Another ASR. Anything to Learn

 

I love this business, and am grateful to be in it because it’s fun and I like the people involved in it. But at the end of the day, we’re about marketing and brand building. We succeed if we create demand for and perceived differences among products that aren’t very different from each. It all sounds pretty trivial after the descriptions of people jumping out of the World Trade Center.

 

Sorry if I’m feeling a little morose today. I imagine some of you might be feeling the same. I’m going to go hug my wife and kids, then its time to focus on some business stuff.

 

 

Speaking of marketing and brand building, it’s getting kind of hard to spot an ad that focuses on product features. They all show teams and tricks. Sometimes, it takes a second to figure out which company the ad is for. One hard goods company told me they could double their sales if they could get a couple of more leading team riders.

 

Talk about shooting ourselves in the foot. We’re working as hard as we can to demonstrate to our customers that most of our products are functionally the same. We call it differentiating ourselves from our competitors. How do you do that on a brand versus brand basis? By spending more on team, advertising and promotion. When can you afford to do that? Only if your volume and/or your prices go up. Who wins this game? Companies who are either larger, have strong balance sheets, or both. How many can win? Don’t know. But I know it’s more if the market is growing, and fewer if it’s not.

 

Maybe this accounts for the feeling I got that there was a lot of energy at ASR, but it was at a pretty even level through the skate portion. Exciting, but the same everywhere. I don’t like sameness. It’s not a good foundation on which to keep growing an industry.

 

Quiksilver isn’t a skate company, though I suspect a lot of people who skate buy some of their stuff from time to time. Thursday, the first day of the show, they guided earnings expectations for their fourth quarter down for two reasons. First, they said that their domestic men’s inventories are much too high and will have to be closed out at distressed prices. Second, they said reorders are coming in more slowly than plan and are being negotiated at lower prices.

 

Part of me feels like I should be able to just stop this section right now and move on, but allow me to belabor the point. In my conversations with people at the show, I frequently heard about softness at retail. This generally focused on soft goods. Hard goods seem to be holding up so far, as did skate shoes, at least for the credible skate brands.

 

My interpretation? If you’re a skater, and you want to keep skateboarding, when the tip of your board has worn down to the point where it’s paper thin, you finally have to get a new board. No choice. If the bearings fall out, you have to replace them. No choice.

 

Do you need a new pair of pants or shirt to keep skating? Nope. You’ve got a choice.

 

With shoes, my hypothesis is that the skate shoe brands with the most credibility with skaters are taking business from all the wannabee brands. So it may be that shoe sales can soften without the major brands really noticing. If they will be cautious about raising prices, this can be a hell of an opportunity for those major skate shoe brands.

 

The ASR show guide has seventy companies listed under footwear. That number is, as I recall, the same or a little higher than the previous show. Not all of those offer skate shoes, of course. But if I’m right about the more credible skate brands taking share from the others, and the economy is soft, then you might expect to see the beginnings of a consolidation in skate shoes we’ve all been expecting. Why might it not happen? Because some of the brands that are in the skate shoe business, but not as credible as the leading brands, have lots of money and big balance sheets. They could make a “strategic” decision to stay in the business and lose money for a while. It happens. Then the number of brands doesn’t decline so dramatically, but everybody’s profitability can be hit because price becomes more of a competitive factor and more has to be spent on marketing.

 

The successful, branded skateboard companies have watched the shoe and soft goods’ companies grow like mad at least partly on the backs of the hard goods brands’ support of skateboarding. Sometimes it looks like the hard goods brands have missed out. I bet they’ve all wondered from time to time if they should be making shoes and soft goods. If the economy turns, they will look prescient, because their market position, focused on the core of people who really skate, is likely to hold up better than the much broader market the soft goods aim at.    

 

Check out again the section above on Advertising Trends and what happens when the basis of competition is advertising, team, and promotion. If you’re a retailer, you might go back a couple of issues and read what I suggested you do if we are, in fact, heading into a recession. Maybe our favorable demographics insulate us from economic cycles? Or may the force be with us. Whatever works.

 

 

The Chinese make lots of stuff that was once made here, and they can make a skateboard. They are making them now.

 

To pick some rough numbers, let’s say there’s maybe $4.00 of wood and $1.00 of glue in a deck. There’s also labor, freight in, waste, the cost of operating a factory, administrative overhead, maybe royalties to team members. Eight dollars? Ten dollars in total? A little more? That’s before graphics and any dying of plies before you make the deck. Total cost depends on your overhead, your cost accounting, and your volume.

 

I hold in my hand an actually quote from a Chinese factory to supply seven ply Canadian maple blank decks at a little under $8.00 depending on dimensions. That’s before shipping and before the four percent duty U. S. Customs tells me would apply. It’s also for a natural colored board. This communication names a couple of brands that are making them there now. 

 

So you can buy decks from China, and probably land them for less than you can make them here. It seems to work for Variflex, who buys god knows how many completes from China and sells them in various discount chain sporting goods stores. 

 

But Variflex isn’t concerned with pro models, doesn’t have to change their graphics as often, and doesn’t, I suspect, handles quite the numbers of brands and models. Make them cheap, make a lot, and ship them out.

 

However, if you were convinced the quality was what you required, and I see no reason why it can’t be, what’s to stop a brand from bringing in blanks and screening them as and when required? You can maintain your flexibility and get a price that is lower. How much would depend on the specifics of your operation.     

 

 

Not too much, as usual. I saw a couple of variations of the long boards with single center wheels on the front and rear that are suppose to emulate surfing or snowboarding I guess. Looks like it might be fun.

 

I heard about something coming out called Sticky. Apparently there are magnets in the shoes and metal plates on the deck so the deck doesn’t always have to be gripped during tricks. It’s not just an idea. It’s been extensively tested and, I’m told, been given thumbs up by skaters who have tried it. Guess it could open up some new possibilities. Wonder what the added weight is?

 

There use to always be “new” snowboards at the snowboard show. Trouble was, the snowboard had already been invented and none of these “new” things, good ideas or not, could ever break through what the established concept of a snowboard was. All these guys might have the same problem. You can have a great technology, but it comes down to marketing. If the riders don’t accept, it’s a bad idea.

 

Dark Horse showed me the rocket bolts and V-Beam axle, which seemed to make sense. But how do you sell technology in a market driven by team and promotion?

 

I’m sure there was some other stuff I missed. Wish I could have gotten into all the booths to see it.

 

Are we headed for economic hard times? If we are, the next ASR could be a bit different. It couldn’t hurt for you to think about what you’d do if we were before we get there. If they happen, they will be hardest on those who haven’t prepared in advance.