Make Love, Not War; Blanks and the Park and Recreation Convention. What’s a Skate Brand to Do?

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First time I’ve ever had two subtitles. That must be meaningful. Either I’ve been thinking a lot about this, or I’ve got nothing to say and am desperate to use up space. I suppose each reader will decide which it is.

 Not long after I read Cullen Poythress’s article “The War on Blanks” in the September issues of this publication, I went to the Park and Recreation Convention here in Seattle. Basically this is the convention of people who sell stuff to playgrounds, and I can only say that I wish I was a kid again. Lots of cool stuff that’s beyond what I could have imagined when I was of an age to use it.
 
I saw Per Welinder from Blitz there, manning the IASC booth and promoting skate parks. I walked around a corner and came face to face with Beau Brown, formerly of Sole Tech and now COO of Radius 8, a seller of portable skate ramps. His face was all aglow from the huge number of business opportunities he thought he had at the show. As we talked, a guy from some municipality came up and, apparently amazed to learn that portable ramps existed, asked how quickly he could get some. He guessed at the price, kind of suggesting that one might cost $3,000 as I recall. Beau, who seems to have a nasty ethical streak he needs to get over, told him that no, the one he was looking at was only $300. The guy scurried away to get his boss.
 
Anyway I know this article is about something besides vignettes from a trade show. I guess I’ve got to go back to Cullen’s article to get to it.
 
I thought it was a good article. Balanced, dispassionate, and talking about an important issue. I would have liked to see some numbers comparing costs, prices and margins on blanks and branded decks, but that was really my only criticism of the article. And I agreed that the brands are critical to building and supporting skating and that blanks undercut their financial ability to do that.
 
I talked to some other business people in the industry who seemed to share my perspective, and were as surprised as I was by the outpouring of concern and criticism the article engendered. That got me thinking and the convention helped that thinking to jell.
 
What would I do if I was running a skate brand?
 
Congratulations!
 
First thing I’d do is recognize that I’d had something to do with skateboarding having broken through and becoming a growing, recognized, and broadly accepted activity. I’d made some money, had some fun, and did it while being involved in something I loved. I’d helped position skateboarding so it probably wasn’t in danger of disappearing like it nearly has before.
 
Good stuff.
 
But after the sweet glow of success had worn off, I’d recognize that the “good old days” weren’t likely to come back, that blanks would be here to stay as long as skaters wanted to buy them, that hard good brand have had a hard time being successful in shoes or apparel (Fallen and Element are the exceptions I can think of), and that the financial model in the “core” part of market, where most hard goods brands are positioned, has gotten tough.
 
And that’s bad stuff.
 
But you know, it’s just business. And when an industry evolves, as it always does, the question isn’t usually how do you turn back the clock, but how you react to the new circumstances to make your business successful. I’ve got a couple of ideas. Maybe not the best ones, and certainly not the only ones, but you got to start somewhere.
 
New Areas of Focus
 
In 1995 I wrote in TransWorld Snowboarding Business (May it rest in peace) that it was time for every serious snowboard brand to hire a Director of Resort Relations. In what can only be characterized as a flash of brilliant insight I said, “Uh, don’t a lot of people snowboard at resorts? Maybe you should be doing something with the people who run them.”
 
I know that people do an awful lot of skating at places other than skate parks. I wouldn’t begin to try and estimate how much skating is done where. Still, the skate industry is doing everything it can to support the improvement and growth of skate parks. There must be some business opportunities there.
 
How about appointing a Director of Skate Park Relations? That person might start by identifying the 100 most important skate parks in the country. Find somebody who regularly skates each park. Make him/her your representative. They get free equipment and a commission on anything they sell at the park. I’ll bet you’d find a few who would really shine. They might find kids they know who would take responsibility for smaller parks in their area. Hell, pretty soon you’d have the Amway of skateboarding going on.
 
Consider creating a Director of Park and Recreation Commissions Relations. Visit the people who run them. Find out their level of commitment and plans for skating. See how you can help them. Help them make good buying decisions. Offer to sell them some decks co branded between your brand and the new park. Call Microsoft and see if they’d pay to have the Xbox logo on the bottom of a skate bowl, and keep a piece of the action while helping the Commission pay for part of the cost of the park.
 
I have no idea what opportunities there might actually be, but I bet 20 meetings with different Park and Recreation Commissions would turn some up. It’s worth a try. If you’re already doing it, never mind.
 
