ISAG

European Business School

PATAGONIA – MARKETING PLAN

Marketing Management

Eline Bevers
Pavol Huňor
Michaela Maršánová
Simona Hránková
2022 Veronika Housová
Table of Content
1. Situation Analysis .............................................................................................................. 3
Market summary .................................................................................................................... 3
Market demographics............................................................................................................. 4
Market needs .......................................................................................................................... 5
Market trends and Growth ..................................................................................................... 5
2. SWOT analysis .................................................................................................................. 7
Competition.......................................................................................................................... 10
Product offering ................................................................................................................... 10
Keys to success .................................................................................................................... 11
Critical Issues ....................................................................................................................... 11
3. Marketing Strategy........................................................................................................... 12
Mission................................................................................................................................. 12
Marketing objectives ............................................................................................................ 12
Financial objectives ............................................................................................................. 13
Target markets ..................................................................................................................... 13
Positioning ........................................................................................................................... 14
4. Marketing Mix ................................................................................................................. 14
Product ................................................................................................................................. 15
Pricing .................................................................................................................................. 15
Place ..................................................................................................................................... 16
Promotion............................................................................................................................. 16
Patagonia´s P´s ..................................................................................................................... 17
5. Financials ......................................................................................................................... 19
Break-even analysis ............................................................................................................. 19
Sales forecast ....................................................................................................................... 19
Expense forecast .................................................................................................................. 20
6. Controls Implementation ................................................................................................. 20
Marketing organization ........................................................................................................ 20
Contingency planning .......................................................................................................... 21
References ................................................................................................................................ 22

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 1. Situation Analysis

Market summary
Regarding the economic forecast summary from December 2021, the economy is
projected to grow by 5.8% in 2022 and 2.8% in 2023. Around mid-2022 the GDP should
surpass the pre-crisis level. Its growth is mainly driven by domestic demand. Also, the economy
will be boosted by the use of EU funds. As the source of financial stress, we can consider the
non-performing loan ratio which belongs to the highest in Europe. Both, consumer confidence
and retail sales data imply a continued strong rebound in consumption in the short term. Service
sector continues to improve, while the tourism industry is recovering rapidly. (OECD, 2021)

Summary of Portugal´s demand, output and prices snags the chart below.

Patagonia is an American business specialized in outdoor and gear clothing and

equipment, and trying through their activity to seek to make the world better. In Portugal

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significant developments in environmental protection were made such as a quality of life
improvement, also Portuguese people are interested in the environmental and sustainability
topic.
The position of the Portuguese people on environmental sustainability is a great
opportunity as the fact that Portugal wants to produce more wealth and jobs by investing in the
sustainability of industries. (Rogado, 2015)

Market demographics
In April 2021, Portugal had 10,344,802 inhabitants, by 2050, the population is projected
to be 9.08 million people and by 2099, the population is expected to be down to 7.01 million
people. We can say that the population is decreasing at a rate of 0.29%, roughly 30,000 people
per year. This is a combination of negative net migration and fewer babies being born.
(Portugal Population 2021 (Demographics, Maps, Graphs), n.d.)
Outdoor activities are prominent in Portuguese culture thanks to the favourable climate,
for example the increase of Portuguese going on hikes. Also, the popularity of water sports is
an important opportunity for Patagonia, as it means the market is growing and there are new
potential customers.
In Portugal there are at least 200 000 surfers and due to Surfing statistics, the global
surf industry generates around $22 billion in revenue from hardware to wetsuits, footwear, and
surf clothing. (How Many Surfers Are There in the World?, n.d.) Portugal was also rated as a
top 9 country which has the most outdoor activities. (Best Countries for Adventure | US News
Best Countries, n.d.)
The total median age in Portugal is 44.6 years - this age belongs to target customers.
The population age structure of Portugal is captured in the picture below. (Portugal
Demographics 2020 (Population, Age, Sex, Trends), n.d.)

