rector for Australia and New Zealand, Dane O’Shanassy, to discuss how the ownership change has impacted the team, the opening of the brand’s first bricks-and-mortar store in New Zealand this year, and what’s next for the brand. Inside Retail: Patagonia is celebrating its 50th anniversary this year. How are you marking the event in Australia and New Zealand? Dane O’Shanassy: The official anniversary happened earlier this year, but a lot of it started with the ownership change that happened last year. That’s been such a foundational change for us – practically, culturally – it’s like nothing changed and everything has.  The company always has a hard time talking about itself and its accomplishments. I think we prefer to talk about the work we’ve yet to do, so rather than look back at our accomplishments over 50 years and provide a history lesson, we looked the other way and said, ‘What are we going to do in the next 50 years? How are we going to amplify and accelerate the important mission work the company does in the future?’ That really led us to try to provoke people’s thinking. We launched with a core message called, ‘Not Mars’. We ran some newspaper ads and billboards in Australia, and concurrently around the world. The idea was to look at where other wealthy people are spending their money in pursuit of getting to other planets, and [say], ‘Let’s just focus on the gift that we have here.’  It was a bit cheeky, which was kind of fun, and now that’s really manifested into asking our customers what it means to thrive into the next 50 years. What does it mean for our mission work, our environmental activism? What does it mean for community and culture? What does it mean for justice? All these things aren’t necessarily independent of each other, they can be and are interlinked.  Patagonia’s “cheeky” campaign released earlier this year. Supplied IR: You mentioned the ownership change that happened last year. As the country manager for Patagonia in Australia and New Zealand, what was your first reaction to that announcement, and what has it meant in terms of the way you work?  DO: It was a big secret, and before we told our staff and customers or anyone else, media included, I was one of the small group of people around the world who had to plan out the [announcement], so I got early wind of it by about a month or so.  The donation of this income-producing asset, which will put north of US$100 million a year now into philanthropic causes, is huge. It’s going to do that every year, and as our business grows stronger and stronger, it will do that more and more. And that’s just the monetary impact, let alone the advocacy impact that we can make.  I was really impressed with the reverence with which the company treated its employees, to really make it about them and have a moment for them to come together, and not just current employees, but inviting past employees to be part of this transition. To see the energy that it brought the team was fantastic.  The unique structure means that the owner sits over here with the mandate to fight climate change and save our home planet, but they don’t have any influence over how we run the business. And those who are responsible for running the business don’t have any financial gain to be made. So there’s a really nice tension to say, ‘Hey, so that Patagonia can produce the wealth and influence that it has, it needs to stay on the sharp edge, invest in the business and innovate, because if we don’t, and we start to whittle it down, it’s almost like selling the farm.’  Patagonia country director for Australia and New Zealand, Dane O’Shanassy. Supplied IR: It sounds like there’s an even stronger incentive for the people within the business to improve it. DO: I’ll tell you another little anecdote. A couple of years ago, the company updated its mission statement to, ‘We’re in business to save the home planet.’ Prior to that, it was, ‘Build the best product, cause no unnecessary harm, and use business to inspire and implement solutions to the environmental crisis.’ It was a huge mouthful, but it was really useful, because as you encountered decisions, you had a moral compass to work with. When [Patagonia founder] Yvon [Chouinard] announced that he had changed it, we were all like, ‘What does that mean?’ His answer was, ‘That’s for you guys to figure out.’ So again, there’s a really nice vision that Yvon and other people in the company have helped create, but the agency that’s not just offered but expected from employees to make it a reality is something that makes this brand truly unique. Usually, that sort of strategy is tightly held, but Patagonia is a very human place that relies on ethics, morals and culture to drive it forward.  IR: Over the last year, there has been even more of a focus on greenwashing. Even though a lot more brands are talking more about sustainability now, you don’t see many businesses taking the kinds of steps that Patagonia has. It’s still the high watermark.  DO: What I’ve observed is that the market and consumer expectations are shifting, and the ability to dig through greenwashing is way easier. We’ve got a supercomputer in our pocket now, with our phones, so it’s much more difficult to keep a lid on bad news. But I think that the thinking has gone from risk aversion, to ‘Let’s just do the right thing.’ Brands that are providing a product or service that has [sustainable] qualities can charge more, and their brands are seen to be stronger and have more equity as a result. So I think it’s gone from risk aversion to a much more traditional business space, where it’s essential.  We’ve been around for 50 years, so people think it must be easy for us. Well, no. This is 50 years of doing lots and lots of little things – courage-building, lessons learned – and what seems like a big step is really just a small step from the last one.  There are governance models that help build trust with our customers. So when we say we’re using fair-trade labour, you don’t need to trust us; go look at Fair Trade USA and their standards because they’re auditing our work. We’re one of the biggest fair-trade garment brands in the world now, which is horrible to think about, given we’re still quite a small brand in the grand scheme of things.  I celebrate and cheer on any individuals trying to make change in any sort of business with this sort of stuff. I sleep well at night, knowing that we can’t be perfect, and it’s the process of continuous improvement and the pursuit of doing less harm. IR: I wanted to ask you about the policy that you rolled out last year aimed at encouraging your wholesale partners to reduce their carbon footprints. Can you provide an update on that, and how effective it’s been? DO: That’s the Impact Incentive. There were two parts to it. First of all, we were going, ‘How can we make sure that, where possible, we can support and lift up our partners who are not just reducing their own carbon footprint, but using their business to do good? That might be supporting local grassroots environmental activism.’  That’s where the incentive came in. So, if you are doing these things, if you can show us some evidence of putting solar panels on your roof, making a donation to a local group, we will provide you with a rebate or a discount to offset some of that cost. For those going a little further, such as 1% for the Planet or B Corp members, we would up that rebate or discount again to provide more financial return.  