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210. Bull, Bear & Beyond – THE ICONIC: executive interview
16 Plays13 days ago
In our interview with Jere Calmes, CEO, we take a comprehensive look inside THE ICONIC, Global Fashion Group’s (GFG’s) platform in Australia and New Zealand, GFG’s most successful region in recent years. Jere gives an overview of THE ICONIC’s market position and competitive edge and reflects on the significant transformation he has implemented. He gives some insight on the potential effects from the wider adoption of AI and the near-term opportunities for the business.
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About ‘Bull, Bear & Beyond’
Bull, Bear & Beyond': features candid conversations with senior executives and from our own team of experts from across industries, exploring strategy, innovation, and the opportunities shaping their markets and 60-second pieces are a compressed summary of content designed to convey our message in a single, easily shareable hit.
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Edison is a content-led IR business. We believe quality investment content should inform all investors, not just brokers. Our mission: engage and build bigger, better-informed investor audiences for our clients.
Edison covers 50+ investment trusts, read about them here: https://www.edisongroup.com/equities/investment-companies/
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Transcript
Introduction to The Iconic
00:00:07
Speaker
Hello, I'm Russell Poynton from Edison Group. And today I'm delighted to be speaking to Gerry Kalmes, who is the CEO of The Iconic, which is Global Fashion Group's business in Australia and New Zealand.
00:00:20
Speaker
Gerry, thank you for taking the time to speak to me today. Thank you, Russell. It's a pleasure to be here. So Gerry, there's probably a very good chance that some viewers will not be familiar with The Iconic business. So why don't you begin with an introduction to the business, the market, and the competitive dynamics, please?
00:00:37
Speaker
ah Certainly. It's actually a very exciting company. So the Iconic is the leading online fashion player for fashion and lifestyle here in Australia and New Zealand.
00:00:48
Speaker
This year will be about 15 years old. um And the company started as a disruptor, a digitally native company um that has a growing 2 million customer active base. um And I think one of the most important things about our company is that our our customers really love the iconic, they love the brand. um we We came into the market that was dominated by literally 100-year-old department stores and brought something fresh. and We continue to do that to this day.
Strategic Changes and Market Expansion
00:01:18
Speaker
Jerry, you've been CEO for just over three years now, and it's very clear that there have been lots of changes in the business over that time. So can you give some insight into the changes that you made from an operational perspective, a marketing perspective, and a product perspective, please?
00:01:31
Speaker
Certainly. um So the Iconic um has been ah a successful, ah ah as I said, ah a successful disrupter into this market over 15 years. um Clearly after the let's say the push of COVID, there was a bit of a wobble as as customers went back to store.
00:01:50
Speaker
ah But the the Iconic kind kept its kept its strategy in post-2022. We really started pushing our marketplace strategy. And a marketplace strategy means that we don't just sell a typical ah one-party retail approach to the business where um you where you buy an item, ah you hold it in stock and then sell it.
00:02:13
Speaker
um But we we opened up our platform to the services that we provide and giving giving brands access to the millions of customers that visit our that visit our site and app every day.
00:02:24
Speaker
um And so what that's done is actually increase the breadth of our assortment over the last few years with very relevant brands, um increasing the customers. So um the customer the customer base, ah which was dropping a bit, started to grow again by Q3 of 2024.
00:02:42
Speaker
ah That momentum's carried all the way through into 2026. um And now if we take a look at our percentage of net merchandise value, it's 36% on our marketplace services and 64% on our retail.
00:02:58
Speaker
Probably one of the biggest factors to the momentum we've been building here. But in addition to that, we we spent quite a bit of investment in 2023, redoing our back end to help with ah company efficiencies, as well as our ability to bring new services to clients ah in a faster way.
00:03:18
Speaker
um And as I stated at the outset, the Iconic is really a love brand here in Australia and New Zealand.
Enhancing Delivery and Customer Trust
00:03:24
Speaker
um So we started to invest our marketing dollars very differently um to focus on both our existing customers and growing our customer base ah with a successful new platform called Got You Looking.
00:03:37
Speaker
In the recent results, Christophe was highlighting the changes you've made from a delivery perspective. Can you just talk about so how that has made the business more attractive to the consumers, please? Well, absolutely. um So those investments into our into our back-end stack actually opened up a lot of additional um capabilities.
00:03:56
Speaker
um So we've always had fast delivery in some of the capitals like Sydney, even down to three-hour delivery. um But in the last in the last two years, we've been able to open up same-day or twilight delivery, next-day delivery pretty much to the eastern seaboard of Australia.
