Operations

Business model

The Group’s stable profitability and successful positioning of the Björn Borg brand largely originates from the business model, which facilitates a geographical and product expansion with limited operational risk and capital investment. Björn Borg’s business model covers the Group’s own companies as well as a network of external distributors and licensees, which on the basis of a license from Björn Borg manage a product area and/or a geographical market. The network also includes Björn Borg stores operated either by the Group or external distributors or franchisees. Björn Borg owns strategically important operations at every level of the value chain, from product development to distribution and retail sales.

Through the business model with a network of its own units and independent partners, Björn Borg can be involved in key parts of the value chain and develop the brand internationally with a compact organization and limited financial investment and risks. The part of the business model that relies on external partners is relatively capital efficient for the company, since the external licensees and distributors in the network are responsible for marketing, including investments and inventory in their markets. This model, which combines in-house operations with independent partners, generates substantial consumer sales with limited risk and investment for Björn Borg.

Brand

Since acquiring the trademark in 2006, the Group has global rights to the Björn Borg trademark for relevant categories of products and services. By owning the trademark, the Björn Borg Group can operate from a position of strength internationally and control the brand’s development. At the same time, ownership provides long-term security for the entire network of licensees and distributors. The company is responsible for the development of the Björn Borg brand as well as implementation of and compliance with the brand strategy within the network.

As a service organization, Björn Borg can provide its distributors with the best prospects of success in their markets. This is done through, among other things, guidelines and various tools for partners in the network, including marketing activities, displays and graphic identity material, which ensures branding consistency and is efficient for the distributor. In a network comprising the Group’s own entities as well as independent companies, tight control over the brand is crucial. With the exception of production, which is handled outside the Group, Björn Borg has its own operations at every level from product development to distribution and retail sales. This depth gives the Group the best chance of ensuring the continued development and correct positioning of the Björn Borg brand. The Group has its own branding specialists. Since acquiring the Björn Borg trademark in 2006, the Group has been responsible for trademark registration and protection. Björn Borg devotes significant resources to combating the sale of counterfeit products.

Product areas

The largest and strategically most important product areas; underwear and sports and performance apparel, are owned and managed by the Group. Design and product development of sports and performance apparel were moved from the Netherlands to Sweden in 2014, and has since 2015 been managed from the Swedish head office. The fall 2016 collection was the first sports and performance apparel collection designed by the Swedish product team. Product development in other areas – footwear, bags, eyewear and other – is licensed externally.

Every product company, whether Group-owned or licensed, is responsible for design, development and sourcing of collections for every market, and for positioning products based on Björn Borg’s guidelines. The collections are shown and sold to distributors in various geographical markets for resale to retailers. The product development companies also play a supporting role for distributors and retailers in the network. All design and product development is done internally by the companies, while production is mostly outsourced to Asia – primarily China. In recent years some production has been moved to Europe as well, mainly to Turkey, which means shorter lead times.

High requirements are placed on quality and deliverability relative to price, and supplier performance is continuously evaluated. In production and logistics, Björn Borg is focused on increased flexibility and efficiency, while not compromising on sustainable choices. These factors all weigh in and have taken on greater importance in recent years in pace with the growing need for a responsive supply chain that can adapt to shifting fashions. The company also requires suppliers to comply with Björn Borg’s guidelines on working conditions and the environment.

For more information about Björn Borg logistics and product development, see the Björn Borg sustainability report.

Distribution

Wholesale operations and product distribution to retailers is handled by external distributors with the right to market and resell Björn Borg products in one or more geographical markets, but also through the company’s own distribution primarily in Sweden, Finland, the Netherlands, Belgium, Germany and England. Björn Borg’s partners in the network are established players with experience in underwear or fast-moving consumer goods rather than fashion, and have an extensive distribution network in their local market with the resources for long-term investments. In new markets, each distributor is evaluated in terms of its opportunities, marketing capabilities and penetration during an initial two-year trial period, after which a decision is made how to further develop the market.