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Market needs
In Portugal, as in all Western countries some of the preferred strategies for reaching
Portuguese buyers effectively are advertising and trade promotion events. As advertising media
the newspapers, magazines, TV, and internet advertising are the most popular, while Portugal
offers a reasonably priced market in which to advertise.
In case of pricing, it is the most common explanation cited for why several U.S.
products which are offered in Portugal are not competitive. The pricing strategy of U.S.
products sometimes reflects the dealer price in the US, this often includes the exporter’s
marketing overhead. For the Portuguese market, marginal cost pricing is the most appropriate
method. (VAT) on most products and services is 23% in mainland Portugal, 18% in Azores,
and 22% in Madeira, and it is charged upon sale. Also, in Portugal there is a high demand for
support and excellent customer services. All the professional sellers are required to provide a
minimum two-year warranty on all consumer goods sold to consumers. (Portugal - Selling
Factors and Techniques, 2021)

Market trends and Growth

Between the most important fact for Patagonia entering the Portugal market is the
expenditure on clothing which tends to rise, more details are shown in the picture. Even there
are captured only from 2008 to 2019, we can predict the growth also in the future years.

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Source: Portugal; OECD; 2008 to 2019

Regarding the chart below, as the most popular online stores in the sports and outdoor
segment in Portugal in 2020, by e-commerce net sales are Nike, Decathlon and Adidas. In
Portugal, there are competitors with strong local presence which Patagonia needs to face. For
example, Deeply, a local and very well-known brand and also other brands such as The North
Face, Element, Rip Curl or Roxy. As Patagonia, they sell a range of products specialised in the
sport industry such as clothing, equipment and accessories.

Source: Statista.com, 2020

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 Last chart show hobbies and interests in Portugal. The results were gained by
responding people aged 18-64. Travelling such as outdoor activities and playing sports are the
most popular activities, what is a good sign for Patagonia in case they decide to enter Portugal
market.

Source: Statista.com, 2022

2. SWOT analysis
The SWOT analysis that is discussed as the next point represents Patagonia’s strengths
and weaknesses or the internal factors of the SWOT analysis and discusses the threats and
opportunities or the external factors (Mindtools, n.d.).

Strengths

● The strategy of Patagonia is a purpose-driven strategy that provides social

consciousness among its customers. They don’t have the 4P’s but the company uses
5P’s to sell their products. It includes price, place, product, promotion and purpose. The
impact that the brand has is as important to customers as the actual products they are
selling (Shastri, n.d., p.1).

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● Patagonia has a strong and loyal customer base. They prioritize communities and the
environment over revenues, so the consumers become loyal customers.
● Patagonia’s philosophy is buy less, buy quality. The company encourages its
customers to buy second-hand outdoor clothes instead of new clothes. It is clear that
the company values the environment more than its own profits. This philosophy attracts
millions of new customers which leads to higher sales.
● Patagonia has effective marketing campaigns such as Global Climate Strike which
convey the desire of the target market. The company responds to the growing eco-
consciousness among its customers.
● The HR-strategy of Patagonia is the employee-first strategy, which enhances morale,
efficiency, and productivity of the workforce. An example of the HR-strategy is during
the pandemic, the workers who couldn't go to work were getting paid the regular
salaries.
● The outstanding reputation that Patagonia built. Since its founding, Patagonia has
focused on aligning its core operation with special causes that matter to the consumer.
Its obsession with sustainable consumption of resources has contributed to the climb to
the top.
● Customers from nowadays are more eco-conscious than ever. The increasing interest
in eco-friendly operations by customers helps Patagonia. The company is the eco-
friendliest retailer and gives 1% revenue to environmental groups. This example makes
the company more wanted by their customers and potential customers.
● The majority of the products that Patagonia has are sustainable. The eco-conscious
customers are interested in the eco-friendly products of the company.
● Patagonia provides its consumers with unique services such as repairing.
● The company is putting the community above its revenue. With this community-
centric strategy, Patagonia endears itself to consumers. An example is the donation of
$10million to community-based environmentalists and activists. They received this
money due to Trump’s tax cuts in 2018.
● The company is a privately-owned business so it is not publicity traded. This gives
Patagonia advantages that their public competitors don’t have. For example the
company can change strategy faster than the public competitors because they don’t have
to go through investors and oversight boards (Business strategy hub, 2020, p.1).