00:04:13
Speaker
um All of this kind of combines to um grow the momentum. Customers are still enjoying the the CX and the service level. um And it's it's actually it's actually created a strong ah financial performance as well. We've resulted in in ah in an EBITDA margin of about 7.4% over the last year.
00:04:34
Speaker
Jerry, and how quickly do those changes show up in a positive response from consumers? um Well, the customers here, ah they really respond um they really respond to a lot of what we're doing because I think the you know when we came into the market, Ecom, was it was brand new. And now there's now there's there's quite a few players. ah ah Some of the cross-border players as well as Amazon are here.
00:05:00
Speaker
um And I think
Differentiation and Market Positioning
00:05:02
Speaker
the customers respond very well because we've we've differentiated ourselves to be um an authority in fashion and lifestyle. um And the service that we provide for an online retailer um is as good as you would get anywhere else. In fact, it's it's better ah because because playing in this segment um is is rather complex in the e-com in in the ecom world.
00:05:25
Speaker
ah Fashion is not a it's not ah it's not toothpaste or toothbrushes. It's not a rubber ducky or bag of cement. Fashion is very self-expressionary. It's very fragmented.
00:05:40
Speaker
So the discovery of fashion is key. ah The CX and the UX online and and the customers that come to our app, they want a very seamless, easy experience to discover something new, much like you would do on Spotify.
00:05:55
Speaker
And most importantly is the delivery has to be on time, building trust. ah And the then the returns, because you're in fashion, also have to be frictionless. And that's another area that we we excel at. Most people think of returns as just a cost driver. We try to drive those costs down. But in reality, it's ah it's a market differentiator for for Australia and New Zealand.
00:06:17
Speaker
You said earlier there's been a lot of heavy lifting done from an infrastructure perspective. So what are the main investment requirements going forward? As i as I've said, ah most of the the heavy investing was done in 2023-24. In addition to that, we we were able to, um I think, put a strong focus on our cost structure um and and grow the grow the business profitably. As I mentioned, we're already at at margins of 7.4%, but they see margin expansion um gross ah growth opportunities as we continue to build our marketplace as our marketplace proportion of sales, um and as well as keeping our operating leverage going. um As for investments for the future, um we are at ah at ah at a stage where we don't require any significant cat capex for for so for for further growth.
00:07:11
Speaker
um We do look at capex mostly from an efficiency standpoint and and would invest for obviously quick ah ROIs. So Gerry, if you're outside the industry, it can be quite difficult to work out what distinguishes a company versus its competitors. So could you give some insight into the company's competitiveness?
00:07:29
Speaker
Certainly. i think um the good news is for the Iconic is we are somewhat of the only player in the market doing what we do. um We're 100% focused on fashion and lifestyle, and that's a very um large segment of the retail market. It's about 28 billion um Australian here.
00:07:49
Speaker
um And we do it online at scale. So we're positioned very well to be um the driver for an ecosystem for fashion and lifestyle.
00:08:00
Speaker
And fashion brands like um their adjacencies. They like to tell stories, and that's very important to them. So we we resonate very well um with our brand partners.
00:08:11
Speaker
um And as as we as we as basic As we look to the future, um we we we have two main focuses in the Iconic um in terms of strategic priorities or strategic pillars. One is to continue to grow that breadth of assortment.
00:08:26
Speaker
um And when you have relevant assortment, it drives more customers and it drives more frequency. um And at the same time, we provide an unparalleled ah customer experience. ah We started off that way. We're known for that.
00:08:39
Speaker
ah We've built a lot of trust. um And as the market continues to grow, um we're we're gaining more and more of that of that share. So those are the two main areas that differentiate us.
00:08:51
Speaker
um In the assortment side, I would also add that we have... um a very healthy a very healthy exclusive assortment. um About 20% of everything sold in terms of our net merchandise value on the Iconic um is it's exclusive just to the Iconic or specifically a brand.com.
00:09:09
Speaker
Jerry, when we look at the numbers and the KPIs, it's clear that the ANZ business has been the driver of the GFG results. So what do you think are the structural growth drivers going forward? um There's quite a few. um I'd say the biggest one is structurally. In the market, um online is growing faster than offline at about a two to one ratio.
00:09:29
Speaker
So as more customers just come online here in Australia and New Zealand, we're well positioned to take that structural growth. um I think obviously with the advent of AI and and retailers becoming even more digital, this actually serves as a big opportunity ah for us to continue to make inroads into the the digital space.
