Operations

Business model

The Group’s stable profitability and the successful positioning of the Björn Borg brand largely originate with the business model, which facilitates a geographical and product expansion with limited operational risk and capital investment.

Björn Borg’s business model utilizes the Group’s own companies as well as a network of 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 by either the Group or external distributors or franchisees. Björn Borg owns strategically important operations at each 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 the key parts of the value chain and develop the brand internationally with a compact organization and limited financial investment and risks. The business model is relatively capital efficient, 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.

Due to the termination of the distributor for Benelux, the business model will change over the long term as distribution in these markets is brought in-house. This will mean a higher degree of control over sales and marketing by Björn Borg, but at the same time an increase in tied-up capital.

Björn Borg Operations

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 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 tools for partners in the network, including marketing activities, displays and graphic identity material, which ensures branding consistency and is efficient for distributors.

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 specialists in brand management and development. Since acquiring the Björn Borg trademark in 2006, the Group has been responsible for trademark registration and protection. Björn Borg devotes significant resources to combat the sale of counterfeit products, especially in the Netherlands and Denmark and tourist destinations such as Turkey, Greece, Bulgaria and Southeast Asia.

Product areas

The largest and strategically most important product areas, underwear as well as sports and functional apparel, are owned and managed by the Group. In 2015 the design and product development of sports and functional apparel was started up internally in Sweden, and beginning with the fall 2016 collection all sports and functional apparel will be developed by the Swedish product company.

Product development in other areas – footwear, bags, eyewear and other – is licensed to external parties.
Every product company, whether Group-owned or managed by a licensee, 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 are done internally by the companies, while production is outsourced mostly to Asia – primarily China – but in recent years more to Europe as well, which means shorter lead times and better control.

High demands 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, two factors that 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 see Björn Borg’s corporate social responsibility.

Distribution

The majority of 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.

Björn Borg’s partners in the network must be entrenched players with experience in underwear or fast-moving consumer goods rather than fashion and have an established 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 being handled by companies within the Group. In its main areas, underwear as well as sports and functional apparel, Björn Borg is responsible for distribution in Sweden, England and Finland through its own sales organizations in these markets. The Group also handles footwear distribution in Sweden, Finland, Denmark and the Baltic countries. Since the fragrances product area was incorporated into the Group, Björn Borg has been responsible for distribution of its products as well. Sales to customers of sporting goods retailers were expanded in 2015.

Cooperation with external distributors

Distributors sell and distribute the products to retailers by building the brand in their markets through their sales forces. 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 particular distributor cannot meet the requirements, Björn Borg can normally terminate its 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. The key to success is to provide a high level of service for retailers in the form of fast replenishment, attractive promotional materials and effective marketing activities. The ability to drive retail sales 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 the new collections and marketing campaigns are shown and strategies and planning are discussed. The performance of each market is evaluated as well. Close cooperation within the network is important to the successful expansion of the brand.

Retail

Björn Borg products are sold at department stores, chains and independent retailers as well as through Group-owned and franchised Björn Borg stores and factory outlets. A growing share of products is sold in Björn Borg stores and online through various websites, including 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 3,300 retailers sell Björn Borg underwear and sports apparel, including 900 in Sweden, 680 in Denmark, 640 in the Netherlands, 550 in Norway, 250 in Belgium and 280 in Finland. In smaller markets, around 850 retailers sell these products. Björn Borg products are sold through a total of around 6,000 retailers.

Fashion and sporting goods chains as well as 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 the 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

The Björn Borg stores are important to the brand’s exposure, marketing and direct contacts with consumers. At the same time they are a valuable source of sales. Concept development continued in 2015. The latest concept, which is used at the new Mall of Scandinavia in Stockholm, among other locations, is called “Cube Concept” and will be applied in all new stores.

Björn Borg continuously evaluates its retail presence to find an optimal number of Björn Borg stores– its own and externally owned – in established as well as new markets. The idea is that the Group’s own stores, together with e-commerce, will continue to play a central role in Björn Borg’s business model in new and 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. Two of the most distinctive trends in 2015 were the
increased demand for multipacks and the growing importance of sports apparel, even though underwear continued to account for the majority of sales. A new web shop design was launched at the end of the year to further adapt to mobile devices as the largest future source of traffic. Björn Borg’s own e-commerce sales were strong in 2015 (up 73 percent), and it sees continued growth opportunities.

Sales through e-tailers, i.e., online resellers, continue to rise in local markets with fewer customers as well as in the international market through large customers such as Zalando, Amazon and ASOS. In established markets, e-commerce offers greater availability, and in new markets it is an important complement since the number of retailers is still limited.