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Weaknesses

● The company engages in politics which is good because social activism is important
in advancing the well-being of the community, but it exposes them to the toxicity of
politics. An example is the founder of Patagonia was one of the critics of Trump's
administration. This can push conservatives away from the company.
● The prices of the products are higher than their competitors.
● Like any other clothing company, Patagonia relies on suppliers from Asia. They
ensure that the suppliers follow the company’s rules and philosophy, but are still
exposed to a wide array of supply chain issues. Which results in over-reliance.
● The company struggles with online sales while other companies prioritized the adoption
of e-commerce. The weak e-commerce of Patagonia is their major weakness,
especially in the current pandemic crisis where consumers prefer online shopping.
● Their promotion is not traditional. The lack of traditional promotion has as a
consequence low brand awareness.
● The company depends heavily on the US market, which exposes Patagonia to the
vulnerabilities of the market.
● Patagonia doesn’t have many stores, only 37 in the US, 2 in Canada and a few in several
countries around the world. The low market presence of the company means that many
customers are forced to go to competitors (Business strategy hub, 2020, p.1).

Opportunities

● The company offers outdoor apparel and other products which are outdoor-related.
They can extend their product line by including everyday clothes, sportswear and
second-hand clothes.
● Patagonia operates now only in the US and Canada yet there is a high demand
worldwide for outdoor apparel. The company can expand globally so it will benefit
from regional streams of revenue.
● The company can strengthen their market presence by opening more stores in the
US. It helps to serve more customers and capture new potential customers.
● The exploitation of the company’s e-commerce channels could help their customers
to buy more products which is an opportunity for the company to grow. By exploiting
the e-commerce channels more effectively, the company’s sales will increase (Business
strategy hub, 2020, p.1).

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Threats

● The products of Patagonia are made from natural products like wool, which makes it
vulnerable to climate change. Due to prolonged droughts and flooding, the availability
of the company’s raw materials will become challenging.
● The retail sector is declining and it was accelerated by the pandemic. The decline
threatens the company’s profitability and long-term sustainability.
● The outdoor apparel retail sector has a lot of players who compete against each other
for market share. The stiff competition doesn’t make it easy for Patagania to gain
market share.
● The world is sliding deeper into recession, so consumers are reducing their nonessential
purchases like Patagonia’s outdoor clothes. The looming recession is a threat for the
company.
● The global pandemic forced Patagonia to close its stores and the company lost
millions. The possibility of more waves of the virus threatens its profits more (Business
strategy hub, 2020, p.1).

Competition

The growing interest among people in sports and mental health gives the outdoor
apparel market a giant boost in sales. The outdoor apparel market is a growing market
worldwide. During the forecast period of 2021-2026 the market will grow at a CAGR of 6.8%
(IndusrtyARC, n.d.).
That means more sales globally and also in Portugal. Portugal already has a couple of
brands that are in the market right now such as Zajo, North Face, Jack Wolfskin, Nike.
Internationally the strongest competitors of Patagonia are Canada Goose, Kathmandu, Zulily,
IceBreaker, Columbia Sportswear, Farfetch and Burton (Comparably, n.d.) (Craft, n.d.).
As Patagonia, they sell a range of products specialized in the sports industry such as clothing,
equipment and accessories.

Product offering

Patagonia is a big company that has a lot of products in the outdoor sector. Such as
clothes, accessories and equipment. They produce products for a variety of sports like surfing,
climbing, trail running, mountain biking, fishing, hiking, yoga, skiing (Patagonia, n.d.).