Improving Brand Positioning
 
It’s all about your brand. At the end of day, still lacking any meaningful product differentiation as perceived by consumers, your brand is all you have. Skate companies may be well positioned in the core skate market. But I think that market is a shrinking percentage of the total skate market as I would define it.   Taking advantage of skate’s growing, and more diffused, audience requires you to expand your market positioning.
 
The people who skate, or who just like skate, but are outside the core market need to know who you are and understand why you are credible. How do you do that? Depends on your brand. I’d suggest you start by studying other companies who have done it. How does Reef manage to sell its sandals at Nordstrom and still be a core surf company? Why can Burton sell its hard goods almost anywhere and still be so credible in snowboarding? What’s Volcom’s plan for expanding its very successful franchise without losing its core credibility? How do the skate shoe brands do it?
 
Now if somebody was to say, “It’s not the same. Skate is different,” I’d probably agree with you but with two caveats.
 
First, it’s never the same. Nobody’s business model is ever exactly the same as your’s and soft goods are different from hard goods. But these companies have made, or all still making I guess, a transition that skate companies probably need to make. So you might think about how they’ve done it.
 
Second, skate is different, and that’s part of the problem.   It’s different enough that it’s impeding the ability of brands to break into the wider skate market. Over twenty plus years, skate brands have made an implicit decision to stick to the core market. For the longest time, there wasn’t much to decide because that was the whole market. Now it’s not, and there are two choices.
 
You can stick to the core market and figure out ways to get skaters to buy more branded product. Or you can do what other successful action sports brands have done and expand your brand’s recognition and franchise to the larger market you’ve helped create. Any skate brand that was able to do that could be successful in the soft goods market. The Tony Hawk brand comes to mind.   
 
If you study the action sports brands that have made the transition to the broader market, the first thing you will notice is that none of them did it quickly. They were all around years before it happened. At some point in the action sports business, when you’ve been around five years or maybe longer, it’s suddenly possible for you to expand your distribution without losing your credibility with your historical customer base. Skate brands mostly qualify from this point of view and then some and that’s good news.
 
I was talking to Jamie Stone at TransWorld on another subject and he had what I thought was a good idea about building skate brands. Jamie’s concern was that pro graphics were changing too quickly. There was never a chance for the skater to build a bond among the brand, the skater, and the graphic. “What if the graphic lasted a year?” Jamie asked. “Then wouldn’t you have a chance to build a marketing campaign around it?”
 
Good question. It reminds me a bit of when the snowboard companies kept expanding their lines in response to what their competition was doing. They were focused on their competitors- not their customers.     
 
I hope there’s a strategy that reverses or at least halts the rise of blanks and shop decks. I know the industry is working hard to find one. But I came out of the Parks and Recreation Convention blown away with the new opportunities there can be for skate brands. Think about it. And go to that convention next year.

 

 

China, Small Brands, Inventory; Visions from Vegas

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Purposeful. In a word, that’s how I’d describe the show. There was the quiet hum of business being done and if the aisles weren’t as full as I’ve seen them in the past, and the noise level was somewhat subdued, it was because the booths were full of people focused on doing business. Sure, I miss the good old days a little, I guess. It really was fun to hear what brand got thrown out of the show for which infraction.

Still, I’d rather people were realistic about doing good business instead of being naively optimistic like they use to be. It’s good for the businesses and good for snowboarding.
 
I want to illustrate that with short discussions of three things I noticed in Vegas. Each could probably be a whole column. And may turn out to be, come think of it.
 
China
 
Not new of course. And I took a whole column to talk about it some issues ago. But what struck me is what a non issue Chinese production is now. Hopefully the extra margin gets allocated in such a way as to both give brands better profitability they can use in supporting the sport and consumers a better deal.
 
But what’s new about China is the impact of the strengthening of the Euro against the Dollar. Stuff was already cheap in China when a Dollar bought one Euro. Now it takes a buck and a quarter to purchase a Euro. All other things being equal, a snowboard made in a factory in the European Common Market is now 25% more expensive than it was some months ago. The Chinese snowboard has stayed the same price, because the Chinese currency is pegged to the dollar.
 
In the course of my wandering at the show, I found myself talking with a representative of one of those European snowboard factories I had known for some years.  In my usual subtle way, I asked him if he had opened a Chinese factory yet. He smiled, but I didn’t think it was completely genuine, if you know what I mean.
 
