Best foot forward: Why Havaianas is expanding in Asia
In most parts of Asia, you can buy a pair of cheap thongs for about a few bucks – yet Brazilian brand Havaianas, which sells them from $20 upwards, sees the continent as one of its biggest growth opportunities worldwide.
During the last two years, Havaianas has added 100 new permanent stores across the region and more are planned, as the brand which categorises itself as “affordable luxury” continues to take off.
Between now and 2024, Havaianas plans to invest $50 million in Asia to accelerate growth for a brand already selling one million pairs of footwear around the world every day.
Pop-up stores, in markets where people are less likely to wear thongs during winter, take that new tally up another 25 or so, along with the pre-existing 35.
In Australia and New Zealand, Havaianas has just two company-operated stores, one at Bondi Beach and another at Britomart in downtown Auckland, both of which opened last year.
The majority of the store development is in Indonesia, Singapore, Malaysia, Thailand, Vietnam, Myanmar and the Philippines. In the Asia-Pacific, the Philippines is the brand’s largest market after Australia, with 55 stores, operated by an exclusive distributor of 18 years and a small wholesale business.
Havaianas have been sold in Australia for almost 20 years and in the Philippines for about 18. They were first imported into Hong Kong by Lane Crawford in the early 2000s and gradually entered other markets across the region as distributors were appointed. Until three years ago, the Brazilian company was represented in about 20 Asian markets through a network of licensees overseen by a Brazil-based export manager who was also responsible for Africa, the Middle East and South America.
Having established its own subsidiaries in Europe and the US, Havaianas decided in 2017 to set up a regional office in Hong Kong to manage Asia. Their first hire was experienced retailer Robert Esser who started out working from a hot desk. Since then, Esser, Havaianas APAC president, has built a full regional office in Kwung Tong, with a team of nearly 30 and a Mainland China office in Shanghai which opened last December.
Thongs are somewhat seasonal by nature, so in Mainland China, Havaianas are sold directly through half a dozen or so small seasonal stores and pop-ups, through licensed distributors and marketplaces including Tmall and JD. Another 20 or so stores are planned for this summer, located in six top-tier cities. A mono-brand store in the tourist destination of Hainan island will be the brand’s first year-round store in Mainland China.
“This was going to be a big breakout year for us (before Covid-19). I think it still will be in China,” Esser told Inside Retail. “But, looking forward, in the next 24 or 36 months, you’ll really see the brand ramp up in Asia.”
Esser expects the advent of Covid-19 will result in the company selling only about 60 to 85 per cent of its original expectations in the region this year, although that figure varies greatly by market.
The pricing puzzle
While it is obvious that consumers in affluent markets like Australia, New Zealand, Singapore and Hong Kong will pay more than $20 for quality thongs, it may seem counterintuitive to expect growth in developing countries like Vietnam, the Philippines or other Southeast Asian nations.
“Our price points don’t vary that much. A basic pair of Havaianas costs $18 to $20 dollars anywhere in the world, and then it goes up from there,” explains Esser. “We have thongs that are $100 or $120 such as our collection with Swarovski. And then in the middle range, we have more premium offerings, licenced products, some leather, some with trimmings and different designs.”
According to Esser, despite Havaianas being 10 times the price of cheap throwaway thongs, most consumers can afford $20 or $25. In the Philippines, 85 per cent of its sales are from people who earn less than US$500 a month. Those consumers want to be sure they are buying authentic products, not copies, and that they get a good customer service experience, which is why the brand generally eschews multi-brand resellers.
In another example, Havaianas partnered with Maison Fashion Group in Vietnam, which represents nearly 30 international brands as diverse as Charles & Keith, DSquared2, and Coach. Havaianas has 10 stores in Vietnam now and was on track to open six more this year before the advent of Covid-19. In Vietnam, they’ve had days when they have sold 200 pairs.
“We have by far the number one top-of-mind brand awareness for sandals or thong brands in the Philippines and Australia,” says Esser. Market share in thongs priced over AU$15 is around 93 per cent in Australia.
Esser points to the strength of the brand, the quality of the product and the broader customer experience as reasons why it excels in such markets.