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 All products are sustainable and made of natural products. 87% of the raw materials
that they use are recycled (Patagonia, n.d.).
The company assures its customers of the wellbeing of the workers in the manufacturers
of the products. The products are produced under safe, fair, legal and humane working
conditions (Patagonia, n.d.).

Keys to success

The key to success for Patagonia is transparency, the consumers of the brand are in love
with the brand due to their way of producing the products and helping the environment. The
company should take their consumer with them on the journey to help the world. Let other
people speak about the brand and how they experienced it. Patagonia can make video content
for their consumers about the production, the projects they support and explain the recycling
process.
It is very important that the consumers can contact the brand with their questions. So,
the company can develop the support service more. The strategy of the company must be the
first thing people associate with the brand. They find the environment and community more
important than the profit of the company.
If the consumers know the story of the company and believe them, they would buy the
products of Patagonia even when the price is more expensive than the competitors. The
customers of the company are loyal consumers who really believe in what the company does.

Critical Issues

The pandemic caused the decline of retail sales and increased e-commerce. The online
sales of Patagonia are weak as are the retail stores they have. The company doesn't have many
stores around the US or the world, which makes it more difficult for customers to buy their
products.
The market awareness could be better if they invest in more stores and e-commerce.
Some customers want to buy products but are unable to do it because of the lack of selling
points and delivery. The products can’t be shipped to every country. They don’t ship to every
country in Europe, so some customers just can’t buy products (Patagonia, n.d.).

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 3. Marketing Strategy

Mission

Patagonia’s mission statement is “We're In Business To Save Our Home Planet.” The
previous mission statement was “build the best product, cause no unnecessary harm, use
business to inspire and implement solutions to the environmental crisis”. Patagonia was using
this statement for over 45 years; however, the company has grown and nowadays they are here
with a bigger vision, and it meant the change of the mission statement to the current one.
The current mission gives more emphasis on the overall impact for products and for the
business model which has on the world. They have widespread benefits that go beyond the
comfort which customers get from their outdoor clothing. (Patagonia Mission Statement 2022
| Patagonia Mission & Vision Analysis, n.d.)
Their reason for being - In Patagonia they appreciate, all life on earth is under threat of
extinction. Their goal is to use the resources they have—business, investments, voice and
imaginations—to do something about it.
Their values consider those of a business started by a band of climbers and surfers, and
the minimalist style they promoted. Their approach of product design demonstrates a bias for
simplicity and utility. They seek not only to do less harm, but better. Once they identify a
problem, they act. Patagonia accepts risk and acts to protect and renew the stability, integrity
and beauty of the web of life.
Patagonia's success—and much of the fun—lies in developing new ways to do things.
(Patagonia.com, n.d.)

Marketing objectives
Patagonia’s Vice president of Marketing suggests that advertising is not a priority.
Marketing efforts are minimal, the company still participates in some form of both traditional
and non- traditional marketing. But still Patagonia’s traditional marketing strategy is far from
traditional one. The company gains attention through unconventional tactics. (Drawbridge,
n.d.)
Patagonia made a campaign “Don’t Buy This Jacket”. They posted this advertisement
in the New York Times on November 25th, 2011. There was a black and white photo of one of
the company’s best-selling jackets along with the words, “Don’t Buy This Jacket” in large font
at the top of the page. This ad was posted on Black Friday so it brought a lot of controversy.
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While many stores were decreasing their pricing, Patagonia was asking their customers not to
buy their clothing. The company explained their decision underneath the article. The human
population is currently using more resources than the planet can handle long-term and major
steps will need to be taken to reverse the damage. The company decided to donate 100% on
Black Friday sales to organizations that help the planet in 2016 and has continued since now.
(Patagonia.com, n.d.)
The primary purpose of the communication was to convince people to buy ‘only what’
they need and ‘only when’ they need it. The idea was to change people’s relationships with
clothing, bringing conscious consumption to the forefront. The outcome of this advert was a
30% rise in sales post the campaign. Though it wasn’t the campaign’s main intention, Patagonia
demonstrated that they can still make profits when doing good. (Deshmukh & Chouinard,
2021)
Another one campaign Patagonia created in 2020. The campaign is called “Buy less,
demand more”. The idea of this campaign should tell people to buy used things instead of new
ones.