Being completely incapable of taking a hint, I commented, “Well, maybe when the Euro hits 1.5 to the Dollar.” I got another one of those smiles and the subject changed. What has me worried is that, as an industry, competitive pressure to make and sell less expensive product means we’ll end up with less margin dollars in total to play with even if our gross margin percentages stay the same or even improve.
 
More about that later. Though it’s not obvious, these three Vegas issues of China, small brands and inventory are all related and by the end of this I hope to show how.
 
Small Brands
 
There were a bunch, and they seemed to be doing great! What a relief. Snowboarding took off because it was fun and because it gave kids something to belong to that was different and unique. Skiing, when it consolidated, was reduced to basically nothing but large company brands with the result we are all familiar with. Snowboarding consolidated, and it was fashionable to talk about how it was becoming “just like skiing.”
 
Apparently, it’s not. Somehow, through the consolidation, a number of smaller, snowboard only brands managed to hang in there. And now more are popping up. Not just appearing and then disappearing, but hanging in there.
 
You might have expected that the sheer size and marketing power of the big brands would have left damn little room for the smaller players. To some extent that happened. But interestingly enough, the sheer size, and the push for growth through broadened distribution by the big guys, didn’t kill the small brands. It validated them.
 
I’m not quite certain why that is, but I’ll speculate a bit.
 
First, though some have been better and some worse, the major brands have pushed hard to find all the distribution they could. I’m not saying that as a criticism, but as a statement of fact. Maybe it was the inevitable competitive response- you know, get the market share before they do coupled with a grow or die mentality. Had that growth been a little more selective, perhaps the opportunity for small brands would have been less because the major brands would have been less like commodities available everywhere.
 
Second, the sheer size of the leading brands makes it hard for them to be quite as in touch or quite as “cool” or quite as at the edge than a smaller brand. You lose an edge when you get to be a certain size. You just do. I heard the story at the show about the small brand that had run an ad explaining how to change the picture on a lift ticket, or forge it, or something. Apparently some of the resorts aren’t too pleased with this for some reason.
 
No large brand, with its rental relationships with resorts, is likely to do that. And I have to confess that while I laughed, I’m don’t like encouraging that kind of behavior. But remember ten plus years ago when the goal was just to find a way onto the hill even if you had to duct tape your binding together, even if the choice was between a lift ticket and food and even if the resort didn’t want you and your snowboard there?
 
Perhaps I wax a bit too nostalgic, but this brand with its lift ticket scam reached back and touched that a bit, not to mention appealing to basic greed.
 
We need the enthusiasm- the “I don’t give a damn I just want to snowboard” feeling- if we want to continue to grow the sport. The success of smaller brands is a barometer of how effectively we are doing that.
 
For that to happen- for the small brands to grow and succeed- they need to make a few bucks. They need not to just to grow in units, but to earn gross margin dollars. That implies a certain cost and pricing structure that may not be compatible with too much inexpensive Chinese product (no matter what its quality) and resulting price competition among leading brands. As they are discovering in the skateboard business right now, if there’s enough price difference and the quality is the same, a lot of kids will forego the hot brand for the feel of cash in their pockets.
 
Which brings us to-
 
Inventory
 
As a finance guy by training, this was the most glorious thing I heard at the show. Retailers were telling me how they were calling up brands to buy some closeouts (an old and honorable tradition) and couldn’t find much. Could it be that the brands were finally coming around to my way of thinking? That it’s better to agonize about not having product to sell than about having it. Hope so.
 
I’ve been making that argument for years because I believe that the best advertising you can do in a one season business like snowboarding is to say, ‘Sorry! Sold out!” No close outs, no old inventory, no retailers pissed because the stuff they paid so much for is now on sale at Chain Store X for less than their cost, bigger preseason orders next year, lower advertising costs, and higher margins for everybody.
 
A little scarcity lets us sell value- not just snowboards. Value goes for a higher price.
 
You can begin to see how these three issues come together based on self interest which, to nobody’s surprise, is the best way to engender cooperation among a group of stakeholders with competing interests.
 
Growing snowboarding requires successful smaller brands and specialty retailers. You can’t just market your way into growth forever. At some point, no matter how good the marketing is, it becomes ubiquitous and mainstream if only due to sheer volume. The excitement and sense of belonging to something declines. Smaller brands and specialty retailers can keep some of that going.
 