Own distribution

To a growing degree distribution is handled through companies within the Group. In its main areas, underwear and sports and performance apparel, Björn Borg is responsible for distribution in Sweden, England, the Netherlands, Belgium, Germany and Finland with its own sales organisations in these markets. Distribution of footwear in Sweden, Finland, Denmark and the Baltic countries is also managed by the Group.

Cooperation with external distributors

Distributors sell and distribute the products to retailers by building the brand in their markets through their own sales organisations. They are responsible for sourcing, sales support, inventory, regional marketing, media planning and training. Björn Borg provides support and guidelines in the form of joint marketing and PR campaigns, among other activities. In their agreements, distributors commit to specific sales and investment targets in their markets. If a distributor cannot fulfill the requirements, Björn Borg normally can terminate the agreement.

The challenge for distributors, in the face of tight competition, is to establish and maintain their position as a supplier to chains, department stores and independent retailers. Success requires a high level of service for retailers in the form of fast replenishment, attractive promotional materials and effective marketing activities. The ability to drive sell-through in this way is critical. Marketing and sales feedback from distributors to Björn Borg and the licensees is important in order to continuously develop and adapt the collections and marketing activities. Several times a year Björn Borg brings together all its distributors for sales meetings, where new collections and marketing campaigns are shown and strategies and planning are discussed. The performance of each market is evaluated as well. This close cooperation within the network is important to the successful expansion of the brand. The agreement with the Danish distributor extends through December 31, 2020.

Retail

Björn Borg products are sold in department stores, chains and independent retailers as well as through Group-owned and franchised Björn Borg stores and factory outlets. A growing share is sold in Björn Borg stores and online through various e-tailers and the Group’s web shop. This retail mix creates the right positioning in the upper mid-price segment while also generating high sales volumes.

The large network of outside retailers represents an important interface with consumers. In all, around 3,700 retailers sell Björn Borg underwear and sports apparel, including 900 in Sweden, 540 in Denmark, 660 in the Netherlands, 640 in Norway, 240 in Belgium, 260 in England and 440 in Finland. In smaller markets, around 900 retailers sell these products and all in all, Björn Borg products are sold through a total of around 4,600 retailers.

Apparel and sporting goods chains and department stores have gradually grown in importance to the sale of Björn Borg products, while independent retailers are shrinking in number. This creates a more efficient selling-in process and leads to greater exposure in areas with high customer turnover. Underwear from Björn Borg is often displayed centrally in department stores, retail chains and fashion boutiques. From well-stocked displays, the products build brand awareness. Björn Borg provides stores with flexible Point of Sale solutions for small spaces, along with fast service and replenishment. This facilitates sales at the retail level – a strong sales argument for Björn Borg’s distributors. In several major chains and department stores, Björn Borg products are displayed separately in so-called shop-in-shops with the brand’s own décor.

Björn Borg stores

Besides being a key component for sales and profitability, Björn Borg stores are important for the brand’s exposure and marketing and an important channel for direct contact with the consumer. Björn Borg continuously evaluates its retail presence to find an optimal mix of Björn Borg stores – its own and externally owned – in both established and new markets. The Group’s own stores, along with e-commerce, are expected to continue to play a central role in Björn Borg’s business model in new as well as more mature markets.

E-commerce

E-commerce enables Björn Borg as a brand to showcase the breadth of its product range, which makes it a directly measurable channel to spot the latest consumer trends. Sports apparel was again given more weight in 2018, although underwear still accounts for a majority of sales. Sales from Björn Borg’s own e-commerce increased during the year, and it still sees good growth opportunities.

Going forward e-commerce will continue to be a priority sales channel. Sales through e-tailers continues to rise in both Björn Borg’s own markets and markets where distribution is managed by external partners. Total sales from Björn Borg’s own e-commerce and e-tailers amounted to SEK 141 million (113) during the year. Björn Borg will maintain a strong focus on e-tailers and virtual marketplaces going forward.