Financial objectives

Patagonia has an online store Patagonia.com with domestically and internationally

focused sales. It’s also reported that Patagonia’s online global net sales have reached $234.4
million in 2020, which is 17.4% more than its net sales in 2019 (Patagonia.com Revenue, n.d.)
For the year 2021 global net sales are not available yet.
Even though Patagonia has always been promoting anti-consumerism, the company is
worth $1 billion in 2018. (Danao, 2018)
Patagonia’s owner, Yvon Chouinard, has a net worth of $1.5 billion in 2019. Patagonia
now has reached a billion dollars in annual sales. With their mission to fight everything that
hurts the environment, Patagonia will sell more in the future.

Target markets
As a company focused on sustainability and giving back to society, Patagonia targets
outdoor enthusiasts and environmentally conscious people. Consumers that enjoy nature and
maintain an active lifestyle. This upscale customer considers themselves advocates of
sustainability and the environment, making them care for quality products and their impact on
nature.

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 Patagonia’s market segmentation includes men and women aged 18-35, those with
disposable income, maintains an active lifestyle, enjoys nature and outdoors, value for quality
products and conscious buyers. (Comparably, n.d.)
The same is true for Portugal. As Portugal is known for surfing, Patagonia can be
attractive here for surfers as well as people looking for sustainable clothing.
Representations of ideal customers are used as a means to understand customers better,
making it easier to tailor content to the specific needs, behaviors, and concerns of different
groups. (Vaughan, 2021)

Positioning
Patagonia has been built around a philosophy of making the best products, causing no
harm to the environment, and using profits to implement solutions to environmental crises. The
enterprise has built itself as a thought leader in environmental protection, social activism, and
sustainable practices.

Patagonia’s social media handles propagate care for the planet and amplify people’s
voices who create a positive impact. They posted brand message to YouTube, Facebook or
Instagram, which aligns with the purpose.
However, it doesn’t stop at promoting their values. It also takes steps to set things right
where required. Patagonia has embodied its brand purpose in its marketing strategy to
everything it does – whether it relates to the sale of goods or taking a stand against the
exploitation of natural ecosystems. When a brand champions a cause and walks the talk, it
brings in customer defense & shores up authenticity too.
This marketing initiative by Patagonia strikes a chord with environmentally conscious
consumers and makes them come back to the company. It is a fine initiative to reduce
environmental footprint, which also boosts retention of customers. And it earns their goodwill
too. (Deshmukh & Chouinard, 2021)

4. Marketing Mix
Patagonia´s success is definitely coming from their 4 P´s. As we know from all
literature focused on marketing, we can define 4 P's - product, price, place and promotion.
However, Patagonia has started to look beyond the basic structure of 4 P's and has defined new

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P's - people, planet and purpose. (Deshmukh & Chouinard, 2021) They moved away from
traditional marketing mix. They reach consumers in their personal time, and worry about
evoking emotion and worth in every point of contact.

Product

Patagonia has a wide range of products for women, men and kids and for different kinds
of sports. You can find goods for snow sports, surfing, mountain biking, trail running, fly
fishing, kitesurfing and climbing. It is not only about clothing but also different types of
accessories such as backpacks, duffel bags, waterproof bags, water bottles, towels, zippered
pouches, wood burning stoves, quilts and much more.
These categories will remain in offer also for the Portuguese market. In addition,
Patagonia would like to focus on 2 main categories.
Firstly, expand the range of products focused on water sports such as surfing,
windsurfing, kitesurfing, kayaking, sailing, rafting and wakeboarding. As most Portuguese
people spent half of their childhood in the water it is a great category to focus on.
Secondly, introduce a new category called Wild Camping. There are many campsites
along the coast and inland in Portugal. Due to demand, many new campsites are added every
year. This is a great opportunity to present products that are needed for camping. Besides
clothing, customers can look forward to sleeping bags, tents, lighting, blankets and other
accessories.