“Our new CEO likes to point out that we have a rare emotional connection to our customers. There are some brands that are really more retail brands and everybody knows that people will buy them, but they are not brands consumers love or that they feel this emotional connection with, like Havaianas.”
As perhaps the only thongs in the market made of rubber, the majority of its competitor products are made from petroleum-based materials, which lack durability and comfort.
“People like the feel, the durability, the colours and the tracks,” says Esser.
Havaianas by nature enjoys a “super hot” retention rate after customers try them out, says Esser.
“Customers tend to buy us and stay with us … we tend to retain them for decades. People feel that we’re colourful, that we’re exuberant, that we give them a bit of affordable luxury. You’re slipping off your shoes and slipping into your weekend relaxing mood,” he explains.
Esser says that since focusing on Asia, the company has worked to develop brand awareness, engaging key opinion leaders and influencers and building Havaianas stores which provide a new customer experience and focus on the category mix, sizes, styles and pricing.
Of all the region’s markets, brand awareness is highest in Bali, which also has the highest concentration of Havana stores.
“We have over 100 points of sale in Bali and almost 20 mono-brand stores. That’s just really in the area of a Kuta – maybe a kilometre deep by 8km or 10km wide. With 100 points of sale there, that’s massive brand awareness, not just for tourists, but also local Indonesians,” says Esser.
“And we’re at the beginning of our journey with the Southeast Asian consumer to some extent. We have new distributors in Indonesia, Singapore, Thailand, Malaysia and Myanmar, all appointed within the last year. All the new companies that we’re dealing with in these markets are much better suited to follow our vision of where we want the brand to go.”
Where once a representative of the company visited once every year or two, with a Hong Kong regional office in place (pre-Covid-19), much more regular communication is possible and the brand and retailers can work together on everything from merchandising to stock selection.
“In Australia, we’ve got a great wholesale business and great retail partners like City Beach and General Pants, which are a giant chunk of our business there,” observes Esser. “But it’s the only market in Asia, apart from Japan, where we have a really developed wholesale and key account business. The rest of the markets rely pretty heavily on mono-brand retail and e-commerce.”
The seasonal challenge
Marketing a product generally suited only to warmer climates is “a huge challenge” for Havaianas outside the tropics. A store which trades well all through summer can see sales
almost dry up during cold winter months. That’s why in countries like Australia, New Zealand, Argentina and the US especially, up to 85 per cent of annual sales occur during three months of the year.
That is one of the reasons the company has chosen to focus on Southeast Asia where the climate is hot all year round – and equally why most of Havaianas’ stores in China are seasonal pop-ups rather than permanent outlets.
Those aside, highly visible flagships offering experiential features like customisation and limited edition releases operate in large cities like Seoul, Tokyo and Taipei. Several others are planned long-term in major Mainland Chinese cities to help build the brand – even if sales are low over winter.
“It is a tremendous challenge having a profitable store all year round, especially coinciding with supe high rents and the higher retail salaries in markets in northern Asia and Australia,” says Esser. “We kind of look at them more as marketing and brand homes than anything else. And that’s why in those temperate markets, we tend not to have so many stores. I think the key to it is having a strategic, robust and commercially viable pop-up strategy, which is really what we’ve been doing.”
The flagships offer more of a consumer experience, with a strong focus on digital features such as fulfilling click-and-collect orders, or buying in-store for home delivery. Interactive screens show the history of the 58-year-old brand, and the product range features more of the casual and beachwear lines: drawstring pants, singlets, t-shirts and bikinis, for example.
Havaianas stores in Asia typically have small footprints – around 60sqm – with flagships as much as 2.5 times that size. But the brand also has small stores in some locations – down to just 30sqm.
Then there are stores opened to take advantage of an opportune location, like one in planning in Japan.
“We’ve got a lovely store planned for Enoshima in Tokyo, which is on hold right now, but it will be near the entrance to a train station on the Tokyo line, where a lot of ocean sports are going to be when the Olympics take place,” says Esser.
This story appeared in the August 2020 issue of Inside Retail Magazine. To receive a print copy, click here.
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