of Richmond in a house with a government valuation of $390,000. She must have liked the area because she also bought a number of houses immediately adjacent to the one she lived in, before recently returning to live in Australia. One of her latest investments is said to be a hotel in Tasmania.

But her biggest investment and passion has been Kathmandu. Now in her early 50s, Cameron was a medical student in Melbourne in the early 1970s, spending her spare time and holidays on climbing expeditions. When she visited New Zealand at that time she was amazed at the lack of specialist outdoor gear available for sale, thanks to the then restrictive import licensing regime. She quickly saw the opportunity to exploit that gap in the market, says former business associate Geoff Gabites.

She began manufacturing in New Zealand a range of specialist outdoor clothing such as gaiters, full zip overpants, anoraks and parkas - all in weatherproof neoprene-coated nylon. She then went on to make lightweight down jackets, vests and sleeping bags, selling out of her own shop in Christchurch.

Gabites was approached by Cameron to retail her gear under the Alp Sports label. They eventually fell out - he claims it was over a mountaineering expedition equipped from his Dunedin store. But he credits her with dramatically changing the outdoor retail scene. "Jan turned the outdoor market on its ear. It was dominated by a bunch of middle-aged men," Gabites says. "She's dynamic, really hardworking and recognises opportunities, but she's also hard on friends and has left behind a trail of broken friendships."

Cameron brought a different attitude to the product and customer than the industry was used to, says long-time outdoor retailer Paul McGuigan of McEwings Outdoor Equipment. "It's not unfair to say she ran the business for her business, not as a partnership with customers and suppliers." It won her respect, if not liking, but she wasn't out there to make friends, he says.

She also fell out with Wanaka businessman John Pawson after a successful business partnership lasting more than a decade. The pair had owned three Alp Sports stores together in New Zealand before selling out to a consortium of investors just before the 1987 sharemarket crash for a "good price", he says. "We were very aggressive at that time and Jan still is. She's quite focused, but not that innovative and is a ruthless businessperson."

The sale deal included a five-year restraint of trade on retailing outdoor clothing and equipment in New Zealand, so Cameron and Pawson promptly set up shop in Australia - a move that marked the birth of the Kathmandu brand. Cameron's ex-husband, Swiss mountaineer Bernie Wicht, owned the company manufacturing gear for Alp Sports. He ended up a third partner with Pawson and Cameron in Kathmandu around the time they re-entered the New Zealand market in 1991. They bought stock and three stores from the Alp Sports receivers and rebranded them Kathmandu.

Within a few years the three directors were squabbling, says Pawson, He sold out in 1994 and Wicht did likewise a short while later. Cameron finally had full control. "She's a bit of a loner; she likes to run it the way she wants," Pawson says. Her real skill is as a trader, he says. While building the outdoor retail chain, she is also said to have dabbled in importing slate from China into New Zealand.

Going mainstream
Central to Kathmandu's success has been Cameron's ability to take a specialist niche product once the sole domain of hard-core outdoor enthusiasts, and transform it into a mainstream product sought after by soft adventure fans - the sort that buy SUV vehicles yet never drive off road. "She's done a phenomenal job of commercialising a niche technical end of the apparel market and giving it street appeal without losing too much of the technical aspect," says Hugo Venter, chief executive of Arthur Ellis, whose brands include Fairydown.

The growing popularity of adventurewear is a worldwide trend.

"Kathmandu has benefited from that growth, as everyone has," says the company's marketing manager, Mark Williamson. "But it has actually created growth as well - because Kathmandu has a much more obvious mainstream advertising strategy than others in the category."

The essence of the brand is "Live the Dream" - designed to tap into consumers' aspirations of travel and adventure. And it's clearly found a rich vein. Kathmandu is now Australasia's largest outdoor clothing and equipment supplier, with turnover of just over $100 million. And it's profitable, funding its growth internally, Williamson says.

What's made the brand so successful? Williamson attributes it to Cameron's single-minded customer focus, while Gabites puts it down to her ability to translate the outdoors into an urban market, and make it both accessible and desirable. Other outdoor labels such as Macpac and Fairydown are anchored in their niche markets, battling it out for the top end of the outdoor adventure market and selling via retailers - with the attendant loss of control over the product, he says.

Cameron, by contrast, has kept her company vertically integrated - it designs the product, gets it manufactured offshore, and then distributes through its own retail stores. It all adds up to better brand control. "Jan set up for commodity selling, produces at a mass rate and then sells bulk at a cheaper price because she also owns the distribution," Gabites says.

Originally Kathmandu sold other brands but over time has seen better margins in focusing on house-branded product. Its streamlined product range comprises around 95% house-branded product.

Kathmandu's best-selling product is fleece clothing - prompting competitors to label it a fashion rather than an authentic outdoor brand. "It has tapped into the wannabe explorer - those where the only exploring they do is going to the mall to buy a Kathmandu jacket, the same as they would Hallensteins or Glassons," says Macpac founder Bruce McIntyre.

But the danger in trying to cover too much ground under one brand is that you eventually lose your top-end users. "There comes a moment when you stretch the brand's credibility too far and steal the heart out of it. I've seen some very good brands wrecked like that," says Auckland-based brand strategist Brian Richards, who helped create the successful Icebreaker clothing brand.

Williamson is well aware of the danger of straying too far from the brand's roots. But he reckons giving the product street appeal doesn't make it any less high performance than its competitors. Kathmandu's cold-weather clothing can be worn by mountain climbers on Mt Everest or mums and dads watching their kids play football at the weekend, he claims.

