What This Industry Needs is More Sunglass Brands!

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Well, you have to admit I got your attention, and that title is way more intriguing than “What I Learned at Agenda.” I never thought I’d say this about any category, but I think there may have been more sunglass than shoe brands. And if case anybody is actually confused, that title is written in the full bloom of major sarcasm.

If you are in the sunglass business, I hope your price points are either around $20.00 or north of around $150 and very boutique focused. I know the margins have made this category very attractive (hence all the brands) but I’ll be surprised if the competitive landscape allows those margins to persist – especially in the crowded market middle.

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Thoughts from the SIA Show

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So I confess. I’m from Seattle and there was no way in hell I was going to be on a plane Sunday while the Super Bowl was on. I left Saturday. But in my two days wandering the show, I had some thoughts I wanted to share with you. 

There was a bit more of a somber attitude at the show then I’ve ever noticed. Everybody I talked to seemed to feel the same way. I particularly noted that the noise/crowd/enthusiasm difference between snowboarding and the rest of the show wasn’t as I was used to. That doesn’t mean there wasn’t a lot of business being done- my sense is that there was. I’d also note that the “core” (still hate that term) snowboard hard goods brands were interspersed with some large booth from brands I’d label as tangential to snowboarding and the snowboard ghetto, as we’ve come to call it, was more spread out. Perhaps that accounted for it. That’s probably a good thing. It recognizes market realities.
 
There were also business reasons why the mood was different. The apparent ongoing decline in snowboarding, a recovering, but still weak economy,  lack of California and Northwest snow, some negative publicity for snowboarding (deserved or not?) and issues of inventory may have had something to do with it.
 
Which brings me to distribution. Everything always seems to bring me to distribution in this industry. At the risk of oversimplifying (I get to do that because I don’t have to actually run a winter business any more), to make money in winter sports, you have to plan for what you think is an average winter in your market and produce/buy 10% (or 15% or 20%?) less than that. You make/buy only what you think you can sell at full margin during the season.
 
You do not wail and gnash your teeth when you run out of inventory and can’t fill reorders when it dumps late in the season. You just calmly remind the buyer to order more in preseason next year (or tell the customer to come in sooner if you’re a retailer) and thank your lucky starts that your inventory is clean.
 
Because the absolute best way to guarantee you don’t make money in winter sports is to have a bunch of left over inventory you have to close out. Not only do you make little to no money on that inventory, but it might have cost you a full margin sale at some point in the future.
 
That’s a particularly important point when all product is good and there’s no reason to replace it very often (On the plus side that reduces the cost to participate). There are fewer chances to make a sale than there used to be. I talked to a couple of industry types who had been offered free boards by brands and actually turned them down. They just didn’t need them and didn’t want to break in a new setup. Getting a new board for free was too much trouble, which sounds strange when I say it.
 
 My point of view on distribution and making money in this business seemed to be validated when I talked to three established snowboard brands who manage their production and distribution carefully. They’d all had issues with west coast retailers who couldn’t move product because of lack of snow. But the brand’s inventory was clean. So clean that they had trouble filling reorders from places with snow. Their solution, which worked because their inventory was clean, was to take the product from the first retailer and move it to the second.
 
Maybe the no snow retailer didn’t really want to give up the inventory even though they couldn’t pay. They just asked for big discounts to keep it. And maybe the product coming back doesn’t exactly match what the retailer with snow wants. Maybe the opportunity happens too late in the season to pull it off. Maybe some other stuff too. There is definitely friction in the process and some cost.
 
But at least these brands had the potential opportunity to take back some inventory and place it with somebody who could move it at full margin. They weren’t in a fight to be paid with a customer they wanted to keep for next season, and they’d made another customer very happy. Maybe there was some margin given up, but it was a lot less than if you had to close the stuff out.
 
This opportunity only existed because the brand was deliberate and cautious with inventory in the first place.
 
I also had occasion to talk with Jono Zacharias who, last time I updated my Outlook, was SVP for Global Sales at Westlife Distribution (686). He told me, speaking of distribution, something interesting. Apparently their best-selling pieces were the same in Europe, Canada and the U.S. this year. And their dogs- uh, I mean styles that didn’t sell quite so well- were the same in all three geographies.
 
I’m hypothesizing that says something about the internet and social networking. My sense is that wouldn’t have been the case a few years ago. Maybe it’s just a coincidence (it wasn’t true with Japan). If I were Jono, or a sales manager for another brand, I might go back a few years and check that out.
 
First, of course, you have to have the systems to do that. I’ve noted in my various articles all the companies spending money on systems to accumulate, integrate and analyze sales and inventory data. If there is some growing cohesiveness among styles and trends across geographies, then the implications for production, distribution and the numbers of SKUs you need could be significant. Just something to think about.
 
You know what? In spite of our industry’s macro problems, snow sliding is still FUN and SIA’s show does a great job reminding us of that. We’ve got something good to sell. The pace of change is disconcerting, but that usually means opportunity. Let me know if there’s a geographic convergence among your successful products. What can you do with that to run your business just a bit better?   
 
          

 

 

Surf Expo from the 10,000 Foot Level- Literally

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Yesterday morning, I was in warm, humid, sea level Orlando for Surf Expo. After 14 hours of travel, I found myself at the cold, dry, and 10,000 feet high Keystone resort for the Zumiez 100K event. Whew. One beer was my limit with dinner last night, and then I went to sleep early. 

Agenda and Surf Expo are two very different shows, with Agenda more urban and apparel and Surf Expo more beach and surf. We need them both but not, if I may say it again, overlapping each other.
 
The thing that almost caused me to keel over at Surf Expo was the stand-up paddle section. I regret not counting the brands. There were a lot. In conversations with a couple of them, I heard that there were perhaps 200 “viable” competitors plus maybe another 100 who just have product made and printed with their label in China. The size, shape, and prices of product varied widely. Incredible number of choices. Amazingly, I was told that the SUP section is about twice this size at Surf Expo’s September show.
 