Pricing

As Patagonia focuses on the use of high-quality materials and cutting-edge technologies

to produce durable, highly functional products that will last a long time, it reflects in products´
prices. The extended useful life of its products allows Patagonia to charge a higher price as
customers are able to buy fewer items over time. (Wilkes, 2015)
Patagonia delivers premium products for premium prices. Besides the high-quality
materials and the fact that the products are built to last, the prices reflect other aspects that
Patagonia focuses on. Innovations are part of the process and they require a healthy research
& development budget. This helped to reduce Patagonia´s carbon footprint over the years as
they attack inefficiency and waste in the supply chain. Another aspect is the impact on the
environment. If there is an opportunity to change something that benefits the planet, they’re
not afraid to raise their prices a little to account for a slightly more expensive way of doing

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things. The fact is that Patagonia does not own any factories, they have to pay for the shipping
fees and in case the factories are overseas, pay also a tariff or tax. (Jacobs, 2021) All this is
shown in the prices of the products.

Place

Patagonia uses three sales channels, their own website, their retail stores and third-party
wholesale partners primarily focused on the specialty outdoor market who resell our products
online and in their own brick-and-mortar stores." (Patagonia Sales Funnel | Wonder, 2019)
These channels will be also used for the Portuguese market. Patagonia has more than 70 stores
worldwide. These stores will be joined by another 3, one in Lisbon, Porto and Peniche.

Promotion

Social media
Promotion channels used by Patagonia are mostly social media like Instagram,
Facebook and LinkedIn. (McGowan, 2019) They will continue in these types of promotions
also for the Portuguese market. There will be some overlap between the platforms, e.g. when
promoting an event but otherwise the content will be different on each platform. Each account
will be focused on Portugal and named Patagonia Portugal. Instagram will focus on resharing
pictures and videos from customers and ambassadors from every corner of Portugal, Madeira
and Azores. It will make the customers feel like part of the family. On Facebook customers can
find event pages and links to stories posted on the Patagonia website. LinkedIn will be focused
on open jobs positions and also posts about the latest news.
The content on social media is not about their products or sales pitch but instead they
are showing photos and videos of beautiful landscapes in which the customers or brand
ambassadors are doing some outdoor sports.

Brand Ambassador Program

Patagonia has a group of over 90 brand ambassadors from different countries.
Interesting fact is that they are organized based on the outdoor activity they excel at, such as
climbing, surfing, snowboarding etc. They are using well-known athletes to not only promote
the products but they are also involved in the process of product development and product
testing. “The company's ambassadors work closely with the design department to test, refine
and validate products in the harshest and most remote locations on the planet." (Collier, 2020)

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Ambassadors give Patagonia the feedback on how the products function in their typical
activities. Then they consider feedbacks and improve the product's design, durability, and
function. The involvement of ambassadors in the improvement process also helps to better
promote the goods to the customers. In the case of the Portuguese market, Patagonia will
cooperate with ambassadors that are well-known in Portugal and especially with those who
perform water sports, e.g. with Teresa Bonvalot who is a Portuguese surfer and the participant
of Summer Olympic Games in Tokyo 2020.

Email newsletters
Using email newsletters to inform Patagonia´s subscribers about product highlights,
sales notifications, exclusive offers, original stories, videos, activism awareness, events and
more will also be applied on the Portuguese market.

Community Events
Patagonia has its values and one of them is helping the community. To make the bond
between Patagonia and the community stronger they will cooperate with zero waste stores and
with local groups that work to protect local habitats and frontline communities through bold,
original actions.

