Retail Growth By Not Growing

Five Black Fridays ago, outdoor clothing retailer Patagonia declared its surprising mission to limit its own growth in the name of the environment. In the years since, the company has actually seen its profits rise. How did this retail paradox become possible?


Let’s go back a few Black Fridays to Friday, Nov. 25, 2011.

That’s when a full-page ad appeared in The New York Times, showing a Patagonia R2 fleece with the words “Don’t Buy This Jacket” emblazoned across the top in large letters. Below it was a breakdown of the environmental cost of one of the company’s top-selling items. The ad asked consumers to think twice before buying it or any other Patagonia product, and the attention garnered from the ad contributed to a significant bump in Patagonia’s 2012 sales.

This wasn’t the first time Patagonia had aligned itself with the idea of quality goods over quantity that consumerism usually demands. Resourcefulness and sustainability have been in the outdoor apparel company’s DNA since its inception, but it was the most notable display of this ethos to date and a major step forward on a path of “anti-consumerism” that the company still walks today — to the tune of $750 million in annual sales.

To truly understand the company’s dual role as a retail innovator and evangelist against rampant consumerism, one must first understand where it has come from.

The origins of the company can be traced back to the mid 1950s, when founder (and avid rock climber) Yvon Chouinard taught himself to forge rock climbing gear by hand. His reusable pitons — a metal spike used to secure climbers and their ropes to the rock face — could be removed from the rock into which they had been hammered and reused in order to facilitate multi-day climbs. By 1965, Chouinard had to begin machine manufacturing his climbing equipment to keep up with demand; by 1970, Chouinard Equipment was the largest provider of climbing equipment in the U.S.

As Chouinard traveled the world, he collected as many ideas as he did outdoor adventures and began experimenting with different materials in outerwear. Using vibrant colors and the latest innovations in materials, his active wear began to be known for its trademark look and superb performance. As the company expanded away from just climbing gear, a name change was in order. “Patagonia” had a sense of adventure, exoticness and ruggedness that suited the brand — and the moniker stuck.

Patagonia is still privately held and 100 percent owned by its founder, Yvon Chouinard, and his family. And although Chouinard spends most of the year at his ranch in Wyoming, he still maintains a desk (sans computer) in the company’s Ventura, California headquarters. Today, the company’s mission statement is “Build the best product, cause no unnecessary harm, use business to inspire and implement solutions to the environmental crisis,” and it certainly walks the walk, as well as talking the talk.

At the same time, Patagonia is on track to have the most profitable year in its history, according to a Fortune article, with sales projected to reach $750 million. The compound annual growth rate has been 14 percent, and profits have more than tripled since the year after Rose Marcario, current CEO, joined the company as CFO in 2008. So, how does a company that asks its customers to actually buy less come to terms with the fact that, in doing so, it is actually selling more? It’s difficult at best.

An article recently published in The New Yorker brings into question Patagonia’s anti-consumerism and anti-growth stance as a company. In that article, Vice President of Environmental Affairs Rick Ridgeway notes, “Companies, including ours, are reducing the environmental footprint of our individual products but increasing the footprint of our company as a whole as we grow.” He also recently spoke with GreenBiz, saying: “It’s our hunch that all these sustainability innovations put together are not going to be enough to offset the continued increase in our human footprint that comes from this tie to growth.”

The idea of sustainability at Patagonia goes far beyond a marketing campaign. The company’s CEO, Marcario, seems to be indicative of the kind of innovation and leadership at the core of the business: raised Catholic in a pragmatic Staten Island home, converted to Buddhism, left a successful career in finance to pursue a more meaningful professional path. As Chouinard himself put it, she is someone who “has exemplified living the examined life.” She has been a central agent in striking the balance between sustained growth as a retailer and sustainable environmentally conscious practices as a business with a significant footprint.

Upon joining Patagonia, Macario set out to streamline production and identify waste in order to save costs. She innovated how the company shipped goods, cut back on the company’s leisure wear lines to refocus on its core products and devoted a hefty amount of time and effort to improve the company’s eCommerce capabilities. But Chouinard is insistent that she is more than a businessperson. “She brings a full perspective,” he told Fortune. Continuing in more radical terms: “She understands the need for revolution.”

For the outdoor retailer, the environmentally conscious “buy less” campaign — which Harvard Business Review regarded as “both genuine and borderline heroic” — marked the beginning of a very public-facing effort for the company to align itself with a cause in the minds of its customers. The efforts that have grown from that initial ad have led to immense growth for the company, which maintains only 32 retail spaces in the U.S. and another 36 internationally, selling the rest through retail partnerships and its very successful online presence.

The HBR article, written in 2011, goes on to point out several key factors working in Patagonia’s favor during the initial phase of the “buy less” campaign: the ability to charge a premium price for its goods, which offsets the loss of more regular repeat sales, and actually attracting new customers with the right messaging, fueled by the right economic conditions, brought on by the most recent recession, which at the time was driving more interest in value versus price. These factors seem to have held steady for the retailer who has continued to see steady growth despite its own efforts to thwart the company’s expansion.

Yes, you read that right. In 2013, Patagonia launched what it called the “Responsible Economy” campaign, which included a graphic that read “growth is a dead end” and an essay from Ridgeway. In the essay, Ridgeway argues that global environmental crises, such as climate change, toxic pollution and resource depletion, were only symptoms of a larger problem, and that compound economic expansion was “the elephant in the room.”

However, since then, things have not slowed for the company — which has enjoyed steady international expansion and has come to be known as “Patagucci,” with some naysayers wondering if it has strayed from its mission and instead become a luxury brand. Despite these pivots in messaging, the company has been committed to a core idealism and the ongoing engagement of its customers in a larger conversation around sustainability.

Patagonia is involved in and has spearheaded a number of successful charitable programs. The company runs an ongoing program called “1% For The Planet,” which has led to over $70 million in donations to thousands of community-based groups doing environmental work locally. It also engages in a number of other activities and grant programs aimed at environmental causes.

Worn Wear is another program run by the company in conjunction with its retail partners, which aims to enter into a pact of sorts with its customers. In exchange for the company’s promise to make products that endure — to repair them when necessary, as well as resell or recycle them whenever possible — it asks its customers to pledge to buy only what they need and to be good stewards of garments, from off the rack to long-time closet favorite to eventually being sent to the recycling bin instead of the landfill.

The commitment to sustainability is not all consumer-facing. Today, Marcario maintains The Footprint Council. This monthly meeting of 10 top company executives — seven of whom are female, a ratio rarely seen at the top in companies of Patagonia’s size — comes together to discuss the company’s “scale of operations” and how it is staying true to the rigorous sustainability goals the company has set for itself.

At the very least, the company’s sustained commitment to environmentally conscious practices is enough to grant that its motives are not purely materialistic, and its ability to use that stance as a means to continue to grow a sustainable retail brand is enough to give it the title of retail reinventor.