00:09:49
Speaker
um In addition to that, we're very focused on um our customer lifetime value and loyalty. So in October of 2025, we recently launched a new loyalty program, which we call the Front Row.
00:10:02
Speaker
um And this instrument enables us to be much more granular in how we um how we build and grow high value segments of our customer base.
AI and Future Growth Plans
00:10:12
Speaker
um And I think that the these these growth drivers are going to actually enable us to continue continue a solid business in the coming in the coming years.
00:10:21
Speaker
So Gerry, you brought up AI there and investors at the moment are trying to work out who are the potential winners and losers from the wider adoption of AI. So I'd be interested in your thoughts on the effects of AI on your business.
00:10:34
Speaker
um Great question, obviously. i mean, i think I think if you can decide who the winners and losers are, let me know, ah first and foremost. But I think AI is obviously having a profound impact on on every business.
00:10:50
Speaker
um I think for a company like the Iconic, we're digitally native. ah meaning we test and learn all the time. It's very normal for us to adopt a new technology um and if it doesn't work, ah fail fast and get on with it.
00:11:07
Speaker
um as As AI um perirates proliferates, we we actually see it as a great opportunity. ah what What it's doing is basically making the shopping journeys much more digital and that plays into our hands.
00:11:22
Speaker
ah Internally, we've seen um we've seen the the tools help us with our discovery, with our search. um as As search turns from kind of keywords into intent-based, um we actually use it to surface up more relevant, more personalized products out of our 250,000 SKUs that we have on site. So it makes our our services more relevant.
00:11:46
Speaker
And I think maybe one of the bigger impacts will be the operating leverage that it provides. um And that is we're able to automate um a lot of internal processes and get our employees to focus on ah higher strategic or more value added more value- added work.
00:12:04
Speaker
Well, that's the tricky AI question out of the way. So what are the other risks you worry about most? um i think I think probably maybe one of the bigger bigger risks is ah it is a competitive environment. We've seen we've seen a lot of companies over over the last few years go away in this market. um And I think as as more and more will struggle with some of the transitions, um they they discount they discount in a way that ah can have ah can have ah a margin pressure effect.
00:12:37
Speaker
um And I would say also maybe just with some of the the current ah the current global outlook, inflation and and consumer confidence, that means we're going to be competing not just with competitors, but also with ah the cost of living.
00:12:51
Speaker
um But I believe also that we have a very solid um structural strategy to grow in this market. um So we're holding we're holding to that path. um and will continue to bring iconic products to to the to the customers that that love us. Looking a bit more at the short term, what are the key opportunities for the coming year?
00:13:13
Speaker
So number one is to continue to grow our platform services, ah bring on more brands. Actually, bring we have many brands on our drop ship model. That means ah ah means a um a brand that actually is on the iconic, but they they have the inventory in their own store. They pick and they pack it once it's ordered. um we're We're bringing many of those brands in-house, so we bring them into our into our fulfillment center and provide them a fulfilled buy service, ah which is a premium service. and ah It opens up, the next day delivers, the the same day deliveries. um Conversion rates go up because it's much shorter.
00:13:56
Speaker
Returns become less much less expensive, and that's resonating. So we'll continue to focus on building the platform. ah Likewise, we're implementing and investing in personalization and using some of these technologies I just mentioned in in regards to AI to continue to improve the CX.
00:14:15
Speaker
um And we'll continue with our um our our delivery enhancements as we bring more and more packages to customers in shorter times. that Customers always want more or something different. So without giving away anything that's too competitively sensitive, what do you think are the key changes that are coming your way?
00:14:33
Speaker
Well, I think, actually, I think um the the recently launched loyalty program is going to going into play very well. we've it was one of the most um It was one of the most anticipated ah features that the Iconic needed to bring into this market. We have a lot of customers, as I said, that that really have a high infatuation with the with the brand and what they do. um So being able to being able to bring a... um ah a further relationship in the digital sphere with them is going to help tremendously. um And for some of our VIP customers, we've already surprised them with experiences. You know, they can't buy with visits to the Australian Open, being part of our yeah being part of our brand partnerships with F1.
00:15:19
Speaker
um so So kind of bringing um fashion and lifestyle to life outside of outside of a product page on a website or on an app. Well, Gerry, that's been great. And thanks for the insight on the Iconic and the Australia and New Zealand market.
00:15:35
Speaker
The business has obviously been performing well, so please keep it going. And thank you very much for your time. Thank you very much, Russell. Great talking to you.