But to stay in business and do what we all seem to think they need to do smaller brands and specialty retailers need margin dollars, because by definition they aren’t going to make it on volume.
 
Margin dollars come from some combination of higher prices and lower costs. The lower costs, like with product from China, can’t be all pushed down to the consumer by competitive pressures. The higher prices come from some discretion in distribution and the right kind of promotion.
 
I’m probably being wildly optimistic here, but what I’m painting is a scenario where some improved control of inventory and distribution by brands, the success of small brands, and judicious use and pass through of the extra margin from foreign production works for brands and retailers in not only keeping snowboarding special and growing the sport, but in financial performance as well.
 
Not too bad.

 

 

Hey! Look at All the Retailers! Good News From Vegas

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Flying in from ASR in Long Beach, where the consensus was that the number of retailers was down significantly, it was a relief to get to the SIA show in Vegas and see the place jumping. It was simply the best show since some time in the mid 90s. Not just by energy level but, in my perception, business being done.

 How come? What happened? When there are still too many trade shows back to back to back, and the economy is soft, how did SIA and the snow sports industry manage to pull this off?
 
Uhhhh, well, actually, I don’t know for sure and I don’t think anybody else does either, but let’s explore some of the factors that may have made the difference and see what they might mean for snowboarding.
 
New, New, New
 
I guess we start with the new location. The food was better, the accommodations more convenient, the walking easier, the ride from the airport shorter, and the smaller footprint helped keep it exciting. Like in your high school physics class, when you compress molecules into a smaller space, they move faster.
 
It even kept it exciting, more or less, all over the show. Use to be that all the energy was in the snowboard section and up in the ski part of the show, nothing would be going on. But this show, for the first time ever in my memory, there was even some buzz, and apparently some retailers, in the nonsnow board part of the show. This extended beyond the couple of ski booths, like Line, that had a distinctly snowboard feel to them.
 
Product was new too. Oh, not so much new technically, but because of the earlier show date, most people, especially from the non chain retailers, are seeing product for the first time. That can generate some excitement.
 
There were perhaps a half dozen new, or recently arrived, small snowboard companies. There’s been lots of talk (some in this column) about the opportunity that smaller brands may have. Their arrival suggests a level of optimism and enthusiasm for the snowboarding business that may be stronger than it has been over the least couple of years. I don’t want to underestimate the business challenges they face, but I sure want to see them succeed. One of the reasons they may is that they seem more business focused than most of the many new brands that popped up eight to ten years ago.
 
One of the things that caught my eye was the quality of the decks’ fit and finish. Graphics, in a word, were generally spectacular. We went through a period of year where graphics seemed kind of taken for granted. Now, with functionality being so good for all brands, graphics may emerge again as a basis for product differentiation.
 
Nitro had a level of detail in its graphics that required a close look and careful study if you didn’t want to miss any of the points of interest and, in some cases, sheer fun that long time Nitro designer Mike Dawson had included. Arbor combined their traditional wood with eye catching screened graphics on certain models in a way that I thought gave their original look a run for its money. Volkl had a finish with two textures that made you stop and figure out what you were touching as you ran your hand over the board.
 
New exhibitors like Volcom added their unusual presentation and irreverence to the mix. I’m glad I didn’t have to clean up all those tortillas.
 
Also new was a four day show, after five days in recent years. Obviously, if you squeeze the same number of retailers and business meetings into four days instead of five, things will look busier even if the same amount of work gets done. I’m okay with efficiency- how about three days next year SIA? How long did retailers really stay at the show?
 
Trade Show Politics
 
The retailers (and the brands for that matter), have more trade shows than they want or can possibly attend. Organizations being the way they are, the companies that put on trade shows are going to keep putting on their shows and hope the other guy goes away. From what I’ve seen and heard at other trade shows this trade show season, SIA seems to be the one that gets to hang out and say “Our show rocks! And yours doesn’t.” That means, I guess, that any talk about snowboard companies exhibiting at ASR instead of Vegas won’t be more than talk. It probably never would have been anyway. Even if the snowboard companies are soul mates to the skate and surf companies exhibiting at ASR, they have to do business with the many ski shops that come to Vegas but not to ASR.
 
