Columbia Sportswear’s Ode to Innovation

 

Also showcased was a new baselayer line featuring Omni-Heat reflective technology, as well as a new line of gloves and footwear featuring its recently-acquired OutDry technology.

The launch, held at an events center in the meatpacking district of Manhattan, began with spectacle. To the tune of Lenny Kravitz's rocker, “Are You Gonna Go Come My Way,” figure skaters danced on synthetic ice while a skier in the background somersaulted on a trampoline. A video screen in the background highlighted visionaries such as Bill Gates of Microsoft, Richard Branson of Virgin and others who daringly recreated their industries. Messages on the screen offered slogans around moving past the “Bullshit” of false marketing claims around innovation and instead “Be Brave. Be Bold. Believe.”

 

But the boldest statements came straight from the mouths of Columbia executives, who delivered a sharp critique on what's wrong in the outdoor industry, even calling out several heavy hitters – The North Face, Gore-Tex and Under Armour – as representative of the industry's tepid commitment to innovation.

“Our industry around the world is not all that healthy,” said Mick McCormick, EVP of global sales and marketing. “In some markets, it's okay. But in North America, quite honestly, it's mediocre at best.” He noted that year-to-date revenues in U.S. outdoor specialty are up 2% over 2009, a year he termed “a disaster.”

But innovation has been helping Columbia. Riding strong acceptance of its Omni-Heat warmth technologies, third quarter sales climbed 16%. Spring backlogs at the time were up 12%, led by low double-digit gains in the U.S.

McCormick admitted Columbia has had its own innovation shortcomings although its roots are there. Chairman Gert Boyle invented the fishing vest while CEO Tim Boyle in the 80’s led the development of the Interchange System behind the Bugaboo parka that brought the brand to the skiwear market.

But then “we kind of went quiet for a lot of years,” McCormick said.
The rededication started 3/12 years ago when Columbia “was having challenges in the marketplace” and struggling financially. “We sold a lot of commodity items at value price points,” noted McCormick.

Consumer research also showed that innovation came in a close second to product wearing out as the reason why customers replace their outdoor gear. Worse, research found that active consumers – including “super actives” and “weekenders” – were replacing their outerwear as well as winter boots every five years.

“We have an industry problem when they replace their cars more often than their outerwear!,” quipped McCormick.

For the industry, he noted that if that repurchase cycle for core items (outerwear, baselayer and footwear) can be reduced by one year, it could increase sales in the outdoor marketplace in the U.S. by over $521 million. “We need to obsolete the consumer's closet,” stated McCormick.

For Columbia, innovation is also helping raise selling prices. For Fall 2011, Columbia is looking to sell outerwear priced as high as $1,200, footwear at $400; and gloves also at $400. Two years ago, its outerwear prices capped at $240; footwear at $100 and gloves at $40.
But coming up with more innovation is particularly required for the industry to reach the female consumer, he contends.

“The challenge is [our industry is] male dominated,” said McCormick. “We don't understand as an industry yet that over 80% of discretionary income is controlled by her, 70% to 75% of footwear and apparel sales are controlled by her. And truly we have people moving into our space.”
He cited the quick success of foreign retailers, H&M, Zara and Uniqlo, in the U.S., even noting that he had witnessed some of those attending the event in an elevator carrying shopping bags from those chains.
“They have a built-in advantage,” said McCormick. “This consumer is in these stores multiple times a week.”

But the industry's women problems are more obvious given the astounding success of Lululemon. He noted that he frequently visits some of Columbia's big-box customers with stores that reach 65,000 square feet. But in a recent visit to a 4,000 square foot Lululemon location, he saw double the traffic and they were all women.
“That's a huge problem for us an organization,” said McCormick. “So how do we address that? Well, we don’t' have any leadership in the marketplace. Our industry is freaking asleep. And I don’t care if it's in Europe, Canada or in the U.S.”

As an example, he cited signs outside a North Face store on Michigan Ave. calling out technical benefits such as “abrasion-resistant two-ply pants.”

“That's going to compete against Lululemon?,” McCormick asked rhetorically “That's the innovation that's going to happen in our industry?”

He also pointed to a graph indicating the sliding sell-through percentage of North Face outerwear in the U.S. outdoor specialty channel.
“This is the number one selling style in the marketplace?,” asked McCormick. “We're going to compete against Uniqlo, H&M, Zara and Lululemon and the best thing we can do as an industry is bring in a long-down parka?”

He also said Columbia was “calling bullshit on Gore-Tex,” pointing out how water regularly seeps into their “waterproof” gloves when in the outdoors. He also implied that the industry was way over-aligned to the technology. Asked McCormick, “If you were in the electronics industry and you had to compete against other competitors in the marketplace with a 20-plus-year-old technology, how big would you be in the electronics industry?”

Finally, he ridiculed Under Armour for recently-announcing it was coming out with a cotton line after calling the fabric “the enemy” for years. He further mocked Under Armour for not having any fabric or process patents. “We don't respect this,” said McCormick. “Tough love. [But] our industry needs more excitement than what's going on there in innovation in the marketplace.”

Not surprisingly, Columbia plans to fill that leadership role in innovation with simple-to-understand (“warm and dry”) and visuals technologies such as Omni-Heat Electric that deliver real performance benefits.
“Anybody know what the number one requested item by the female consumer in the automobile is?,” McCormick asked.”Heated seats. By the way, they're expensive, right? But we found a way to take those damn heated seats with you.”

Other successes include the Fall 2009 launch of electric boots, which “undersold the marketplace,” with sell-throughs of an updated collection for Fall 2010 already experiencing “phenomenal sell-throughs.” With the success of its Omni-Heat Reflective technology, McCormick sees a “huge opportunity” for Columbia in baselayer, another category that “hasn’t innovated in years.” Meanwhile, its OutDry technology was promoted as the next step up from Gore-Tex.

In two years, Columbia has gone from two patents to over 116 patent applications and its ongoing innovation timeline so far stretches through 2013.
Acknowledging some bold talk given during his presentation, McCormick noted that all the technology on display at the event is brand new over the last two years and many in the audience had snickered 2 ½ years ago when Columbia's management similarly boasted its intention to lead the industry in innovation.

“When you think about what this company can bring and what this industry needs, I hope our competition comes after us,” said McCormick. “It will make us that much better and make the industry stronger.”