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.”
The buy/sell cycle seems to be on everybody’s mind these days. The brands are concerned because the decline of in season orders means they have to take more inventory risk. Retailers, on the other hand, are thrilled to be able to get quality product in season at discounts, though are perhaps concerned that it’s tougher to hold their margins due to oversupply.
You might have thought I could have gotten around to this before now, but there were no more SnowBiz issues after Vegas, and I kind of forgot about this for a while. Sorry.
Okay, let’s review the rules.
We were looking at a recession before the September 11 attacks on the World Trade Center and the Pentagon and the tragedy raised the possibility (certainty in the minds of many) that the recession would be longer, deeper or both then it would otherwise have been. Economic activity has already rebounded since its nadir in the days following the WTC. But what’s a “normal” recovery from such an event? Who knows.
It’s old news, of course, that we’ve gotten to the point in this industry where probably north of eighty-five percent of the snowboards sold come from a handful of brands, mostly made by ski companies with the usual exception. And if that concentration is not how we’d like it to be, it’s how it almost always is. Don’t worry; I’m not going to give you the lecture on consolidation again- it’s too late to help anyway.
Here we all are, back from ASR and boy are we excited. More brands, more excitement, hype, orders, deals, three page ads in Skate Biz. People can’t get enough of skateboarding There’s nowhere for business to go but up, and it’s got to be even better next year.
- Business cycles happen. Someday, skateboarding won’t be as hot as it is now and your company, even if it’s exactly the same, will be harder to sell and worth less.
- Getting a business ready to sell, and selling it, takes time. Want to have a deal done in a year and get the best deal you can? Start now. Anybody can sell a good company fast if they are willing to sell it cheap.
- Figure out what you want to do and what you are trying to accomplish. Then decide if and when you should explore selling. It’s true that you can just wait for a buyer to show up. But you won’t be in control of the process and probably won’t get the best deal.
- Business is a risk. Money in your pocket today is worth more than money in your pocket tomorrow. That’s why we have interest rates, a measure of time and risk. Given that time and risk, and the difference between what you can sell for today compared to tomorrow, it might not make sense to wait. Especially if you expect valuations to decline. That is, a company might be worth more today than tomorrow even if tomorrow’s company was bigger and more profitable.
- Supply and demand matters. If times should get hard, there will be lots of sellers and fewer buyers. If you sell, you want to do it when you’re the only one for sale.
Okay, what was I doing at the Ski Industry Summit (formerly known as Ski Week) and why am I writing about it for Snow Biz?
By now, you should all have seen SIA’s study “Growing the Snow Sports Industry” and NSAA’s growth model for the resort business. They don’t claim that any industry initiative by a trade association is the salvation of the winter sports industry’s issues of participation and profitability. They say, if not exactly this way, “It’s up to each of you.”
- Develop a unified understanding of the marketing problems and opportunities
- Identify the market segments that hold the greatest “acceleration potential”
- Focus our marketing resources on those productive audience segments
- Apply those resources in an integrated, efficient manner
- That participants aspire to be “extreme.” They don’t. They are in it for the wholesome, lifestyle activities.
- That the dominant barrier to increased participation is increased cost. It’s more complex than that and involves time, quality of experience and proficiency.
- That we have a big opportunity with underserved populations who have never been on the hill. Maybe not. They have to be lured to the slopes, sold on winter vacations and cold weather activities, and convinced to adopt an activity their peers don’t participate in.
- There’s a single advertising message that will work for the whole industry. There isn’t. The consumer base is too diverse.
- That awareness of various “make it easier” technologies like shaped skis and of the technology’s benefits are high. Nope. Most are unaware of its existence or benefits.
- There is a strong relationship between proficiency, enthusiasm, participation and sales.
- The industry is bleeding new triers and participants of low proficiency.
- The biggest opportunity is in reactivating lapsed participants and upgrading light and moderate users.
- New technology can produce marketing leverage.
- Children can be a barrier or a motivator to increased participation.
- Introducing consumers to skiing/boarding young and keeping their loyalty can have an exponential impact on revenue.
When a market gets hot, people start companies. Where the capital costs and entry barriers are low, they start more rather than less. When there’s enthusiasm for the industry and the lifestyle, they often start them for all the wrong reasons, and without adequate or any business planning. It looks like easy money, but it usually isn’t.
I enjoy hearing from you, even when you disagree. The exchange means that I learn something, too. Leave a comment on any of my posts to contact me directly.
Market Watch updates
- What Caused Shopko to File for Bankruptcy? Two Parts to the Puzzle.January 19, 2019 - 10:58 am
- What Happens When the Apparel You Buy Fits Perfectly Every Time?January 7, 2019 - 5:36 pm
- It Probably Wasn’t the Plan; Abercrombie & Fitch’s November 3rd Quarter.January 4, 2019 - 3:51 pm
- Popups, Extra Week, Higher Costs; Tilly’s QuarterJanuary 1, 2019 - 3:07 pm