“Say, That Sounds Like a Good Idea!” The New Board Retailers’ Association

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Like the web site (www.boardretailers.org) says, the idea for the Board Retailers’ Association (BRA?) goes back to the mid eighties and has been discussed annually. But for the past year, Roy Turner, the owner of Surf City Surf Shop in Wrightsville Beach, North Carolina, and Mike Duncan of Sage Corporation, a web applications firm with roots in action sports, have been making it happen. Roy’s been in the surf industry for 25 years. He’s been a snowboard dealer for over ten years.

And yes, I know this is Snow Biz, not Surf Biz, but I wanted to make a point, which I try to do from time to time, so bear with me.
 
If the organization had its genesis among some surf focused people, it quickly became clear that the issues they felt needed addressing were universal to snow, skate, surf and wakeboard retailers. The web site reflects that and this article could be appearing in Snow, Skate, or Surf Biz and would be just as relevant. .
 
If only because of production and seasonal considerations, manufacturers/brands tend to focus on individual sports and the associated lifestyle. But among retailers, as Roy and the Association’s impressive advisory board of retailers found out, few make their living on just one activity. Even where the focus of the shop is clearly snow or surf or skate or wake, sales of soft goods, including shoes, to people who don’t participate in the shop’s core sport or, indeed, in any board sport, are necessary for survival. Most retailers sell more than one activity to manage seasonality.
 
So the perspective of the retailer is perhaps different from that of the manufacturer/brand and inevitably there’s some normal conflict of interest if only because there’s only so much margin to go around (less than there use to be) and it’s expensive to be in business (more than it use to be). The small “core” retailers (I hate that term, but haven’t thought of a good replacement) are acknowledged by pretty much everybody to be critical to the market, but at the end of the day, their orders aren’t, and won’t ever be, what make or break the major brands.
 
Wouldn’t it be great if there were an association that could bring the concerns of these shops to the attention of the brands in a professional, constructive way?
 
The first thing Roy told me was that BRA is not and won’t be a buying group. It was formed, he said, with four basic goals.
 
·         To save retailers money
·         To help insure the success of small, new shops
·         To educate shop owners and promote good retail practices
·         To give the industry a cohesive voice from the retailers on a grassroots level.
 
“The business environment made it the right time to do it,” said Roy. “The mass merchant influx, over distribution, rising costs, the dominance of a comparatively few brands and lack of product differentiation mean that your margin for error is way smaller than it use to be. I can’t afford to make a 10 percent open to buy error anymore.”
 
Let’s turn to the organization’s goals and take a look at each of them in turn.
 
Save Money
 
This should be fairly noncontroversial. Like all trade associations BRA will use its buying power to get its members discounts on services, including shipping, various forms of supplies, insurance, lower bank card rates, etc. You get the picture.
 
The association’s fee structure is straight forward- annual membership is $125.00 per storefront. It’s essentially mathematically impossible not to recoup your membership fee at least quarterly. I would expect many member shops, and maybe most, to do it monthly. BRA is a 401C nonprofit corporation, which means that any board sports retailer is qualified to join. Who knows- if the Zumiez of the world step up, maybe BRA can reduce its annual dues even further.
 
Just for fun, let’s say your shop has annual revenue of $750,000 and that 60% of that is done by credit card. If the association can get your bankcard rate down half a percent (a reasonable goal) you’ll save $2,250.00 a year. I don’t have a degree in mathematics, but I’m pretty certain that $2,250.00 is greater than $125.00. If BRA does nothing but that, you should all be breaking down the door to join. What’s the impact on your bottom line if your association can do half a dozen other things with similar impact on your costs? There is absolutely no reason they can’t. Trade associations do it every day.
 
The specifics of the discounts aren’t all known yet. The ability to offer really meaningful insurance discounts nationwide is awaiting the likely passage of a law by Congress. But check out the web site and do some rough calculations you. Bet that $125 a year membership fee looks pretty damn good to you.
 
Insure Small, New Shops Success
 
Roy’s old. He told me so. I’m old too. We try to be cool without looking stupid and to figure out what’s up, but there’s a limit to that as my fourteen year old constantly and pitilessly reminds me. “Nice shirt Dad. Why are you wearing it?” was his most recent comment.
 
“No tattoos and no holes in my body other than the ones that God gave me,” is the way Roy put it.
 