The other side of it was going, ‘Business as usual is about discounting your biggest customers based on volume, and in some ways, that creates an underlying culture of rewarding those that are helping people consume more.’ We ask our customers not to buy it if they don’t need it, so we don’t want to incentivise the wrong sort of behaviour.  We were blown away at the interest. Almost everyone we spoke to said, ‘This is incredible.’ There were some who were already doing these things, there were others who said, ‘Tell me how to do it,’ and there were others that really liked the idea but weren’t quite sure how to get started.  We were really careful not to make this a punitive process. For us, this is how we’re going to conduct our business, so season one, two, three and 20, we want to help people move with us. Those who are doing the most are going to be sharing in the wealth that is created.  We’ve had a handful of early adopters. We’ve had some of our biggest accounts reframe some of the good work that they’re doing in communities to take advantage of this. One of our top five customers in New Zealand jumped on in the first season, so we’ve had some incredible things happen out of the gates.  But we also realised that we probably need to provide more support. We’re lucky to have employees who are experts in this stuff; we’ve got knowledge that we can pass on. So this season, we’re creating resources for when these conversations come up. Not just how to do it, because it’s not that hard to figure out how to make a donation or put solar panels on, the real opportunity for our partners is differentiating their business from their competitors.  There’s a growing consumer base that is really seeking out brands and resellers that are doing good things. Market research says people are willing to pay 25 per cent more for goods and services that have an ethical, social or environmental benefit built into the core value proposition. These are really customers of the future, which is arguably where a lot of the disposable income lies.  IR: You mentioned that the aim is not to be punitive, so how have you been working with those resellers that have said, ‘We’re not sure,’ or ‘We need more time’? Have they lost their discount?  DO: In some cases, yes. We’ve wanted to be a little bespoke in the timeline that we’ve offered those partners, but we’re in the very final stages of saying, ‘If you’re not moving into taking action here, your discount is going away.’ We do offer a small discount support for what we call core specialty sports stores – a ski shop or a bike shop – but we don’t actually have that many people getting a [volume] discount anyway.  Working in the rag trade, there are margin deals all over the place, so it’s actually a big prevention tool for us. A lot of big box accounts have enormous margin pressure. That doesn’t mean they’re not interested. We get calls from every big retailer you can imagine, but the first thing we say is, ‘We can do margin, but this is what’s required.’  It’s not just ‘talk the talk’, it’s ‘walk the walk’. It also challenges us to think about different retail models – consignment, shop in shop – that allow us to maintain control over assortment, price and communications. It’s not punitive, but we must see through these things for our own integrity’s sake.  IR: Can you give an update on how the local market is going for Patagonia?  DO: We’ve had an incredible year of growth. We had a great year the year before, and we had a relatively flat year prior to that, because there was so much closure. This was the first year of unencumbered trade that we’ve had, and we went into it pretty trepidatiously, because we weren’t sure what to expect.  That same feeling is prevailing into next year, even amidst the dark clouds of recession.  Patagonia traditionally has always done well through times of economic hardship. That’s been absolutely true of the last 12 months here in Australia. I would not want to presume that it’s going to continue unencumbered, but at this stage, there are no signs of it slowing down.  We’ve had best ever sales, best ever sell-through across here and New Zealand. Every one of our retail stores has had its very best year ever. I don’t talk about specific numbers because we’re privately held by the planet now, but when I hear what is going on with other brands, we’re well ahead of what they’re doing.  We definitely saw a softening of our e-commerce business in the last year, and the cost of e-commerce is going up. We’re fortunate to have a great sales forecasting and buying team, so we’ve had a lot of the right stuff at the right time, and that has positioned us well.  We’re really careful about our distribution. We grew enormously in the last year; however, we also want to control our growth, so we don’t oversupply, and so we don’t devalue our own product. IR: Off the back of that, you’re opening your first store in New Zealand. Can you tell me about where it will be, when it will open and why you decided it was the right time to do that? DO: We started to work on that pre-Covid, so it’s a little bit delayed, for obvious reasons. The location is in Queenstown. We’ve been selling into New Zealand for a little while through our wholesale partners and our online business, but with the establishment of the first store, we really see this as the start of Patagonia in New Zealand.  We want to build this as a New Zealand business, not as an Australian branch of an American company doing some more selling somewhere else. So when this all begins – we’re hoping to open in August – we’ll be rolling out our 1% for the Planet grants program to support and engage the local community around that area.  We want to use our store for events and things in service of the community, and over time, we hope that business will grow to a couple more stores around the country. Over the next few years, we expect to have a great little crew who are working hard on important issues to Kiwi customers, not just what Australians think Kiwi customers might want or need.  IR: In addition to the new store, is there anything else that we can expect to see from Patagonia in New Zealand and Australia in the near future? DO: We plan to open more stores in Australia, too. We don’t open a lot of stores; each one is a fairly bespoke affair, so it’s not a sort of race to having 100 or 200 stores. It’s a slower strategy.  We’ve got some exciting new environmental campaigns coming around healthy oceans this year. We were so excited to hear about the end of native forest logging in Victoria – that’s a campaign we’ve been working on for the last couple of years. There’s no finish line to this work. It’s really about looking at the next thing that comes along. We want our environmental activism and philanthropy to grow as our business grows. We’re starting to see some of the money from the new business structure coming to the market here in Australia, and potentially New Zealand as well. A couple of our long-standing grantees were benefactors of some really big donations. That was a wonderful thing to be part of.  Again, this business is a tool for environmental protection, so the responsibility we have is to not go, ‘How big are we going to be in five years?’ I’ve never been asked by the Chouinards how sales are going, but they’re very interested in what impact we’re having in the local context. It’s a reminder of why this business is different.