Pass through any mall or department store. It's hard not to notice abundance of celebrity signature apparel and accessories. Jaclyn Smith, Cheryl Tiegs, Christie Brinkley, Jane Fonda, Elizabeth Taylor, Linda Evans, and more have the name attached to a particular lice of clothing, cologne, or other accoutrements. But star strategy is nothing to sneer at. Starting retail price for Fonda workout togs is around $50. Cher's Uninhibited perfume $175 an ounce.
And Olivia Newton-John's Koala Blue, the Southern California-based retail apparel and licensing operation partnered by the singer/actress and her long time friend Pat Farrar, is making a multi-million-collar international name for itself. Dismissed by the media and fellow retailers as merely a cute, celebrity venture, the company found its niche in the right combination of colors, comfortable, price points, and the fact that, as the trade magazine Marketing News put it, Aussie mania
swept the US in the late 1980s. The upshot for this particular side venture
has been that gross sales in 1989 are anticipated in excess of $30 million, current worldwide store count: 40. If you qualify financially, you might want to consider becoming retailer number 41.
LET'S GET PRACTICAL
Koala Blue began over a whimsical dinner conversation between longtime Aussie friends Newton-John and Farrar, their stroll down memory lane broke into a decision to bring a bit of their homeland to the United States. They would open a shop featuring the kinds of fashions they liked to wear and at the same time capture some of the color and culture of their continent.
By the time dessert arrived, Koala Blue (an acronym for Korner Of Australia in Los Angeles; blue means friend in Australian parlance) had been born. The grand opening took place in October 1983, in a store on hip-and-trendy Melrose Avenue In Los Angeles' West Hollywood section.
Image counts for a lot in hip-and-trendy LA, and Koala Blue's opening was, in true Hollywood style, grandiose and expensive. It was also, the founders now admit, their first business mistake. We just couldn't have a normal opening party,
Farrar explains. Livvie is a star, and the party had to be in a grand style and on a grand scale. So we spent lavishly for that one evening. We even had T-shirts screened with the Koala Blue logo-but thank God for that.
Why thanks were due became clearer only after costs were counted. We invested a substantial amount of money in that one store, and most of it was lost,
says Newton-John. We imported everything from aboriginal art to Australian artifacts, some at a very costly price.
IT'S THE BUDGET I WANT
The problem, stated in business terms, was one that's all too typical of first-time boutique retailers: a nonexistent budget and business plan. It almost added up to disaster for Koala Blue. We just opened the store and were rather extravagant and silly.
recalls Newton-John. As Pat said, a lot of it went toward the grand opening. What saved us is that we found people kept coming in to buy the signature T-shirts, sweatshirts, and leggings. Those items kept us afloat for a couple of months until we found our real niche.
As Koala Blue developed, so did the hands-on market, management, and inventory knowledge of its owners. Today,
Farrar reports, 85% of our products are women's sportswear -T-shirts, sweatshirts, socks, what we call our signature items, and our designer items, which are all our fashion-forward styles for each season.
Approximately 5% of the Koala Blue inventory comprises children's clothing, and another 56-69% is made up of accessories.
You might expect that Koala Blue imports its apparel and accessories. Not so most of the clothings manufactured in the company's own factory in Bell Gardens, a suburb of Los Angeles. But Farrar and Newton-John strive for the Aussie accent and work with Australian designers living in the US whenever they can The look is definitely Down Under; customers and clothing, however, are for the most part made in the USA.
Our customers range from 18 to 45.
says Newton-John, citing Koala Blue market demographics, and our clothes run the same gamut. Some things are geared for a teen while others are for more mature women.
The clothing is feminine, bright, colorful. It's also affordable (surprisingly, perhaps, given the lustre that a star of Newton-John's stature brings to this nonentertainment-industry venture). Most Koala Blue designs are finer contemporary coordinates and separates, which account for about two-thirds of sales. Newton-John describes the concept of the line as styles that are put together in component groupings, like a mini and long skirt, pants, snorts, and various tops and blazers.
Adds Farrar, Our clothing is unconstricted and uncontrived, and the majority of our fashions are made of cotton with elastic waists. We like well-fitting garments, like leggings, which can be matched with almost anything in the store.
The coordinated approach to fashion appears to account at least in part for the moderate prices typical of the line. Basic tops retail for $16-$45, and $18-560 for bottoms. Using a standard markup formula of keystone plus three, this puts typical wholesale cost of misses' and women's separates at about $8-$20 for tops and $9-$27 for bottoms.
The owners agree that their best form of advertisement has been the fact that they wear the clothes themselves. People are constantly coming up to me and asking where I bought what I'm wearing,
says Newton-John. But that is hardly sufficient for what has become since 1984 a chain of apparel boutiques. Today, Koala Blue supplements the walking, talking commercials with an annual advertising budget of $750.000 and an aggressive, high-visibility marketing strategy. The dollar figure includes an array of ad media that have proven successful for major labels: billboards, signs in subway stations, bus stops, glossy-magazine print ads, color postcards, and a music video starring guess-who that's distributed to each store so that customers can preview next season's fashion line.
I HONESTLY CLONE YOU
The Koala Blue look and label have leapt and bounded in a way worthy of a giant kangaroo. By the end of 989, there will be 40 stores worldwide, from the sites already licensed in the US, Cana da, and Japan to the newest locations in France and China. We just signed deals for a store in Barritz and one in Hong Kong,
says Newton-John, and we're even close to making a deal in Australia.
What? No stores in Australia yet? In order to go into Australia, you have to find a partner,
explains David Sidell. whom Newton-john and Farrar brought in as Koala Blue's chief operating officer after their initial foray into the market. Sidell says the reason it has taken so long to establish the Koala Blue name in Australia is because of high import duties and complex protectionist policies of the Australian government. But he says the firm did find an Aussie partner and that expansion Down Under is a matter of time. As he says, They're going to replicate the concept the way we have it here-manufacturing, licensing, and retail-and we'll just be partners.