The people running the surf companies, the snow companies, the skate companies, the winter resorts and the successful core retailers are also sort of old compared to their customers.         

Mikke Pierson, owner of ZJ Boarding House in Santa Monica, California, is a member of the Association’s Advisory Board. His shop sells snow as well as surf and skate. He’s been a snowboarding dealer since 1989.  He shares Roy’s concern about the aging of existing retailers. “There’s no new blood our there,” he says. “Too many existing boardsport retailers are ‘specialty dinosaurs’.
 
Both Roy and Mikke are confident their shops will be successful no matter what happens. But longer term, they see the board sports industry’s strength and growth depending on new blood. It’s one of BRA’s goals to help that new blood emerge and thrive.
 
Part of how they will do that is by educating shop owners in best retail practices. That will start with a series of articles in TransWorld Business publications on specific best practices. “The first one will be on hiring,” says Mike. “You’d be stunned how much bad hiring practices can cost you.”
 
There’s also a “rookie buyer” seminar scheduled for Surf Expo this coming September. 
 
Roy talked about helping shops with “balance sheet management.” “There isn’t the room for mistakes there use to be,” he says. Issues of inventory control and cash management require good data and a certain level of management sophistication. “When I came along, you learned everything by showing up,” says Mikke. “Those days over.”
 
Both Mikke and Roy emphasized the importance of knowing and managing a shop’s gross margin. BRA expects to offer assistance, both in terms of education and discounts, in installing and using good financial systems that will strength a shop’s balance sheet management.
 
A Cohesive Voice
 
Over distribution, lower margins, rising expenses, insurance, mass merchants, and increased customer expectations are some of the key issues impacting all board sports retailers. BRA will address them as an industry.
 
“Manufacturers are looking at their market place from the point of view of what their competitors are doing and sometimes forget their customers,” says Roy. “We want to be able to talk in a constructive, cooperative way about issues that are of concern to both retailers and manufacturers and to have them take us seriously.”
 
I guess it takes tougher business conditions to make something that seems, in hindsight, to be such a good idea actually happen. The board sport retailers, especially the so-called core shops, have compelling common issues and interest no matter where they are located. They are competitors only when they happen to be located near each other. The immediate financial benefits should make joining a no-brainer. The Board Retailer Association’s other activities may be more important in the longer term, but for the moment saving money should be enough of an incentive to sign up.
 
There is, of course, strength in numbers and no trade association starts up without thinking that it will gain some leverage over constituencies it wants to influence. A prime constituency for the board sport retailers is obviously the manufacturers. I suspect that manufacturers are just the slightest bit concerned about the association’s proposed activities for just that reason even though it isn’t a buying group. Can’t blame them. As noted earlier, there’s only so much margin to go around.
 
Still, both the core retailers and the brands recognize that if all the snowboards are sold at Garts and all the surf boards at Costco, it’s going to be damn tough to influence people to pay prices that reflect the value of the brands and the cost of the marketing campaigns that convince those people they want to share in our lifestyle, even if it’s only through the t-shirt they wear.

 

 

Strategic Planning; Questioning Our Most Cherished Assumptions

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This article sort of popped full formed into my brain at the TransWorld Snowboard Industry Conference at Whistler in April. It happened in an elevator. A kid carrying a skateboard got in (Shows you what kind of lousy winter it was in Whistler). As the door closed, I asked him how often he replaced his deck. He said, “I’ve been skateboarding eight years and this is my fourth deck.”

 Let’s hope he’s not our average customer.  I don’t believe he is. Still, how do we really, really, know and prove, for sure, that he isn’t? What percentage of our market does he represent? Hopefully, he replaces his shoes and clothing more often than his deck. Should we be marketing to him differently? Is he really what we mean by a “skateboarder?” Does he care about all the marketing we do?
 
No doubt somebody is reading this and saying, “Well, the answers to those questions are obvious!” Maybe. But I’m reminded of H. M. Warner at Warner Brothers in 1927 saying, “Who the hell wants to hear actors talk?” Or Digital Equipment President Ken Olson, in 1977, saying, “There is no reason anyone would want a computer in their home.” Or the Yale professor who wrote, “The concept is interesting and well-formed, but in order to earn better than a ‘C,’ the idea must be feasible” while critiquing Fred Smith’s plan for an overnight delivery service (Fred went on to found Federal Express, which is showing signs of being feasible).
 
