Founded by rock-climbing enthusiast Yvon Chouinard in 1973, Patagonia has grown from a climber equipment builder to a global outdoor enterprise with over 70 stores all over the world. The company remains privately owned to date. The brand offers clothing and gears for seven activities including surfing, climbing, mountain biking, kite surfing, fly fishing, skiing/snowboarding, and trail running.
Retailing is a major source of revenue for Patagonia, but the company also has a venture capital division, Tin Shed Ventures, which invests in environmentally and socially responsible startups (Beer, 2018). According to Forbes magazine (Au-Yeung, 2020), founder Yvon Chouinard owns all of the company, which had an estimated $800 million in revenues in 2019. The publisher estimates his net worth at $1.2 billion, nearly all of which is based on the value of the clothing retailer.
The company is well known for its commitment and actions to save the planet. Since 1985, Patagonia has been donating 1% of its annual sales to support environmental nonprofits, and has pledged more than 116 million dollars to help nonprofit organization to make impact in their local communities. According to TIME magazine (Semuels, 2019), Patagonia’s sales quadrupled over the past decade and recently surpassed $1 billion. In some sense, the 1% for the Planet is not only a commitment but also a beneficiary business strategy which helps Patagonia establish reputation, support and patronage from conscientious customers. The purpose-driven company nature also helps to justify its premium pricing on products.
In addition to the Planet Pledge, the outdoor company donated 100% of its 2016 Black Friday sales, a total of $10 million, to an environmental nonprofit. In 2017, Patagonia’s launch of Worn Wear project has also been effective in retaining current and attract new conscientious customers. Worn Wear offers a place online where customers can trade, sell and buy second hand Patagonia clothing and gears (Patagonia, n.d.-c). The project serves as an ideal venue for new customers to get to know the brand’s products and culture in an affordable and eco-friendly way. Meanwhile, the project can be seen as a marketing strategy to maintain customer loyalty because it shows current customers evidence that Patagonia is constantly finding innovative ways to generate less impact to the environment. “The more Patagonia rejects consumerism, the more the brand sells (Demkes, 2020).” It has been urge customers not to buy too many of its products as seen in its 2016 movement, Wear Worn, and life-long free repair service (MacKinnon, 2019).
Patagonia is also a community based brand, exemplified by its Action Works, a digital social network for everyone to connect with grassroots organizations, but the community nature is a double-sided sword to its business development. On one hand, the community helps maintain customer loyalty. On the other hand, as Patagonia relies heavily on in-store shopping experience to provide customers the sense of community, it partially contributed to its weak e-commerce. The weak e-commerce channel led Patagonia to take a hard hit when COVID-19 happened.
The brand took an unusual step, in the beginning of the pandemic, by closing both in-store operation and online sales on March 13, 2020. It was speculated that the company was not ready for a sudden shift from offline to online retail (Au-Yeung, 2020). A month later, the brand came back to accept online orders in North America. It is not clear how much profit Patagonia lost during the one month of complete non-operation and the limited store operation which goes on until today and which is likely to continue in the near future. With efforts taken to strengthen its online retailing and global expansion, the financial future looks great for Patagonia.
Future outlook
Today’s customers want their money to go to companies that support good causes. One in two people are belief-driven buyers; based on survey conducted by Edelman in 2020, 68% of participants from 28 countries agree that CEOs should step in when the government does not fix societal problems. With the trend of conscientious consumerism on the rise, many companies are joining Patagonia to becoming a force for good. Having 40 years history of environmental conservation and activism, Patagonia is a frontrunner in the retail world and its anti-consumerism will generate more profit for it in return, which the privately held company might use to support causes to form a virtuous cycle.
References
Au-Yeung, A. (2020, April 24). Outdoor Clothing Chain Patagonia Starts Selling Online Again After Unusual Decision To Pause Its E-Commerce Due To Pandemic. Forbes. https://www.forbes.com/sites/angelauyeung/2020/04/23/outdoor-clothing-chain-patagonia-yvon-chouinard-starts-selling-online-again-after-unusual-decision-to-pause-its-e-commerce-due-to-coronavirus-pandemic/?sh=ca1a5541c48a
Beer, J. (2018, March 15). How Patagonia Grows Every Time It Amplifies Its Social Mission. Fast Company. https://www.fastcompany.com/40525452/how-patagonia-grows-every-time-it-amplifies-its-social-mission
Demkes, E. (2020, April 28). The more Patagonia rejects consumerism, the more the brand sells. The Correspondent. https://thecorrespondent.com/424/the-more-patagonia-rejects-consumerism-the-more-the-brand-sells/56126501376-a30f2daa
Edelman. (n.d.). 2021 Edelman Trust Barometer. Retrieved March 29, 2021, from https://www.edelman.com/sites/g/files/aatuss191/files/2021-03/2021%20Edelman%20Trust%20Barometer.pdf
MacKinnon, J. B. (2017, June 19). Patagonia’s Anti-Growth Strategy. The New Yorker. https://www.newyorker.com/business/currency/patagonias-anti-growth-strategy
Patagonia. (n.d.-a). 1% for the Planet – Patagonia. Retrieved March 29, 2021, from https://www.patagonia.com/one-percent-for-the-planet.html
Patagonia. (n.d.-b). Annual Benefit Corporation Report. Retrieved March 29, 2021, from https://www.patagonia.com/static/on/demandware.static/-/Library-Sites-PatagoniaShared/default/dw824fac0f/PDF-US/2017-BCORP-pages_022218.pdf
Patagonia. (n.d.-c). Worn Wear – Used Patagonia Clothing & Gear. Retrieved March 29, 2021, from https://wornwear.patagonia.com/
Semuels, A. (2019, September 23). “Rampant Consumerism Is Not Attractive.” Patagonia Is Climbing to the Top — and Reimagining Capitalism Along the Way. Time. https://time.com/5684011/patagonia/
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