Sidell cites the benefits of expanding Koala Blue throughout the area that's be come known as the Pacific Rim. in Hong Kong,
he says, it's a free port and the dollar is very strong there. And in Japan, the port duties aren't that high, and the yen is so powerful that it doesn't have much of an impact on our sales.
According to Sidell, the company antic pates having opened more than 60 stares by the end of 1990.
The exponential growth of Koala Blue began in 1987, with the implementation of strategic business expansion. This involved licensing the store name, concept, and merchandise to outside investors interested in owning and running their own Koala Blue retail stores. In that first year of adopting licensees, their Si-million sales figure quadrupled, to $4.5 million.
Koala Blues licensing, not franchising, its name, and Sidell is quick to point put the difference. The main difference with a franchise is that they charge royalties and franchise fees,
he says. What we do is grant people the right to use the Koala Blue name and purchase Koala Blue products from us. We're a manufacturer for them, just like Polo or Benetton, so we're basically creating a market for our own products in our own licensed stores instead of through department stores. We're safer that way-vertically integrated - which gives us total control on raw material, production, manufacturing, and distribution.
IF THE SUIT FITS...
In the garment wars, as Olivia Newton-John and Pat Farrar discovered, a newcomer can get caught in some pretty serious crossfire. It's important to know the workings of the market inside and out, before taking up arms. The clothing business right now is really competitive
, warns Sidell. Unless you have something that is different than everybody else or priced low, you might be in trouble unless you do your homework. Don't spend a lot on fixed overhead-it'll kill you.
Armed with a better grasp of business affairs, the founders of Koala Blue anticipate no more boomerangs. What has made Koala Blue so distinctive and profitable, they agree, is that as Sidell says, nobody else has it. There are lots of different styles of clothing, but nothing like Koala Blue. It represents a lifestyle, and we've found a niche for ourselves with consumers. And because we're only dependent upon ourselves for pricing and production, we don't have to worry about what happens in Japan or Hong Kong or Korea.
Plus,
he adds, we have Livvie.
But Newton-john emphasizes that she lends not only her name but what over several years has become her strong business savvy to this successful firm. As Sidell puts it. Olivia is creative, innovative, and has great taste in clothes. She might open the door, but once the door is open, it's our job to keep it open.
With American tourism in Australia increasing by 25% a year since the mid-1980s and everything Australian from baked goods to shrimps, barbies, and brew pubs making a splash in cities across North America. Aussie mania seems here to stay. And Koala Blue, licensing plans and all, poised to do plenty more than just say g'day. We're not just the flavor of the month.
says Farrar. We caught it right at the beginning and it's kept on going. We don't particularly follow all the fashion trends, but we try and offer something that's a little different. And so far it's worked.
How about that for a Down-Understatement?
TAKE A CHANCE
What does it take for a mere mortal to own a Koala Blue store? For starters, check your business-planning savvy and wherewithal. COO Sidell explains Koala Blue's licensing and merchandising concept. What we do,
he told WOMAN's ENTERPRISE, is have the interested party or parties fill out an application which states their background and financial condition. Assuming they're qualified, they would then come to Los Angeles to meet with me, Pat, and Olivia, to see our operations, our distribution center and factory. And we in turn would try to get to know them better. Assuming we feel good about them, we give them a license agreement to review.
They actually have their choice of location or territory, Sidell continues, but we do ask that they have access to $200,000 and a net worth of $500,000. But that comes down to a business value judgment on our part, as to how flexible we choose to be.
Once established in their Koala Blue store (generally 800-1,500 sq. ft. in size). licensees purchase stock ranging in value from $50,000 to $100,000, depending on the apparel season, We provide all our licensees with basic ads, ad-mats, color slides, logo, and artwork necessary to place local ads,
says Sidell. And we spend approximately 4% of what a store purchases from us in their advertising They can co-op it with us or not. It's not a guaranteed 4%, but it's a pretty good guideline we use. And that includes the music video and a lot of little things we add during the year.
With annual figures in front of him, Sidell names Koala Blue's South Coast Plaza Store, located in Southern California's Orange County, the best in sales, This will undoubtedly be the site from which the chain will start the planned expansion of its line of children's clothing in the early part of 1990. We're so busy developing women's grouping and opening new stores,
says Sidell, that we want to make sure our production and distribution capabilities are there before we really concentrate on kids. But we have conducted market research and our children's the would be merchandised along the same avenue as our women's clothing.
Retail prices of children's clothing currently available at Koala Blue outlets are fairly moderate, from $9 for a T-shirt to $100 for hand-knit sweaters (see box, page 43). Reflecting Koala Blues concern to appeal to the baby-boom-echo market, with which she is personally familiar, mother Olivia comments, I'd like to design the type of children's clothing that I'd like to see on Chloe.
If the Australian mood isn't set in a Koala Blue outlet with the plush koalas, Australian books, mugs, and visors (all bearing the KB logo), then it may be with the presence of a Milk Bar, which is featured in a few of the stores. But Sidell points out that foodservice's a secondary concern for future Koala Blue outlets. Although the Melrose store in Los Angeles offers beer, wine, and assorted pastries, plus such Aussie accented specialities as frothy milkshakes. Australian sandwiches, cookies, candy bars, and desserts, in most locations, he says, you really don't have enough seats and volume to cover the overhead of operating a restaurant.
This year, Koala Blue will also best the licensing of women's accessories with the Koala Blue label through department stores. According to Newton-John, the line will probably begin with perfume. This way we can still maintain total control over the merchandise.