I’m sure all these guys thought what they were saying was “obvious.” 
 
Strategic planning, I’ve learned, is the process of using the same information your competitors have to make better decisions than they make. You do it, in my experience, by questioning cherished assumptions, rigorously collecting good information, and looking at that information from a different perspective. 
 
In a difficult market, the industry’s general response seems to have been to cut expenses, including marketing, and discount to get orders and keep volume up to the extent possible. I’m all for good expense management- in any market conditions- and wrote about it here some issues ago. Still, we’ve lived by marketing, and I wonder if we can’t hurt ourselves by not marketing lacking any real product differentiation among brands.
 
But marketing what to which customers? When everybody was fat and happy and selling everything they could make, we had the luxury of not worrying about that. Now, companies who prosper are going to take some risks and do some things differently. What things? Depends on the company, but let’s look at some “Cherished Assumptions” and see if we can get a glimmer. 
 
“Core Shops Are the Foundation of the Industry!”
 
 Hold the hate email please. I recognize the importance of shops and I’m not saying that statement is inaccurate, but I’ve got a couple of questions.
 
What, exactly and specifically, is a core shop? What are its attributes? It probably doesn’t sell skateboarding only, so can it be both a core skate and, say a surf or snow shop at the same time and still be “core?” Is core then not a function of what a shop sells? As the industry has involved, have others “foundations” emerged? Like televised skateboarding, the skatepark movement, the contest circuit? What’s their relative importance to individual companies? How has it changed? How is this different for apparel and shoe companies compared to hard goods companies?
 
“Riders Are the Key Influencers of Skaters.”
 
If so, why are there so many blanks and shop decks sold? It appears that price is also a key influencer. Obviously, riders don’t influence all, or even most, skaters to buy a certain brand of deck, though hopefully their prominence promotes skating in a general sense. From a company’s perspective, then, how has the relative influence of pro riders changed? How strong is the association between the brand and the rider? How strong is the tendency of kids who like a rider to buy his pro deck and how has it evolved? Or do they just buy a blank and slap a sticker on it? Interesting questions to ponder when considering issues of budget and marketing.
 
"Chain Stores Suck"
 
Well, I doubt the shoe and apparel companies would put it quite that distinctly. Chains- not all chains, but chains- move a lot of product for them and make them a lot of money. There also seems to be a certain level of conventional wisdom that says chains, by selling cheap completes, are important in getting new skaters involved in the sport. That would be interesting to research.
 
At the end of the day, though, chains are neither good nor bad- they just are. And they are more all the time. My opinion is that the Zumiez and Pac Suns of the world are going to make it increasingly tough on core shops. I hope to be wrong. No company can grow very big without an increasing percentage of its sales being to chains. That’s not an opinion, and it shouldn’t be controversial. It’s just mathematics. In a market with little or no product differentiation, where price matters, volume becomes an important survival strategy. So companies- including hard goods- need strategies for working with certain chains if they want to prosper and maybe just if they want to be around given the evolving financial equation.
 
Of course, it may be a viable strategy for some companies to not work with big chains, and to constrain their growth. But the companies that do that won’t ever be big. By way of definition, I don’t believe there are any “big” companies in skating. My information is that the shoe companies are the largest, but I still see them as pretty small. And note that getting to even that size required sales to chains. 
 
“A Skateboard is 7 or 9 Ply Laminated Canadian Maple- Period.”
 
What a remarkably conservative industry we are, and isn’t it funny to hear that? Granted, laminated hard rock maple has worked great. But it’s also true that the industry has encouraged the idea that anything not made of Canadian maple couldn’t be a skateboard, wouldn’t function right and, worst of all, might get you laughed at. For a long time, all that was true. But industry growth and visibility, coupled with advances in composite materials, engineered resins and manufacturing techniques, along with the acceptability of blanks, suggest that this may change. If it does, I hope the charge to adopt new technology is lead by the current industry leaders.
 
Lots of questions. No solid answers, though we’ve all got lots and lots of opinions. But opinions, even tried and true and generally accepted opinions, can’t be the basis for a business plan when the industry is changing. And I’m pretty certain that doing “more of the same” isn’t going to work for at least some companies. I’ve always thought that doing the same old things when the market was changing was riskier than trying something new that might not work out. The companies that feel that way, and that go through the process of questioning their assumptions, will most likely emerge as the leaders.