I know some of you have had the same thought I had- “Oh lord, it’s the SIA snowboard section in Vegas in 1996.” We know how that worked out. Honestly, I expected a consolidation sooner. It was two years ago I saw a $400 SUP board at Costco and there’s never been the manufacturing learning curve and lack of capacity issues we had with snowboarding.
 
The reason we haven’t had a consolidation yet, I hypothesize, is because SUP has a much larger potential market and is easier to learn than surfing or snowboarding. And it doesn’t require a mountain or a wave. There are lots of lakes.
 
I couldn’t help but notice how many people involved in SUP had been through the snowboard business cycle. Hopefully, they haven’t come down with a case of selective amnesia. This time will not be different. There will be a consolidation, margins will drop, there will be too much product and production capacity. I don’t know when, but I recommend that you build your balance sheets and not assume it will only impact your competitors.
 
But damned, it’s great to see a new category with some legs.
 
The skateboard section was intriguing. The skate ramp was packed (I love watching the etiquette that skaters use to keep from running over each other). Volcom was the sponsor, with its booth opening on the ramp. Every kind of skateboard was represented. Long, short, narrow, wide, various shapes, wood, plastic, metal. I particularly liked Beercan Boards, made from scrap aluminum by an auto parts manufacturer from Georgia. They readily acknowledged that they didn’t know anything about the skateboard industry, but they seemed to be having fun. It felt a little like the bike show, where anybody with a new idea is welcome and encouraged to try something different.
 
While one end of the show was dominated by skate, the other end was what I guess I’ll call resort focused gifts, for lack of a better term. I more or less walked the whole show, and found it interesting how the energy built from one end of the show to the other. Kind of suggested that they have it organized right. At first, I found it interesting that beach and surf were separate, but as you walked the sections it became clear why. Their products mostly wouldn’t sell in each other’s channel. Surf industry consumers want technical board shorts. Beach market customers want a bathing suit.
 
Oh- and I want to thank Surf Expo for giving me a badge that said “buyer.” People in booths were nice to me, and I actually had an apparent reason to stop in my tracks and check out the models because, obviously, I was a buyer with an interest in the swimsuit business. My favorite booth had to be a little one with a guy sitting at an unadorned table with some apparel hung on the back wall. The sign over the front of the booth just said “DEALS.” I thought that was refreshingly honest.
 
A company called New Trick Sports was featuring a 45 pound electric wench fitted with an 1,800 foot line that can be easily attached (and detached) from a pickup truck and can pull a wakeboarder. The videos on the web site make it look like it’s plenty fast. I guess one potential inconvenience might be that you have to swim the line out. They are working on a gun that can be used to shoot the line out for rescue purposes, but I doubt that will be available to consumers. Too bad.
 
There were some pretty large booths in the surf section. Billabong, Quiksilver and Vans come to mind. Shades of the old ASR. No second stories though. I understand The Endless Summer showing the first night of the show was a big success, though I didn’t get there to see it due to my being efficient and planning too far in advance. Do something that cool next year and I’ll be there.

 

 

Agenda Show: The New Skate Business Model

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I’m somewhere in the middle of the country between the Agenda and Surf Expo trade shows at 30,000 feet. Before I talk about the sea change in skateboarding I saw at Agenda, I have a request. Will the powers that be at both shows please figure out how to not have the shows overlap? 

Please, no explanations and finger pointing. Not interested. Yeah, yeah, I know. I don’t understand. I’m just a customer (kind of) that thinks it sucks and is inconvenienced by it. And I’m not even the customer you should care about.
 
There, I feel a whole lot better.
 
Okay, skateboarding. An English magazine product guide I picked up at Agenda listed 55 brands of skate decks. Some I knew, many I’d never heard of. And those are only the ones who have enough presence (and money?) to be in that publication. Lots and lots of small skate brands around. At the show, there were a bunch of small deck brands that were new or had only been around a year or two. My perception over two days (shared by others in the industry I asked) was that the newer brands were busier and full of kids while the older brands (guess what – I’m not going to call them the “core” brands) were slower and full of older guys.
 
Many of those older guys will remember a time when they were just kids skating who thought it would be cool to get a few decks made for their friends because they kind of had an idea for a graphic. So somewhere they got 50 decks made and, after selling them to their friends, found they had made a couple of hundred bucks.
 
Of course, it had taken them at least 100 hours of work to get them made and sold (maybe a lot more) so in fact they’d earned about fourteen cents an hour. But who cared. They had a few bucks in their pocket, had a lot fun, and sensed a new found respect from their friends. They were on to something. Next time they’d make a hundred.
 
And the guys who turned out to be pretty good at that (and committed, and worked hard, and had a vision, and managed to raise a few bucks, and were a little lucky) are the guys I spend time talking to at Agenda. I like them, I’ve known them ten or fifteen years, it’s interesting to hear what they think, and they’re my age (okay, not that old, but getting there).
 
As they built their brands, they created a business model based on a high retail priced product carefully distributed (initially) with differentiation based mostly on team riders. High gross margins and big marketing budgets.
 
That business model started to go to hell about ten years ago as skateboarding got big enough to attract outside attention and lacking any kind of product improvement or differentiation not based on marketing. As the skateboard deck became a commodity to more and more skaters, there was no way to sell enough of them at a high price to fund the marketing program. The leading brands in the industry lost their ability to control pricing.
 
But they were stuck with their business model in terms of how they thought about it and because of a corporate structure with committed overhead. And they were getting older- every day, week, month, year- in an industry where the fourteen year old if the arbiter of cool. Maybe the 12 year old. Attitude and reality was (is?) working against them.
 
Meanwhile, the kids with the new brands have discovered what the owners of the core brands once discovered. It’s cool to make 50 boards and sell them to your friends. But they aren’t trapped by an increasingly obsolete business model and overhead structure.
 
Who’s on their team? The kid who did the coolest trick caught on video at the local skate park yesterday. It was up on YouTube, Twitter, etc. and the brand’s web site before his session was over. Hmmm. Maybe web sites don’t even matter like they used to. Tomorrow it will be somebody else. Or it will be the same skater. But there’s no need to create and run a series of ads to build a single skater’s credibility.
 
