Kookai fashion empire sticks to its niche market strategy amid retail shakeout

Rob Cromb, founder and CEO of the Kookai fashion empire, has some simple advice for textile or retail: find a niche, something that can’t be replicated anywhere.

It’s a formula that has worked for Kookai. Cromb has a creative, risk-taking mindset. He reinvented the business several times and settled on the principle that every item of clothing can be individualised to create one’s own look. Kookai’s niche is basics for the 22-year-old girl. Although the company sells a full range of fashion, about 70 per cent of the business is basics such as T shirts and jackets.

The company has two unique differences.

One is to manufacture craft each item individually. Using Australian fabrics, Kookai does not use mass production techniques such as mass cutting and assembly. Instead, they focus on having lots of variety in their designs, and no making sure no two jackest or T-shirts are identical.

The other is that the company is vertically integrated: it only makes clothes for itself and on one else.

Australia’s textile industry has been contracting since the tariff walls started coming down in the ‘70s but Cromb says you can still make good money if you manage it well. “The problem with textile is that anyone can go into the rag trade. So many people want to go into fashion, they see it as quite glamorous. You don’t have to have a degree, you don’t have to have anything.

“You have low barriers to entry and the industry has lots of people who struggle. Eighty per cent struggle. You have got to find a niche, you’ve got to find a reason to exist like any business. What I found was the textile, business if it’s managed really well, can be very profitable.

Kookai has 26 stores in Australia and four in New Zealand. It employs 400 staff including in its factory. Cromb will not disclose the company’s profit or sales but says Kookai has experienced considerable growth in the previous two seasons, averaging 17% increase on sales against the prior year.

He set up the business 20 years ago for his then-wife, former model Danielle Vagner. At the time, he was working as a financial controller for a construction and engineering company. He took out the Australian and New Zealand licence for Kookai from the parent company in France. When he started out, the idea was to import clothes from Paris.

“It was just a little hobby business,’’ Cromb said. “I didn’t think it would amount to anything important.”

“I just set it up and I said, ‘Why don’t we import clothes from Paris and on Friday night, we’ll take $200 out of the till and go out for dinner’. That was the idea and it gave my wife something to do after modelling.”

Vagner struggled at first so Cromb became more involved and was eventually absorbed into it. The couple has since divorced but they still work together. “Actually it works better now than when we were married,’’ he says. “I had known Danielle since she was 14 and I was 15 years old. We were friends before we started dating and we are still very close friends today.”

“Things didn’t work out which is unfortunate but we always had a very strong bond. And now we can argue [about business] and I don’t have to go home and carry on the argument.

“There is a lot of respect for what we both do which is very different. She respects what I do and I respect what she does. She is into visual merchandising and styling and the campaigns. I tend to the background work and I do design as well.”

Kookai’s key demographic is a 22-year-old female, the age the couple were when they started the business. “She is the most fickle, she is the most challenging, she tends to be the most interesting in terms of her social life and her spending habits. We chose her because we wanted someone who was going to push us as designers, someone who was constantly pushing the boundaries for herself and that would force us to keep up.”

After the business had been running for two years and not attracting enough customers, Cromb decided it was time to take the matter in hand. “The problem was that I was the same as everybody else. I had good knitwear coming in from Paris but I watched women walk in and walk out without spending money,’’ he says. “So I started scratching my head to work out what it is I could make for a relatively affordable price that they can walk in and buy. I went out and looked at all the stores in Australia and I found that no one sold basic T shirts for girls. Eighteen years ago, a woman couldn’t buy a basic T shirt for herself in colours.”

He asked Danielle why; she said maybe no one wanted them. But how would they know if no one is selling them, he said. He found a manufacturer who started making the T-shirts for Kookai. They sold well.

“The only reason I started manufacturing for myself was because the guy who was making it for me put up his prices by 40 per cent and I started asking questions,’’ he says. “I mean, how hard could it be to make a T shirt and I found I could produce a T shirt for about a quarter of the price.”

Cromb hired five women to make the tees and then realised he couldn’t keep producing the same item, he needed variety. So the former number-cruncher learned design. Two years later, he bought a small manufacturing plant in Suva, Fiji.

Cromb was going back to his roots. With a Fijian mother and Scottish father, he had grown up on the island of Vanua Levu, Fiji’s second biggest island. His parents brought him to Australia when he was 12 to get an education.

Kookai has a competitive advantage manufacturing out of Fiji, he says. “Many years ago, I saw everyone heading to China. I felt eventually that China would go the same way Japan did; they would move to areas of business that would deliver higher outcomes for themselves and clothing is not one of those fields. Companies there could see they would earn more money with electronics,’’ he says. “Doing business out of China is now more comparatively more expensive for than getting products out of Fiji.”

Fiji has other great advantages. Its proximity means freight costs are lower. It is a developing country so goods come in duty free and everyone speaks English.