SIA’s successful show might also put them in a better arrangement to negotiate a merger with Outdoor Retailer, with whom I hear they overlap a day next year. A number of people I talked to about trade shows in general suggested that would be the best thing to do. But there’s still the same problem that existed last year when the two organizations talked about some kind of merger. OR is for profit and SIA isn’t. How you negotiate starting from those two completely different perspectives continues to be beyond me.
 
Business Trends
 
The earlier show dates are consistent with the strategy I see snow retailers pursuing in their purchasing. Either because they are smarter, the economy is soft, boarders aren’t buying new stuff as often, or because the brands will tend to let them get away with it, snowboard retailers are going to be continuously cautious in their ordering. I expect to see preseason orders for basically what they think they can sell through Christmas and maybe a little beyond. Then they can come to Vegas and get any end of season products they need at better prices.
 
Some brands have said they will only produce to preseason orders, with the usual increment for team, warranty, demos, etc. So some retailers may find they can’t fill in after the holidays with the product they want.
 
I don’t see selling product at large discounts after January 1 as a big money maker for anybody- especially for brands who paid preseason order prices for product. Maybe the best thing that could happen to the industry is if there was just a bit of product scarcity from time to time. So I hope the retailers are cautious in their ordering and the brands are cautious in their production. That would be the best for the snowboard industry overall.
 
In another outburst of raging optimism, I’m hopeful that the quality of the show is at least partly the result of all the time, effort and money that the whole winter sports industry, especially the resorts, has spent on programs to improve facilities, the learning experience, and the overall customer experience in the last five to eight years. That has got to be having a positive impact, and maybe we’ve seen it at the show for the first time.
 
One other thing I’d like about the early show as a brand, or at least as the finance guy for a brand, is the ability to deal with retailers who haven’t paid me in January instead of March. In January, you can have the, “Well, we’d like to take your order and give you the show and preseason discounts, but we need to clean up this old receivable first” conversation with a higher probability of success than in March. Receivables that are open in March and April tend, in my experience, to be receivables you don’t collect until it’s time to ship next summer/fall if then.
 
Finally, this was a busy, upbeat, exciting show. But it wasn’t that way, like in some previous Vegas shows, because of people who snuck in for the vibe or companies thrown out for various amusing behaviors. It was like that because the snowboard business community was excited to be there, to see new products, and to do business. That’s good to see.
 
My Quandary
 
Well this is kind of a problem. I’ve gone and written an unabashedly upbeat, glowing and positive article about the show and the prospects for the industry it seems to represent. This is going to ruin my reputation. I’ve got to complain about something.
 
Ah! The signage sucked. You couldn’t find your way around. I spend the whole time looking at the damn map and even that didn’t help. I’m going to call SIA President David Ingemie and asked him how come that was so screwed up.
 
Oh dear. Turns out they did it on purpose. David points out that the aisles and signage in a department store are laid out to “encourage” you to see more product in more locations, and they did the same thing at the show. He did agree that the restroom signs needed to be a little easier to see. I imagine I’m not the only one who noticed that problem.
 
Okay, I guess I might as well drink the Kool Aid here. I shouldn’t be this easily seduced by one good show, but I have some hope that a confluence of events in retailers, resorts, and brands may mark a turning point for snowboarding and the winter sports business in general. Perhaps business cycles are longer than we think. We didn’t just need to consolidate, but to get over and come out of it. Ski and snowboard had to, in some sense, come together. The large brands had to solidify their market positions to make room for smaller ones to emerge again. Retailers had to start and do better business and those that didn’t had to go away. Resorts had to give their customers a better experience.
 
The retail numbers don’t necessarily support this kind of perspective- at least not yet- but in a soft economy, I’m willing to see the glass half full instead of half empty.

 

 

Hype, Technology And Trade Shows; Not Enough of Some, too Much of the Other.

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Slowing growth, or a decline in year over year sales if that’s what your company is experiencing, was inevitable in skateboarding. Sure, we would rather it didn’t happen. But since we all knew it was going to happen, it might as well be sooner rather than later so it’s less painful.

What I didn’t see in San Diego, happily, was what I saw at the Vegas snowboard industry show in 1995. Or was it 1996? Whatever. Vegas that year was the biggest snowboard party I’ve ever seen with lots of hype and lots of new brands. And then the snowboard consolidation wiped out most of those brands.

Skateboarding doesn’t seem to be doing that to itself. The number of brands isn’t expanding dramatically. We’re resisting, so far, “net never” dating, and there isn’t a Japan around that’s going to yank the financing many companies need to survive as there was in snowboarding.
 