Patagonia´s P´s

The already mentioned campaign “Don't buy this jacket”, is a great example of how
Patagonia is not using traditional ways of communication and promotions but is going beyond
the 4 P's that we know. Better than lower prices and increase sales during the Black Friday they
pointed to the problems that matter. They put the environment first. They focus on the planet
as well as on people and purpose. These additional P´s will be also applied for the Portuguese
market.
Part that is beyond the basics is a section called Used Gear. The fact that Patagonia´s
products are durable so therefore there is no need to buy new clothes made them come up with
a new idea. In 2017 Patagonia created a Worn Wear website where people can return goods
that are in good condition, then they are cleaned, repaired and sold on the website. In return,
people get credit for their next purchase and used items are at better prices. This webpage also
allows customers to not only buy used clothing but also repair their own damaged clothing or
trade in clothing. This ideology persuades people to care about the clothes, waste and care for

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the environment. It is based on 5 R´s, reduce, repair, reuse, recycle, reimagine. (Deshmukh &
Chouinard, 2021) It is initiated to reduce environmental footprint and strengthen goodwill too.
In Patagonia, they know prioritizing durability results in consuming less energy, wasting less
water and creating less trash.
Since 1985, Patagonia has committed 1% of its sales to the protection and restoration
of the natural environment. In 2002, Patagonia founder Yvon Chouinard and Craig Mathews,
owner of Blue Ribbon Flies, founded a non-profit company to encourage other businesses to
do the same. It may sound small, but regular improvements of 1% represent a huge change. It's
all about regularity and full participation throughout the system. Nowadays, One percent for
the planet has more than 3,000 members. (About, n.d.)
In July 2019, 91% of employees at Patagonia said it is a great place to work compared
to 59% of employees at a typical U.S.-based company. Employees say it is a great workplace
and they describe it with words: environmental, people, mission, benefits, planet, family care,
unique, balance and others. (Working at Patagonia, 2019) In Patagonia they promote women
into leadership roles, pay to send nannies on business trips to embrace and support work-life
integration, and host childcare right on their facilities. Patagonia's Chief Human Resources
Officer, Dean Carter, told a crowd at a recent Salt Lake City conference, "We want them to be
who they are". (Mautz, 2019)
Even though Patagonia does not own any factory, they care about people working in
factories, mills and farms. They developed a document “Supplier Workplace Code of Conduct”
which defines standards for fair, safe and healthy working conditions and environmental
responsibility throughout their supply chain. It outlines policies on topics like child labour,
forced labour, harassment, abuse, discrimination etc. All suppliers must commit to adhering to
the Code of Conduct and detailed Compliance Benchmark standards. (Working With Factories,
n.d.)

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 5. Financials

Break-even analysis

Sales forecast

Patagonia has an average annual revenue of $800 million. Over the past decades, the
company's sales have quadrupled and have exceeded 1 billion.
For Patagonia’s e-commerce performance, it has an online store, Patagonia.com, with
domestically and internationally focused sales. According to an analysis conducted by Statista,
Patagonia’s online store generated roughly $365 million in net sales in 2018. 92% of its online
net sales are generated in the United States (Statista, 2019).
Regarding market value, the outdoor apparel industry in the US is valued at $12.7-
billion, and forecasts shows a steady growth to reach a value of $19.6-billion by 2026. Whereas
the global market is expected to grow from $34.7-billion to $43-billion in the same period.
Moreover, the clothing industry is evolving toward ethical fashion that adapts a circular
economy model as shown in figure-10. Fashion industry specialists believe that fashion’s
circular economy is a fast-growing movement and would reach $5-trillion. Group of high-

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profile industry brands are already on board in circular economy such as Nike, North Face,
Puma, and Adidas.