Marketing budget? Practically zero. Maybe you end up with a “team” of 6,000 composed of a couple of skaters at various skate parks and neighborhoods around the country. Or maybe you don’t. And your “team” will change and you won’t know it or control it. Maybe you cobrand with local shops or skate parks. Some brands and some skaters will rise to the top just like they always have. But there’s not an initial and expensive structure and process required. It will be informal, inexpensive, and inexact. In a word, it will be surprising and the skaters, not the brand, will have a lot of control. I wonder, in fact, if you don’t try and control it at your peril.
 
But how different is this really? The heritage skate brands (Oh god, what an awful thing to call them) aren’t strangers to creating new brands. But the communications process and the cost structure are dramatically different from what they are used to.
 
The heritage brands can’t do a damned thing about this as long as they have to exist within their old cost structure. Maybe one of these brands should rename itself Phoenix and rise from the ashes by severing all ties with the parent and putting a few kids with computers and a travel budget into a small old house somewhere and start over with the same brand name. Don’t you wish you’d done that with longboarding ten years ago? Or maybe you approach half a dozen of the new brands that are thought to be the coolest and you offer each of them $10,000 for an equity stake in the business (actually convertible debt would be better).
 
I keep being told that, according to the numbers we have, skating is declining. But damn, I see a lot of people skating (Of course, that’s what I want to see). And I was reminded at the show that the industry is about due for the next demographic boost. The numbers I’ve seen bear that out.
 
So anyway, when I get to Surf Expo, to the extent they are there, I’m going to spend all my time talking to skate companies I’ve never heard of. Won’t be as much fun, but I have a sense I’ll learn more about where the industry is going.
 
Meanwhile, at Agenda, the coolest thing I saw was the tagged police cruiser with the skateboard through the front windshield and the product displayed in the trunk. That’s the kind of thinking we need. I also saw a really busy show, though not quite as busy on the second day partly, I think, because people had left for Surf Expo.
 
I visited RAEN (because they asked me to) and saw a business model I liked. They’ve got some actual product differentiation, a story to tell, and a price structure that makes sense. I was scared to death I’d break their material when I twisted the frame, but when I worked up the nerve to try, I couldn’t. I also liked the product look, but for all I know, that’s the kiss of death for them.
 
Speaking of old school, I went to Bud Smith’s retirement party thrown by NHS. I’ll miss Mr. Griptape.  Next day, retired or not, Bud was still in the NHS booth. I didn’t stay long enough to see if Denike had to have him removed by security when the show closed.   Hey Bob, maybe you can get him to sell some grip tape for free?

   

Brand Extensions, Market Niches, Internships and Other Notes from the Agenda Show

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Agenda did its usual good job of putting on what I’ll call its youth culture show in Long Beach last Thursday and Friday. I don’t really like that term, but I like “action sports” less at this point in our industry’s evolution and I really hate “fashion.” And not everything is “urban” or “street” wear so it’s youth culture until somebody comes up with something better. I’m waiting for your suggestions. 

My request to Agenda is that they keep the booths small and low, the food trucks coming, the signage easy to follow, that they never move out of Long Beach (because the airport is easy for me) and that they flee into the night whenever somebody tells them they are “the new ASR.” They’ve replaced ASR, but they need to fight not to become it. I know they are.
 
Beware Product Extensions and Know Your Niche
 
Nikita contacted me a couple of weeks ago and asked me to stop by their booth at Agenda. I told them I wasn’t so much interested in reviewing their product line (in spite of all that I obviously know about women’s fashion) as in talking about their business history and strategy. Strangely enough, they wanted to talk to me anyway.
 
Nikita, you may recall, came out of Iceland about ten years ago with the tag line, “for girls who ride.” As I wrote at the time, it was simply the best, most succinct definition of a market niche I’d ever heard. It gave the company direction and focus and it was a niche nobody else was focused on.
 
Things, I guess, went well for a couple of years. And then they extended, trying to come out with a line of clothing for guys and I went, “Oh shit.” Brand extensions are hard enough, but when you’re defined as “for girls who ride” and then try to make clothing for guys, well, I was concerned.
 
Seems I was right to be. To make a long story short, about a year ago they were acquired by Amer Sports. Under the tutelage of the group at Bonfire (owned by Salomon, which is owned by Amer) they’ve spent a year revamping, rethinking, restructuring and now relaunching the brand. They’ve done something I think is really smart; they’ve hired somebody from outside the industry to help them evaluate the brand and it’s positioning. We all talk to each other way too much. Having somebody without a bundle of preconceptions and no fear of stupid questions should produce some interesting results.
 
Of course street clothing for girls who ride was a pretty small niche and Amer is a public company interested in growth. That’s the danger of niches. You can own yours, but it doesn’t leave you with any place to go if you’re a smaller, thinly capitalized company. Happily, Amer isn’t.
 
The group at Nikita is trying to figure out where they can take the brand. I think I can say with certainty it won’t include a guy’s line, but there’s some street wear as well as their snow line in their current offering. “Girls who ride” do more than snowboard and if pursued cautiously and consistently, there should be an opportunity.
 
Meanwhile, over at what apparently continues to be the very well received Stance sock brand that is now, what, four years old there are definitely no brand extensions on the horizon. I was sitting chatting with somebody when I saw Stance CEO John Wilson walk by and, fresh from Nikita and having noticed that it was easier to list the brands that weren’t making shoes than those that were, I yelled out, “Wilson! No brand extensions!” I got a smile, a thumbs up, and a high five. The trouble is when you’re sitting down and high five the not exactly short Wilson, you can damage your shoulder. Mine should be fine in a couple of days.
 
I didn’t ask him, but I’ll bet anything he’s been asked when he’s going to move into shoes. I mean, shoes to go with socks- what could be more natural (note extreme sarcasm). I’m sure there will come a time- someday- when there will be another Stance product. But I predict it won’t be shoes and it won’t be for a while. Four years is not a long time to build and position a brand that can support product extensions.
 