Still, this setback has wonderfully focused the mind on some significant business issues. Here are some of the ones mine is focused on.
 
Hype
We need less hype. Between network television, Investor’s Business Daily, The Wall Street Journal, The New York Times, and more bad ads featuring skateboarding than I can even begin to count, it’s just too much. Maybe what I mean is we need the right kind of hype. At least part of skateboarding’s success has been its ability to be underground, a little dark and urban, and maybe somewhat unintelligible in its humor and attitude toward non-participants. That kind of hype—the kind that makes people curious about skateboarding is a good thing.
 
I’ll go a step further. The kind of hype we want encourages people to skate or learn to skate better—not just to buy a T-shirt. I recognize that we can’t do much about the people who just want to create an association between their brand and skating for the sake of selling a product and don’t really give a damn about skateboarding. I hope the skate-industry companies will look at all their advertisements and promotions through that filter—does it encourage people to skate? I think that for the most part they do.
 
Two people I respect have pointed out that the slowing of skateboard growth may be related to demographics. As they put it, we’ve got a lot of sixteen-year-old boys who are discovering girls and cars to the detriment of skating. We’ve also got a lot of seven, eight, and nine year olds who are discovering skating, but their disposable income is limited and their purchases largely controlled by their parents, who tend to favor spending less rather than more and buying pricepoint decks. The suggestion is that our slowdown/decline may be caused by the loss of older kids before the younger ones, although they are coming up, are ready to replace them. In this scenario, everything will be fine in a couple of years.
 
I haven’t checked out the census data recently, but if the numbers bear it out, I can see some validity to this scenario. The caveat, and this is where we get back to hype, is that it won’t matter how many kids there are if too many of them think skateboarding is lame because of how ubiquitous it’s become.
 
Technology
Meanwhile, cheap decks from China are happening. I’ve written enough about that and the potential (probable?) impact in previous articles. What’s the typical strategic response in any industry to lower-cost foreign competition? Technology and product improvement that can’t be matched, at least not immediately.
 
Of course, the skateboard industry has spent some years now explaining that a seven-ply Canadian maple deck is what a skateboard is, and nothing else is a skateboard. Nevertheless, if you’re a factory making skateboards and you want to compete with Chinese labor costs, you’d better figure out a better skateboard technology that gives you a competitive advantage.
 
Over at PS Stix, to nobody’s surprise, Paul Schmidt has taken a shot at that. His Featherlight technology results in a skateboard he describes as lighter and stronger. It contains a layer of new material that results in a stronger, more consistent pop back when you flex it. The new material doesn’t go all the way to the tips, and the deck will still wear out.
 
The good news is it looks just like a traditional skateboard. The bad news is that it looks just like a traditional skateboard. How do you sell something nobody can see when they inspect the product?
 
PS Stix’s answer is to have a display for the retailer that shows the cross sections of the deck. An awful lot of people tried this in snowboarding to differentiate their constructions, and it never seemed to work. Maybe the differences weren’t significant enough and maybe there were too many of them. Probably both. PS Stix seems to have first-mover advantage on this, and there won’t, at least at first, be 100 guys using cross sections to explain why their construction is better and their decks perform better.
 
PS Stix’s Featherlight deck will sell for about ten percent more than a traditional deck. That’s what you expect from a product with a competitive advantage. If it catches on and the volume justifies the effort, eventually the low-cost producers will figure out how to make it for less. Then PS Stix and the other manufacturers will have to move on to another new technology. Sounds to me like it could be good for the consumer. Oh yeah, I guess that’s what competitive pressure is supposed to accomplish.
 
How do we get notoriously conservative skateboarders to accept these new technologies as they come along? We’ve created the form of rock star known as the teamrider. We’re more or less convinced that what they ride influences what other kids buy. It’s pretty clear, then, that we have to get our teamriders to ride decks with the new technologies.
 
That shouldn’t be so hard. The company says, “Hey, you need to ride this new technology from now on and love it.” The rider says, “I don’t want to!” The company says, “Do you want to get a check every month?” The rider says, “Yes!” The company says, “Given the number of blanks being sold and the margin pressure we’ll be under if this new technology doesn’t work out, you won’t get that check unless you ride and love this new technology.” The rider suddenly feels love for the new deck welling up in his heart. People with agents should be able to see the business necessity.
 