Expense forecast

Patagonia's clothing lines and outdoor gear have a reputation for being premium. They
use high-quality practices and have an acute emphasis on sustainable sourcing, manufacturing,
and business operations. All these factors make their products more expensive.
Patagonia mentioned in their annual report that they are facing challenges regarding
balancing their performance and social responsibility, in addition to challenges regarding
transparency. On the other side, there are several advantages for reducing product quality.
First, lower quality means reducing cost of goods sold. Patagonia risks their profitability for
premium quality inputs which usually cost up to 50% more than normal quality input. The shift
to lower-quality inputs will increase the gross profit significantly. Another advantage will be
having more available fund for social responsibility programs, which are the core values of
Patagonia.

6. Controls Implementation

Marketing organization

Patagonia average customer is 38 years old with an average household income

$160,000. They are trying few marketing strategies to attract new customers like:

Strategy: To monitor sales trends and marketing effectiveness monthly, adjusting strategy
accordingly.
Tactics:
• Rigorously execute and monitor progress of all aforementioned LOHAS Eco Tourism
and Natural Lifestyle marketing initiatives weekly. “Winner’s Circle” segment.
• To execute and monitor Common Threads Partnership with eBay. “Shotguns & Pickup”
segment.
• Increase brand awareness, drive traffic to Patagonia website, and increase customer
loyalty while attracting new customers

20
Strategy: To show consistent growth per month with LOHAS Community customer base by
generating donations toward Patagonia’s grassroots environmental organizations.
Tactics:
• Increase traffic to Patagonia’s website through various internet-based marketing such
as SEO, PPC, Email Marketing, Social Media, Blogging, CRM/Loyalty Programs and
Affiliate Marketing.
• Execute aggressive advertising campaigns in states with a higher percentage of click-
through behaviour.
• Incorporate Patagonia Organic Cotton Apparel success stories into online marketing
programs.

Strategy: To convince Google of the environmental benefits of Patagonia’s Organic Cotton

Apparel and establish an effective advertising partnership.
Tactics:
• Provide Google with advertising space on Patagonia.com
• Work with Google executives monthly in order to research and expand search tags that
will provide Level One Category hits for Patagonia Organic Cotton Apparel or LOHAS
Community.
• Offer varying week-to-week incentives for consumers that visit website (i.e., % off
product price, Eco T-shirt, water bottle, etc.)

Contingency planning

With a more than 40-year history of environmental conversation and activism,

Patagonia has always been supporting the preservation and restoration of the environment.
Since 1985, Patagonia has contributed 1% of its annual net revenues to help solve
environmental issues and support domestic and international grassroots groups that are making
differences in their local communities and promote environmental sustainability. For now,
Patagonia has donated over $116 million in cash and in-kind donations through its “1% for the
planet” program (Patagonia.com, n.d.-a). In 2016, Patagonia gave 100% of its global retail and
online Black Friday sales to environmental organizations that help preserve lands, water, and
climate for future generations. The total sales reached $10 million on that Black Friday, which

21
was five times over its expectation (Marcario, 2016). According to Patagonia’s Annual Benefit
Corporation Report for the fiscal year 2019, Patagonia donated an additional $10 million on
top of its 1% sales donation due to the corporate tax cut initiated by the Trump administration.
According to Patagonia, its funding programs focus on organizations that are action-oriented
and have specific goals to improve our environment. Since Patagonia is a privately held
company, it has the freedom to fund any groups with a risky mission. The size of its grant
ranges between $5,000 and $20,000.
Patagonia has made over $5 million in grants to environmental groups that are fighting
to protect lands and waters in the fiscal year 2019. Besides, it also made $400,000 plus to
organizations that are working on renewable energy and over $1 million to groups that promote
organic agriculture and soil health. Besides, Patagonia also provided $109,000 subsidies to its
child care programs for employees. Total stipends of $178,000 are also provided for childcare
to employees who don’t have access to its childcare programs (Patagonia Annual Benefit
Corporation Report, 2019).

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