Monday, November 24, 2008

Link of the day - How Changed The Domain Game For Good

A little over five years ago, Michael Ball looked at his then-girlfriend's expensive jeans and decided he could design a much better pair himself. Not long after, Ball, who had no fashion design experience, did just that, creating an ultra-slim fitting line that caught on with the celebrity set in Los Angeles. Having stirred interest, he got financial backing, suppliers, and manufacturers together and began selling his high-end jeans for $300 from specialty stores within the city. A cult following soon developed.

Since then, Ball has turned his idea into Culver City (Calif.)-based Rock & Republic, a $300 million brand of men's and women's jeans that now includes cosmetics, accessories, shoes, and other clothing lines that are sold in 86 countries. His long-term goal is to create a far-reaching lifestyle brand that includes boutique hotels and restaurants and a domestic airline. Ball says he is far from done.

From the start, Ball, 43, a former television commercial actor and professional long-distance cyclist, concluded he had to do more than just design cool jeans to be successful in the cutthroat denim market. He had to create a new version of cool. Although he began by planning to construct a high-quality product as a foundation, Ball says: "I was clear about who we were as a brand and who we were going after. The market was clean, edgy, rock-and-roll. I was very confident, take-no-prisoners."
A Life-Changing Purchase

According to market researcher NPD Group, denim is an $11 billion industry in the U.S. and has been growing at around a 5% to 7% clip in recent years. Premium labels such as Rock & Republic now account for a 7% chunk of the total market. "Consumers will pay $300 for the right pair of jeans," says Marshal Cohen, NPD's chief industry analyst. "They see it as an investment."

Moreover, Cohen says, "certain denim brands have made it their focus to be a game-changer. They make you feel really great and you will pay twice as much for those. What [Ball] is able to do is get the consumer of many different age segments and deliver on the implied promise that these jeans will make your life better, you will feel better."

Even in an economic downturn, Cohen calls denim "recession-resistant." "People are going to make significant changes," he says. "They don't have a lot of money in their pockets. They may not buy three pairs, but they will buy one pair and it has to be about who has the right message."
Timing is Everything

At the time of Rock & Republic's debut in 2002, premium jeans (those with price tags that start at $75) were on the rise. Brands like True Religion (TRLG), Citizens for Humanity, Diesel, and 7 for All Mankind had recently hit the market and were catching on. Ball acknowledges that his timing was spot on. "7 was exploding and buyers were looking for the next big thing," he says.

The rest of his success came down to branding and marketing. Following a strategy to create a niche label within a tight space of niche labels, Ball and his partner, Andrea Bernholtz, unveiled the line at fashion shows primed to grab attention. They had models careen down the runway drinking beer, flipping the bird at photographers, and lifting their skirts. "We did things that no one did," Ball recalls.

At the same time, Rock & Republic worked to heighten interest among consumers and retailers by creating scarcity. According to Ball, when Barneys came to him and said it wanted an exclusive deal to sell his line, he turned the luxury department store down. In the beginning he says he also turned away Bloomingdale's. "My ability to say no made our brand," he says. "I had a twofold strategy about where I placed the brand and leverag[ed] its exclusivity."
Hit With Lawsuits

As he built his brand, Ball earned a reputation for brash arrogance, taking digs at his competitors and blithely forecasting triple-digit growth. Last year, he told the Los Angeles Times that his company would reach $400 million in sales, eclipsing the combined total of revenue of his two closest competitors. (Annual sales are over $300 million, he now says).

Last year, Ball was served with a handful of civil suits, alleging defamation, extortion, assault, and sexual harassment. However, at least two of the suits alleging extortion and harassment were dismissed and the defamation suit was voluntarily withdrawn. (Currently, the extortion suit is being appealed.)

Ball, who holds the view that all publicity is good publicity, cites Sir Richard Branson, and his Virgin Group empire as a business role model. "He was able to market and brand himself and his various products very well," Ball says. "I learned [from watching him] that those businesses that he is completely attuned to became extremely successful and those that were kind of a throwaway, kind of failed." Ball learned the latter lesson the hard way over the past year when he says he neglected his new handbag and footwear categories and their sales slipped.
Moving Away from Top Tier

Ball says that sales during the first half of 2008 were up 14% but have fallen flat in the second half. With consumer spending slowing to a trickle, Ball says he's had to put some of his grand plans on hold, recalibrate, and retrench, including repricing his luxury jeans which had catalyzed the denim market. Going forward he says, "we are not developing jeans above $280. The top-tier has fallen off—there is no point in sitting there."

If any luxury brand has a shot at staying aloft during this downturn it very well might just be Rock & Republic. "We know very well from our data that strong brands hold up better than weak ones," says Nigel Hollis, chief global analyst at Millward Brown, a branding firm. "And by strong I mean those that have a distinctive position and a real perceived differentiation in the market. Rock & Republic seems to fit that bill even in a fairly competitive market."

Moreover, Hollis says one should not underestimate the cachet that Rock & Republic jeans continues to confer on its wearers. "Yacht manufacturers are suffering," he says. "But let's face it, someone that is willing to shell out $200 to $300 on jeans is not going to run out to the Gap (GPS) for their next pair. There is tremendous badge value in this sort of luxury and if Rock & Republic has it, that is what people will buy."
Retail Plans Moving Ahead

For now, the Ball's boutique airline is on hold. The hotels and restaurants, however, are moving forward, he explains, because he is using "other people's money" to finance them. Plans to open the first Rock & Republic branded supper club in Los Angeles is on tap for third quarter of next year, and a hotel in Las Vegas is planned by 2011.

The one area that is moving ahead more or less as planned is the expansion of his Rock & Republic retail stores. "Freestanding stores means control of our own destiny," says Ball. He has, however, reconsidered locations. "Rodeo Drive [in Beverly Hills] or Fifth Avenue [in New York City] are not as important anymore."

When asked about his future plans for his brand given the state of the economy, Ball says, without irony, "global dominance."

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