Meanwhile, I walked by Wolfgang Man and Beast and found a new market niche for upscale dog collars and leashes (think of an $80 collar). I also found industry veteran Luke Edgar who, along with four other dog lovers, started the brand. This is what Luke does when he’s on vacation from Skullcandy. I kind of smiled, but then I reminded myself of just how much money people are now willing to spend on their pets, so maybe there’s a market there. I’m told the initial reception is positive.
 
If you’re in the private equity business, you go around collecting cards from new brands that might have found a market to exploit. Then in a year or two you check back to see if they’re still around and are succeeding. I ran into one private equity guy I know and, sure enough, he already had a card from that business. So we’ll all check back in a year or so.
 
Consumers seem to trust new brands a lot faster these days. Maybe it’s more accurate to say they don’t distrust them. Anyway, finding a niche that’s derivative of the whole youth culture market is a good thing. You know, I’m wondering if first movers are at the same disadvantage they often were in the past.
 
Child Labor
 
A conversation with somebody in the core skate industry lead to the usual bemoaning about how there were fewer skaters, the old business model didn’t work anymore, there was nothing new product wise, and it was getting harder and harder to figure out what was relevant to young skaters.
 
The last point led to an offhand comment about skate brands needing to hire 12 year olds. When somebody made a point that it would violate child labor laws, we were immediately off and laughing, imagining the head of some skate company explaining to a judge that they only had a bunch of kids working at their company because they were trying to find out what was cool again. I can see the prosecutor holding up a deck with the graphics the 12 year old created, and “contributing to the delinquency of a minor” being added to the charges.
 
Skate companies will say with some justification that they already do that with team riders (find out what’s cool- not the illegal part). But team riders are the top 2% or so of skaters and besides, they get free product. I have never been quite sure just how relevant their input was to the broader skate market.
 
Well, maybe 12 is too young, but I’m wondering if anybody has ever hired some kids as interns (paid or unpaid) in the marketing and/or design departments. They should be kids who skate, but are not necessarily great skaters. Maybe some of them should even be long boarders.
 
Have a contest with some retailers to select a couple of kids who’ll be paid to work for you during the summer or a few afternoons a week after school. Have them occasionally bring in a few of their friends. Pay them a few bucks, teach them something about business, and get them to create and react to new product ideas. Then take a chance with what they come up with. Put whatever graphics they come up with on a deck and let that deck be sold at the shop they hang out at.
 
Maybe this is already happening, but as business risks go it’s pretty low and who knows what might come out of it.
 
And kind of related, I found out about the Next Up Foundation. It “…provides after-school and summer mentoring programs that teach today’s youth life skills through skateboarding.” I heard good things. I have a kid who was sort of drifting and unhappy until he found something he loved that gave him some focus, self-respect and friends. In his case, it was music. But if it had been skateboarding, that would have been just fine too, and that seems to be at least part of what Next Up does.
 
I don’t have the list, but obviously some brands are involved in and contributing to Next Up. I’m wondering if any of those brands are using that involvement to get a sense of new cool stuff while at the same time helping the foundation meet its goals.
 
See you at the next show.
 
    
 
 
 
 
             
 
 
 
   
 
 
 
    
 
 
 
 
 
 
 
 
    
 
 
 
              
 
 
 
 
 
 
 

Brand Extensions, Market Niches, Internships and Other Notes from the Agenda Show

 
Agenda did its usual good job of putting on what I’ll call its youth culture show in Long Beach last Thursday and Friday. I don’t really like that term, but I like “action sports” less at this point in our industry’s evolution and I really hate “fashion.” And not everything is “urban” or “street” wear so it’s youth culture until somebody comes up with something better. I’m waiting for your suggestions.
 
My request to Agenda is that they keep the booths small and low, the food trucks coming, the signage easy to follow, that they never move out of Long Beach (because the airport is easy for me) and that they flee into the night whenever somebody tells them they are “the new ASR.” They’ve replaced ASR, but they need to fight not to become it. I know they are.
 
Beware Product Extensions and Know Your Niche
 
Nikita contacted me a couple of weeks ago and asked me to stop by their booth at Agenda. I told them I wasn’t so much interested in reviewing their product line (in spite of all that I obviously know about women’s fashion) as in talking about their business history and strategy. Strangely enough, they wanted to talk to me anyway.
 
Nikita, you may recall, came out of Iceland about ten years ago with the tag line, “for girls who ride.” As I wrote at the time, it was simply the best, most succinct definition of a market niche I’d ever heard. It gave the company direction and focus and it was a niche nobody else was focused on.
 
Things, I guess, went well for a couple of years. And then they extended, trying to come out with a line of clothing for guys and I went, “Oh shit.” Brand extensions are hard enough, but when you’re defined as “for girls who ride” and then try to make clothing for guys, well, I was concerned.
 
Seems I was right to be. To make a long story short, about a year ago they were acquired by Amer Sports. Under the tutelage of the group at Bonfire (owned by Salomon, which is owned by Amer) they’ve spent a year revamping, rethinking, restructuring and now relaunching the brand. They’ve done something I think is really smart; they’ve hired somebody from outside the industry to help them evaluate the brand and it’s positioning. We all talk to each other way too much. Having somebody without a bundle of preconceptions and no fear of stupid questions should produce some interesting results.
 
Of course street clothing for girls who ride was a pretty small niche and Amer is a public company interested in growth. That’s the danger of niches. You can own yours, but it doesn’t leave you with any place to go if you’re a smaller, thinly capitalized company. Happily, Amer isn’t.
 
The group at Nikita is trying to figure out where they can take the brand. I think I can say with certainty it won’t include a guy’s line, but there’s some street wear as well as their snow line in their current offering. “Girls who ride” do more than snowboard and if pursued cautiously and consistently, there should be an opportunity.
 
Meanwhile, over at what apparently continues to be the very well received Stance sock brand that is now, what, four years old there are definitely no brand extensions on the horizon. I was sitting chatting with somebody when I saw Stance CEO John Wilson walk by and, fresh from Nikita and having noticed that it was easier to list the brands that weren’t making shoes than those that were, I yelled out, “Wilson! No brand extensions!” I got a smile, a thumbs up, and a high five. The trouble is when you’re sitting down and high five the not exactly short Wilson, you can damage your shoulder. Mine should be fine in a couple of days.
 