Protecting the brand's reputation with hard-core enthusiasts is the reason the company set up a sub-brand when it opened a range for style-conscious family campers last November. The Basecamp range offers a more sophisticated take on camping gear, including tents, bedding, furniture and lighting. Traditionally Kathmandu has sold gear that could be carried on your back; the foray into gear that needed to be transported by car didn't entirely fit its brand. But it didn't want to miss out on a business opportunity either. Thus the compromise of a sub-brand. So far, Basecamp is positioned only in five of the largest Kathmandu stores because it requires lots of space.

A huge percentage of Kathmandu's turnover comes from its three big discounting sales held each year, when staff numbers swell from 600 to around 1000. Cameron upset the industry when she started this pattern of heavy discounting. Until then outdoor gear sale tags might have offered discounts of 10-20%; Cameron came in with all guns blazing offering 40-60% off, making Kathmandu the Briscoes of the outdoor retail industry.

Where everyone gets a discount
This discounting strategy prompted one competitor to quip about Cameron's reputed $75 million wealth: "Remember, you have to take 50% off that."

Former Alp Sports staffer Wayne Martin recalls one of Kathmandu's first big sales in Christchurch. Customers were lined up with the queue snaking along the street. The store ended up serving sausages to those waiting because they'd been out there so long, and in-store signs asked customers to remove clothes hangers to speed things up at the till.

It certainly shook up the industry. Martin (now involved with Bivouac) says the best way to compete with Kathmandu is to get a site close by and sell what it doesn't. "Kathmandu is the largest Australasian fleece importer but has a limited range, so when customers can't find what they want they can come next door to the outdoor stockist that does."

Kathmandu's competitors claim it manufactures stock specifically for its sales rather than selling end-of-stock items. Williamson's response is they order stock for the sales to ensure people can get what they want.

Heavy discounting lifted the brand profile, rapidly making Kathmandu a household name.
But the downside is few customers are now prepared to pay full price. It's a strategy that can backfire, as Briscoes has found. Last month Briscoes announced a change in strategy, saying it was reducing its reliance on deep-cut discounting to attract sales and that creating a profitable business was now its focus. Colmar Brunton research into Rebel Sports' declining same-store sales found it had strong customer support in key areas, but the flip side was the brand had been cheapened by constant discounting, reduced customer service levels, and stocking stores with too much ordinary merchandise.

One of Kathmandu's biggest Australasian competitors, Snowgum, has taken a different tack to its high-volume, discount sales approach. "Kathmandu is a very successful business so we've had to differentiate ourselves from them," says Snowgum chief executive Ross Elliott. The franchised retail group tries to make its mark by having trained staff provide more customer service to those buying specialist gear. Another major competitor, Mountain Designs, keeps its focus on the top-end users to ensure brand longevity while also dipping into the lucrative mainstream market.

Although Kathmandu has grown rapidly on the back of a fashion trend to adventurewear in the past few years, the question is where that leaves the business when the fad changes. Williamson says you need to have strategies in place to ensure the brand's on-going appeal once fashion trends change, although he won't reveal what Kathmandu's strategies are.

Spreading out
Cameron was the first of the local outdoor clothing and equipment suppliers to take production offshore. Nearly all have now reluctantly followed, apart from Earth Sea Sky in Christchurch and One Planet in Australia. She's also had the clear vision from the outset of creating an international brand - hence the bold step of trying to replicate the model offshore by opening a store in the UK late last year.

The UK store is said to be meeting expectations (whatever they were). There are a few differences in what UK customers are buying compared to here and Williamson says it will take time to prove to customers the products are good quality. It doesn't make economic sense with Kathmandu's high-volume retail strategy to open just one store. It wants to open a few more this year, but is having trouble finding the right locations. The goal is to have the same size operation in the UK as in New Zealand and Australia within five years.

The rapid growth that saw Kathmandu make 18th place in the Deloitte/Unlimited Fast 50 index in 2002 also meant the company was in dire need of a new management style. Cameron stepped aside from the chief executive role for six months in 2002 - firstly to have a break and secondly so acting chief executive Rod Harris could introduce some much-needed systems into the company. It had grown to more than one million transactions per year and needed better internal logistics systems to keep pace.

Williamson, formerly with Wools of New Zealand, was also appointed at this time. Under the company's flat management structure, Cameron has five senior managers report to her - the chief financial officer, a production manager, a New Zealand operations manager and one in Australia, and a marketing manager. Ever cost-conscious, she's waiting to see how two to three UK stores go before appointing a UK operations manager.

Despite Cameron returning to Australia to live and the fact the Aussie market is faster growing (there are 19 Australian stores compared to 15 in New Zealand), there are no current plans to shift head office from Christchurch. Industry rumours abound about Kathmandu being up for sale or the potential of a public float. Williamson denies this. John Pawson says from time to time Cameron would find the workload too demanding and want out to just enjoy life. But he can't picture her running a publicly listed company. "Jan could not handle the scrutiny of a public company," he ventures. He won't explain why.

Cameron is said to have had an exit strategy in mind ever since she got into business. In this, her reclusiveness could prove a bonus. "I think one of the things this woman has got as an advantage is if she wanted to exit the brand, her name and personality are not attached to it," says Brian Richards. "The exit strategy is much stronger if the brand is not built around people."

It's all a long way from the back room of that med student's Melbourne flat: $100 million in sales, an Australasian retailing empire, and a household brand name. Not bad for a woman you wouldn't recognise if you passed her on a backcountry tramping track. But then she doesn't have much time or inclination for that these days.

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