patagonia-business-model

The Patagonia Business Model In A Nutshell

  • Patagonia is an American clothing retailer founded by climbing enthusiast Yvon Chouinard in 1973 who saw initial success by selling reusable climbing pitons and Scottish rugby shirts. Over time Patagonia also became a fashionable brand also for its focus on slow fashion. Indeed, the company sells high-priced clothing items built to last which it will repair for free.

Background

Patagonia, Inc. is an American clothing company selling primarily outdoor clothing and associated equipment.

Based in California, the company was founded by climbing enthusiast Yvon Chouinard in 1973. Chouinard began rock climbing in 1953 as a 14-year-old member of the Southern California Falconry Club. His passion was instilled in him by the leaders of the club who taught him how to rappel down cliffs to view falcon nests.

As he grew older, he met members of the Sierra Club who would regularly meet in Yosemite. Chouinard was also an environmentalist who wanted to climb without leaving his equipment embedded in the rock face. He figured that a reusable piton was the answer, but no such product existed on the market. So he decided to design and then produce one himself, using an old coal-fired forge salvaged from a junkyard.

The reusable pitons were a hit in the climbing community, so Chouinard began selling them under the company name Chouinard Equipment. By 1970, Chouinard had become the largest supplier of climbing hardware in the United States.

Patagonia then began selling rugby shirts, bivouac sacks, gloves, hats, and mittens after Chouinard returned from a climbing trip to Scotland. The first store opened in 1973 in Ventura, California as the company shifted to developing innovative activewear made from synthetic fibers with an environmental slant. Further expansion of the product line saw Patagonia branch into sleeping bags, camping gear, surfwear, athletic equipment, and backpacks. 

Today, Patagonia has annual revenue of approximately $1 billion with more than 50 stores globally.

Patagonia revenue generation

Patagonia makes money by manufacturing and selling clothing to consumers for a profit.

However, the company is unique among its peers. It enjoys high brand equity but encourages people not to buy its clothing despite remaining a for-profit organization.

Patagonia promotes anti-consumerism, fair trade, charity, and environmental stewardship and actively embodies its values to build trust with consumers.

Let’s take a look at how these values help the company make money.

Highly durable clothing

Patagonia sells high-quality, long-lasting clothing to consumers. While profit margins on individual items are higher, the company does not subscribe to the planned obsolescence strategy used by many clothes retailers today.

To further its environmental values, Patagonia also holds regular Worn Wear events across the US where customers receive free help repairing old clothing. Alternatively, shoppers can pick an item from a selection of pre-worn clothing and fix it themselves. These events solidify the connection between Patagonia and its target audience. It also assures customers that their warranties will be honored.

Advertising and marketing

Through its advertising campaigns, Patagonia believes that less is more. In other words, it actively encourages consumers to buy less clothing.

The Patagonia Common Threads Initiative advocates sustainability and anti-consumerism, with a message on the company website stating that “We design and sell things made to last and be useful. But we ask our customers not to buy from us what you don’t need or can’t really use. Everything we make – everything anyone makes – costs the planet more than it gives back.

Patagonia is also famous for its “Don’t Buy This Jacket” campaign as a way to push back against sales such as Black Friday and encourage consumers to be more thoughtful about their purchases.

B-Corp certification

Patagonia became a Benefit Corp (B-Corp) almost as soon as it was possible to do so in California. 

A B-Corp is a socially and/or environmentally responsible company that can write associated values into their articles of incorporation. In more general terms, Patagonia is accountable for metrics beyond just profit and loss.

To that end, Patagonia donates 1% of total revenue to charities promoting conservation and sustainability. It also makes the manufacturing and distribution footprints of its operations freely available online.

This certification increases operating costs and certainly reduces revenue, but embodying these values helps Patagonia resonate with a target audience who then become more motivated to purchase Patagonia products.

Key takeaways:

  • Patagonia is an American clothing retailer with an emphasis on activewear and associated equipment. It was founded in 1973 by Yvon Chouinard who saw initial success by selling reusable climbing pitons and Scottish rugby shirts.
  • Patagonia makes money by selling clothing items for a profit. But in reality, its revenue generation strategy is far more nuanced. The company sells high-priced clothing items built to last which it will repair for free.
  • Patagonia promotes anti-consumerism by encouraging consumers to purchase thoughtfully during sales events such as Black Friday. As a B-Corporation, it also donates to charity and is transparent about its impact on the environment. Demonstrating the change it wants to see in the world further strengthens Patagonia’s brand image and equity. Consumers with similar values then become proud to wear and promote the Patagonia brand.

Read Next: ASOS, SHEINZaraFast FashionUltra-Fast FashionReal-Time Retail, Slow Fashion.

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Published by

Gennaro Cuofano

Gennaro is the creator of FourWeekMBA which reached over a million business students, executives, and aspiring entrepreneurs in 2020 alone | He is also Head of Business Development for a high-tech startup, which he helped grow at double-digit rate | Gennaro earned an International MBA with emphasis on Corporate Finance and Business Strategy | Visit The FourWeekMBA BizSchool | Or Get The FourWeekMBA Flagship Book "100+ Business Models"