I didn’t ask him, but I’ll bet anything he’s been asked when he’s going to move into shoes. I mean, shoes to go with socks- what could be more natural (note extreme sarcasm). I’m sure there will come a time- someday- when there will be another Stance product. But I predict it won’t be shoes and it won’t be for a while. Four years is not a long time to build and position a brand that can support product extensions.
 
Meanwhile, I walked by Wolfgang Man and Beast and found a new market niche for upscale dog collars and leashes (think of an $80 collar). I also found industry veteran Luke Edgar who, along with four other dog lovers, started the brand. This is what Luke does when he’s on vacation from Skullcandy. I kind of smiled, but then I reminded myself of just how much money people are now willing to spend on their pets, so maybe there’s a market there. I’m told the initial reception is positive.
 
If you’re in the private equity business, you go around collecting cards from new brands that might have found a market to exploit. Then in a year or two you check back to see if they’re still around and are succeeding. I ran into one private equity guy I know and, sure enough, he already had a card from that business. So we’ll all check back in a year or so.
 
Consumers seem to trust new brands a lot faster these days. Maybe it’s more accurate to say they don’t distrust them. Anyway, finding a niche that’s derivative of the whole youth culture market is a good thing. You know, I’m wondering if first movers are at the same disadvantage they often were in the past.
 
Child Labor
 
A conversation with somebody in the core skate industry lead to the usual bemoaning about how there were fewer skaters, the old business model didn’t work anymore, there was nothing new product wise, and it was getting harder and harder to figure out what was relevant to young skaters.
 
The last point led to an offhand comment about skate brands needing to hire 12 year olds. When somebody made a point that it would violate child labor laws, we were immediately off and laughing, imagining the head of some skate company explaining to a judge that they only had a bunch of kids working at their company because they were trying to find out what was cool again. I can see the prosecutor holding up a deck with the graphics the 12 year old created, and “contributing to the delinquency of a minor” being added to the charges.
 
Skate companies will say with some justification that they already do that with team riders (find out what’s cool- not the illegal part). But team riders are the top 2% or so of skaters and besides, they get free product. I have never been quite sure just how relevant their input was to the broader skate market.
 
Well, maybe 12 is too young, but I’m wondering if anybody has ever hired some kids as interns (paid or unpaid) in the marketing and/or design departments. They should be kids who skate, but are not necessarily great skaters. Maybe some of them should even be long boarders.
 
Have a contest with some retailers to select a couple of kids who’ll be paid to work for you during the summer or a few afternoons a week after school. Have them occasionally bring in a few of their friends. Pay them a few bucks, teach them something about business, and get them to create and react to new product ideas. Then take a chance with what they come up with. Put whatever graphics they come up with on a deck and let that deck be sold at the shop they hang out at.
 
Maybe this is already happening, but as business risks go it’s pretty low and who knows what might come out of it.
 
And kind of related, I found out about the Next Up Foundation. It “…provides after-school and summer mentoring programs that teach today’s youth life skills through skateboarding.” I heard good things. I have a kid who was sort of drifting and unhappy until he found something he loved that gave him some focus, self-respect and friends. In his case, it was music. But if it had been skateboarding, that would have been just fine too, and that seems to be at least part of what Next Up does.
 
I don’t have the list, but obviously some brands are involved in and contributing to Next Up. I’m wondering if any of those brands are using that involvement to get a sense of new cool stuff while at the same time helping the foundation meet its goals.
 
See you at the next show.
 
    
 
 
 
 
             
 
 
 
   
 
 
 
    
 
 
 
 
 
 
 
 
    
 
 
 
              
 
 
 
 
 
 
 
 
 
   

 

 
 
   

 

 

Trade Show Evolution: The Boardroom with the Vans U.S. Open. I Like It, I’m There.

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Over the years I’ve had a lot (some would say way too much) to say about Trade Shows. I’ve suggested there were too many, that they were too expensive, that the internet made them less necessary, that they’d lost focus, weren’t efficient, and that the way product was sold into broader distribution made them less important. 

The poster child for most of these issues was ASR which, as you all recall, went away a couple of years ago. I don’t think my concerns are all resolved, but there’s been progress.
 
And the smartest thing anybody did in the wake of ASR’s closing was, well, nothing. Absolutely nothing. This brilliant doing of nothing was conceived and implemented by Surf Expo.
 
You remember all the noise and wringing of hands that accompanied the closing of ASR. Everybody wanted to know what was going to “replace” ASR. There were various proposals and discussions among all the usual suspect organizations about doing a new trade show. Happily, in my judgment, nothing happened.
 
I say happily because the last thing we wanted to do was replace ASR which, I think it is generally agreed, had become a flawed model. But when ASR went down, people lost streams of income. Having carefully studied this for many years, I have determined that nobody likes it when they lose a source of income, and they will flail about madly trying to replace it.
 
Flailing there was, but no new event emerged. A little time needed to pass, things had to settle out, and we had to get a better idea of just what it was we needed, because it sure wasn’t to “replace ASR.”
 
In the fullness of time, the Agenda show evolved to be part of the solution for the street and skate part of ASR. I never saw Agenda as a surf trade show and, frankly, how well did having skate and surf under the same roof at ASR work out anyway?
 
Then enough time passed. Nike walked away from the U.S. Open, Vans (owned by VF) became the title sponsor for the event owned and operated by IMG and GLM Fashion Group that runs Surf Expo and LAUNCH LA bought The Boardroom. The stars became aligned (and a bunch of people worked really hard).
 
The result is that we get the event announced today and described in this press release. I’m saying event because trade show doesn’t do it justice and I don’t yet have a better word to describe it. Here’s what the press release says in part.
 
“A celebration of surfing, surfboards and the shapers who make them, The Boardroom will be held within the Vans US Open of Surfing in a 50,000 square foot freestanding pavilion that will be floored, carpeted, and fully climate controlled. It will feature shaping competitions, seminars, entertainment, autograph signings and hundreds of booths filled with surfboards, legendary and contemporary shapers, surf apparel and accessory companies. The Boardroom will be a hybrid trade/consumer event with two days exclusively dedicated to retail buyers and media as well as two days also open to the general public.”
 
Here’s an event, then, that involves the surf industry, its customers, the media and the world’s best surfers.   It will be all about surfing and, I hope and assume, we won’t have an Invisilign tent on the beach this year. I don’t know- I just had a hard time seeing their connection to surf.
 
The industry needs this kind of focus and excitement.   Whatever this thing is, I’m enthusiastic about going to it like I’ve haven’t been about a trade show in years. I’m expecting to have fun, which is kind of why I got into this industry in the first place. 

 

 

I Went to the Know Show. I’m Back

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I haven’t been before, and I didn’t stay long, but that’s a really good thing because it’s an indication that the show is accomplishing just what it’s supposed to be accomplishing.

The show was full of focused retailers paying close attention to presentations by reps and, as far as I could tell and from what I was told, writing orders.  Sometimes there would be ten or twelve people sitting in a booth as the rep went through the line.  They were quiet and attentive.

The aisles weren’t jammed, there was no carpet on the floor and the booths were mostly not big and fancy.  There were no competing sources of loud music and not much in the way of in-booth parties and craziness.  Relax, it’s not like you couldn’t find a beer here and there.

If it wasn’t as upbeat at other shows I attend, that’s because it’s not supposed to be.  It’s not a marketing extravaganza.  It’s a place to attend to the nuts and bolts of business and people seemed to be doing just that.

So you can see why I didn’t stay long.  I wasn’t going to meet consulting clients there, senior executives were generally not attending, and the reps in the booth were busy talking to people who wanted to buy product from them, so why waste their time with me?

The Know Show was a preview of the snowboard product I’ll see at the end of the month at SIA’s show in Denver.  I saw Volcom’s shoes for the first time.  I knew they’d be making them, but I walked by wondering if there was anybody who wasn’t making shoes at this point.  Which made it about perfect when I walked by a booth for a company called Generic Surplus that also makes shoes.

There are so many nice shoes out there, and mine are so uncool (as I got told at my last trade show- you know who you are).  I am just going to have to break down and buy some new ones.  Boy, that will be a market top.

DC was exhibiting their snowboard hard goods under the slogan, “Snowboarding: Defined by DC.”  I don’t even know where to go with that.

I saw Canadians doing business with Canadians in a solid environment for doing business.  I liked it.

 

Trade Show Season or, “Hi Ho, Hi Ho, It’s Off to Sell We Go!”

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My list this year includes Agenda, The KNOWSHOW in Vancouver, and SIA in Denver. Part of me would like to go to others, especially Surf Expo, part of me wouldn’t and, like all of you, I figure it out based on schedule, resources, expected results and, frankly, my tolerance for travel. 

I liked Agenda as usual. Also as usual, people think it’s a bit early but on the other hand it doesn’t conflict with another show and I expect they get a hell of a good price on the space given those dates which I hope they pass on to the exhibitors.
 
Here are a couple of things I noticed at the show:
 
Thinking About U.S. Manufacturing
 
I talked to four brands that are considering starting or increasing their manufacturing in the U.S. I’ll have more to say about this in an upcoming article, but I wanted to highlight it now as something maybe you should be thinking about too. Partly, it’s because Chinese wages have risen something like 17% a year for five years and are continuing to rise. And some of their factories have started to automate. But it’s also because U.S. wages, for better or worse, have fallen.
 
Once the labor cost differential isn’t so dramatic, then other costs become more important. Travel, freight, time to market (which impacts the amount of inventory you have to hold), communications issues, surprise delays, custom duties, control of intellectual property and quality control are among the costs that may be higher with foreign production. But most general ledgers aren’t set up to isolate those costs. 
 
It’s an accounting hassle, and no fun. But if you take the time to figure out those costs, you may find there’s a certain logic to making some formerly foreign produced products in the U.S.
 
The Great Skate Divide
 
When I go to Denver for SIA, I’m pretty sure I won’t find the snowboard companies that make pipe boards in one part of the show, and the ones that make all mountain boards in another. But at Agenda, I find the street skating companies in The Berrics, and the longboards mostly in one aisle far away.
 
Perhaps it’s just because of how the Berrics was organized and set up with Agenda. You know- institutional inertia. But I wouldn’t be surprised if there was still some left over and nonproductive stuff (I’m struggling here for a good word. You know me, I always want to be careful what I say) going on. A bit of a hangover from longboarding growing so much and street skating continually hoping it would go away?
 
I would like to remind us all (including myself) that we will never be the arbiters of how a twelve year old decides to roll down the street and have fun. The “stuff” we’ve got going on doesn’t matter to them. Can anybody say “plastic skateboards” or “scooters?”
 
I know longboarding is different from street skating like snowboarding in the back country or on groomed runs is different from being in the half pipe. But the snowboard companies all think they are in the same industry. I’m not sure I know how to get there, but the skate industry needs to think the same. Most of our retailers already do.
 
IASC
 
And speaking of progress, it isn’t a new development but it was great to see Steve Lake from Sector 9 and Monica Campana from Transworld sitting up there with the IASC board of directors at the open board meeting at the show. The meeting was well attended, but then they had a keg so what would you expect. They introduced a great new insurance product for skaters from Aflac at the meeting which is probably worth the cost of membership all by itself. You can find a link to it at the bottom of this page.
 
Hoodiebuddie
 
Hoodiebuddie is a couple of years old, but I chatted with them at the show and discovered some interesting business things (Full disclosure- they gave me a hoodie which I passed on to my kid, so he thought I was cool for almost 20 minutes).
 
As you probably know, they make the hoodie with the ear buds built in and you can put it through the laundry without removing them. The technology that allows them to make buds that can withstand the wash and dry cycle is patented.
 
That’s cool, but what really caught my attention was their business strategy. First, they do all the design, product development and marketing themselves. But they have a business partner that handles production, accounting and most of the back office. And the partner is big enough to defend their technology around the world as people try to rip it off. I like that arrangement.
 
More importantly, the company isn’t really just about a hoodie with washable ear buds. That’s their entry product that establishes their market position and gets them recognized as a brand. But longer term, they are building a product line that expands out from the basic hoodie, but is based on it. Essentially, they are trying to make hoodies into a category with a fashion component to it. This isn’t all that different from Clive in back packs and Nixon with watches.
 
It might be that they could have a nice little company just selling hoodies with ear buds, but I doubt that would be of much interest to their partner. The lesson for all of us is that the focus needs to be on the market position the product gives you, not just the product.
 
Okay, that’s it. See you at the next show. 
            

 

 

Notes on SIA’s Denver Show and Thoughts on the Trade Show Slog

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It was nice to walk to the Snow Show the second day when it was actually snowing. I think I’m completely acclimated to Denver, though I do miss playing blackjack with friends. And I still get confused when one of the people who works at the convention center says, "How are you today, sir? Have a nice day and enjoy the show." They actually seem to mean it. After so many years in Las Vegas, you can understand why I’d be startled.

Inside the convention center, the thing I heard most often was "I’ve got to leave for ISPO tomorrow." This was typically spoken by somebody with a resigned tone to their voice and slumped shoulders. It often included phrases like "Six shows down, two to go!" or "I don’t remember what my children look like."

The more things change, the more they stay the same. I wrote about the trade show schedule back in 2002 and much of the article has held up pretty well.  People complain about the trade shows and the schedule, but they all go. I’ll get back to that after mentioning a related issue.
 
Trade Shows and Outerwear
  
The related issue is that there seem to be mighty few snowboard industry companies that aren’t making snowboard outerwear.   Seems like all the hard goods companies are making apparel and many of the apparel companies are making hard goods. I suppose the logic of becoming a full line company is irresistible. "Well, we’re already selling them product X, so as long as we’re in front of them, and it’s consistent with our image as a snowboard company, we might as well sell them product Y."
 
Retailers, of course, already can’t/don’t/won’t carry more than a fraction of a large brand’s line, and I doubt that a brand expanding its product line will change that. Lacking some market growth, it’s just more good quality product that lacks fundamental product differentiation chasing the same customers. The scramble for market share and a source of growth continues. It’s not that there’s no innovation in the snow industry, but whatever advantage it confers doesn’t last long, as innovations are copied across the industry in about one season.
 
Who might be the winners of the rush to do outerwear? I think it might be companies like Arbor and Never Summer who, I’m pretty certain, won’t be doing outerwear.  I’m only half kidding when I suggest that companies like those may find their market positions strengthened and better defined as a result of all the other companies doing full snow product lines. Maybe I’m not kidding at all.
 
Let’s get back to trade shows. So you’ve expanded your product line. You’d probably like to sell some of this new product. This might require some new customers unless your existing ones are extraordinarily cooperative. How do you find those new customers if, as I’m suggesting, your existing retailers may not automatically just order your new stuff and throw out your competitors?
 
 Maybe by attending some new trade shows? If, for example, you’re in the snowboard business and make outerwear, going to Outdoor Retailer probably makes sense. Lots of people seemed to think so at any rate. But there’s diminishing return from going to more and more shows given the inevitable overlap in customers. We also need to remember that larger brands especially are seeing customers more and more outside of the trade show environment.
 
 Where going to all the related trade shows can probably makes sense is when you’re a new brand- especially one not limited to the snowboard or winter sports business.   The sock brand Stance comes to mind as a company that could benefit from extra trade shows. John, Ryan, hope you’re having a good time in Munich, or wherever the hell you are now. More coffee, less beer!
  
To summarize what I might have said in the last four or five paragraphs, the decision to expand a product line, with particular focus in this case on outerwear in the snowboard industry, is made at least partly with the expectation of expanding your market beyond the core snowboard niche. Especially as a larger company, and even more as a public company, you know (at least I hope you know) that the growth you can reasonably expect in the snowboard market probably doesn’t justify the effort and expense of creating and marketing an outerwear line. So you’re off to various other trade shows that have retailers who, to a greater or lesser degree, overlap snowboarding and you’ll look for some growth there.
 
And those dynamics are at least partly the reason why we’re so willing to go to so many shows.
 
Things I Noticed at SIA
  
I guess I’ve talked enough about everybody making outerwear, so let’s move on.
 
 I loved the 686 concept car, though I was disappointed to learn it’s probably not street legal. Oh well, I guess I’ll have to look for another ride.
  
There was some talk about booths getting bigger again. Mostly from people like me who remember the two story Morrow booth with the helicopter on top at the absolute peak of the snowboard madness in probably 1995. The concern is that we’re getting profligate in spending on booths again.
  
I had a different take. While there did seem to be some size expansion, I saw a lot of less expensive soft sided booths and many of the booths reused the same components and materials they had used in previous years. Still, if one of you guys wants to put a main battle tank or maybe a small, temperature controlled, enclosed hill where you make artificial snow in your booth that would be okay with me.
  
The Mervin Manufacturing surf boards. Behind Mike Olson’s always smiling, happy go lucky, endlessly positive, demeanor is a guy who’s always smiling, happy go lucky, and endlessly positive. However, he’s also a guy who knows a thing or two about materials and manufacturing. He’s been working on surfboards for a long time, and if he’s ready to sell these I’m pretty sure it makes good business sense. This is going to be fun to watch. I hope the guys at Quiksilver, who owns Mervin, are as excited as I am.
  
I really liked the Recon system that installs in specially adapted goggles made by goggle brands. They have a built in computer that connects to GPS and shows you where you are on the mountain, how fast you’re going, and how high you jumped. It also gives you access to your phone, music and other functions. You wear a little control module on your wrist, but view it through a small screen below your right eye in the goggles. It does not interfere with your view.
 
It looks like it will take a bit of training to use it well, and some people may just not want to be quite that connected while on the mountain. But it also makes sense for other markets, and I suspect in some form it’s a piece of the future.
  
Then of course there was seeing former and long time- very, very long time- Burton senior executive Clark Gundlach over at the Quiksilver booth where he’s now in charge of the company’s snowboard program. Of course I knew the change had happened, but it still felt almost odd to see him there. Proof, I guess, that nothing is forever. Probably felt a bit odd for Clark too.
  
But when you think about it though, who else was Quik going to hire if they are serious about building their snowboard business? You can kind of imagine the conversation at Quiksilver. “Hey, we need an executive who has mountains of experience in all aspects of building a successful snowboard program in a large company environment. Let’s make a list of possible candidates.” Short list.
  
We came to the SIA show this year disappointed in the snow, though we got a storm the previous week and things seem to be picking up. SIA reported that sales through December were $2.2 billion, just 2% below last year’s record sales. Unit sales fell 10%, showing some discounting, and specialty store inventories were, inevitably, up 16%. Still, that’s not as bad as I feared it might be, and it’s definitely recoverable with improved snow conditions.
  
I want to point out that it would be a lot worse and not necessarily recoverable if, as an industry, we weren’t doing a much better job controlling our inventories. Keep up the good work.
  
Well, I’m home with no more trade shows on my horizon. The kids didn’t miss me because one’s away at college and the other is living on his own and has A  REAL JOB! My wife claims to miss me, but it may because I do most of the cooking. The cats definitely miss me.
  
Hope you all have a good trade show season.

It’s Tradeshow’s Season. I Started with Agenda, But I’m also Thinking About SIA.

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Among the things I liked at Agenda, the one I liked the most was Shmooza Palooza, the jobs fair jointly sponsored by Agenda and Malakye.com. 500 people preregistered for it and it was busy every time I looked in. It’s great to sell a few more T-shirts or another snowboard, but it’s even better to help somebody put food on the table. The guy who probably didn’t get a job at this job fair is the one who told one of the recruiters he had gotten a college scholarship and taken the money to use for a surf trip. It’s somehow troubling he apparently thought that would make him sound credible.

On a personal note, I have a kid who graduated from college last spring and has an actual job with benefits and 401(k) plan. Most of his peers are not so fortunate and I think he knows how lucky he is. My wife and I feel like we won the lottery.

The other things I liked at Agenda included flying into a small airport, $100 hotels, and the food trucks. It was a pleasure to get good food at a fair price instead of bad food at an expensive price. I also liked having the booth numbers at the top of the booths where they were easy to see, though I understand this isn’t new. And as always, I liked seeing some new brands, or at least brands I haven’t seen before. I hope they do well.
 
I didn’t like it when people referred to Agenda as the "new ASR," because I remember what happened to the old ASR. I had written before, when ASR first closed, about the pressure Agenda, or any other trade show, might come under as it succeeded and grew. That analysis, I think, is still valid. But Agenda has done at least two things that should mitigate those pressures to some extent. First, they got the hell out of San Diego to the more attractive cost structure of Long Beach. Second, they are keeping the feel of the show more or less the same as it grows by keeping most booth sizes the same. Or at least keeping them from getting too big.
 
Yes, I know a few brands had larger booths. I noticed it too. But I don’t think that’s different from how it was in San Diego. It’s just that a new location makes you see perceive things differently even if they ain’t.
 
The new location makes it difficult to compare last year’s Agenda this with year’s. But then I’ve always been cautious about reaching conclusions based on how busy a given booth was at the moment I walked by or how crowded the aisles felt. The question is do brands and retailers feel like the show is a good place to get business done, and nobody at Agenda complained to me about that.
 
Next, I’m off to the SIA snow show in Denver. Nothing could improve that show more than a lot of snow during the next 10 days. Last year, as you know, was an epic snow year.  I never expect two great years in a row, but I was really hoping that this year would at least be okay.  Last year’s great show, coupled with the residual fear from the recession, meant that retailers have been cautious on their inventory and most of the old stuff was gone. There wasn’t much left over product at deep discounts, and customers learned they had to buy quickly and at full price to get what they wanted. The result was a great year not just for sales but for profits as well.
 
Though it hasn’t always been the snow industry’s mindset, you really can sell less and earn more, and I was hoping for another year to cement that kind of thinking.
 
What I’ve heard so far is that brands, in general, didn’t over produce and retailers didn’t over order due to over enthusiasm from last year. That’s good. We should never let ourselves be deluded into believing we’re great managers and sales people just because it snows.
 
Still, it appears likely that we’re going to get to Denver with some of the dreaded inventory overhang in the one season snow business. Hmmm. Maybe an overhang is a non-alcohol induced hangover.
 
My guess it won’t be as bad as it has been in past years because there won’t be as much product to deal with, and discounting didn’t start in August. Yet, inevitably, brands will want to get paid on time, won’t want to offer discounts, and won’t want to take product back. Retailers will want to delay payment, get discounts, and send back product.
 
I’d note that retailers, generally, haven’t panicked. From what I can tell, there’s been more resistance to discounting early and often than in prior years. No doubt it’s partly because there’s less inventory, but I also trust it’s because we’ve learned a few things. 
 
There have been some instances recently where brands (not just in snow) didn’t necessarily replace their whole product line every year. Certain pieces got carried over. I guess it’s mostly in apparel, but I’m wondering if it might not work with select hard goods.
 
Let’s start by acknowledging that there are no bad hard goods out there anymore. Everything’s durable, functional, and more or less good looking. And hopefully, you’ll also agree with the following:
 
·         Though the economy appears to be improving a bit, sales increases are still not easy to come by and generating additional gross margin is important in increasing profits.
 
·         Inventory scarcity improves product perception and makes consumers less price sensitive. It also reduces working capital investment, which we finance oriented people like.
 
What I’m asking/hoping is that the tension between brands and retailers not be allowed to turn back into the zero sum kind of game it’s been in some past years. Can some product that sold well this year and is maybe in short supply be kept in the line for next year?  Can retailers and brands share the burden of a poor snow season such that product doesn’t turns up at the wrong time, in the wrong place, and at the wrong price? At least not too much.
 
I get to look at this from the 10,000 foot level and don’t have to worry about keeping a factory busy or generating enough cash to pay the bills (though I have had to do that with snowboard brands. I mostly didn’t enjoy it). Except in the very short run, we are all better served by holding prices where reasonably possible and keeping product scarce. Please remember that when all those meetings start in Denver.  Let’s build on what we’ve started.