Trade Show
Over at the International Coup D’Etat Skateboarding Exposition, sponsored by Alien Workshop and Foundation Skateboards and supported by others who showed some product and paid for some of the festivities, companies had a good time and got some business done. Tum Yeto’s Tod Swank says he spent less cash than he would have spent exhibiting at ASR and was able to make, because of the involvement of his and other companies, a contribution of at least 10,000 dollars to the Children’s Museum where the event was held. Nice.
 
Powell, Nixon, and Gravis were upstairs in rooms at the convention center. Bet they saved a few bucks with no loss of business. I thought the atmosphere up there was more conducive to doing business than it was on the floor of the show.
 
Meanwhile, various companies were spending well over 100,000 dollars to attend ASR, not counting lost business and management time. Under current business conditions, I think they have to look themselves in the mirror and ask, “If I didn’t come to the show or cut my presence way back, would I actually lose much business?” They might consider spending some or all of the money they spend at ASR on other ways of meeting their customers’ needs. If you haven’t seen it, you might check out my article (“Trade Shows Again”) in the July 2002 issue of TransWorld SNOWboarding Business. It suggests an alternative trade-show strategy used by some snowboard companies that might be appropriate for some skate companies. (If you e-mail me, I can send you a copy.)
 
Then there was the “secret” meeting called by ASR to address issues that the skate companies have with ASR. I’m told about 25 skate-company heads were invited. I didn’t go. Couldn’t find the secret room. Don’t even know the secret handshake.
 
The skate companies are unhappy because of the cost of ASR and the pressure from ASR to participate in other kinds of advertising and promotion as part of the perceived price for getting the booth you want in the location you want regardless of how long you’ve been coming to the show. They also don’t feel it’s right that ASR pays SIMA a bunch of money to support the show but don’t pay a dollar to skateboarding now that skate is arguably more important to the show than surf.
 
I guess there was also some frustration expressed with the fact that there’s no beer allowed in the booth. You know, that one bothers me, too—especially after waiting in a long line to pay four dollars for a small beer when I could have gotten a big one for free somewhere.
 
I think these concerns are justified, although I’m not so worried about the beer as the other issues. It’s getting harder and harder to justify the expense of the shows. I imagine ASR recognizes these issues as being legitimate. But they can justifiably ask, “Who, exactly, should we negotiate with?” There’s no skateboarding equivalent of SIMA, and unless IASC gets more industry support and Jim Fitzpatrick is ready to quit his day job, we can’t really point there.
 
There’s an old Chinese curse that says, “May you live in interesting times.” For a lot of reasons, including those discussed above, this would be a good time for the skateboard industry to cooperate in ways it never has before. The industry’s history is such that I won’t hold my breath. Still, imagine if we could.

 

 

The End of the Beginning; Observations from Glitter Gulch

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“Now, this is not the end. It is not even the beginning of the end. But it is, perhaps, the end of the beginning.”

Overall, Vegas showed signs of being the end of the beginning of the snowboard industry’s consolidation process. 
 
Which is convenient, since I’ve always wanted to use that quote. The first person who identifies the person being quoted by calling or e-mailing me, the approximate date of the quote, and the event being referred to will be acknowledged along with their business in the next Market Watch.
 
In Vegas, the industry shows some signs of stabilizing, but it has a long ways to go. There were few or no new exhibiting snowboard companies, but not less by my count. Prices were up, down or unchanged depending on who you talked with. But not too much either way. Careful cash management has become more important than taking market share. With a couple of exceptions, senior managers seemed to feel that they had or could get enough cash to do what they needed to do, but not what they would like to do. Significant product innovations were rare. I saw only one new step-in system. Making a profit is still tough. Retailers seemed more deliberate perhaps because there were fewer choices to consider.
 
The Good News
 
The good news starts with SIA’s retail audit, where a big increase in hard goods sales by units and dollars was reported through the end of December in both chain and specialty shops. Especially in boards, the dollar increases were generally more than the unit increases. This translates into an increase in the price per unit at retail. It’s about time. Over the same period, snowboard apparel sales plunged, but that’s more a reflection of last season’s unsustainable growth rate and poor weather than of a problem with apparel.
 
The chaotic over supply that resulted from companies producing with the goal of achieving hopelessly optimistic projections, to keep factories running, or to take market share from competitors is gone, bludgeoned by the sacred sledgehammer of financial reality. That’s not to say that over capacity isn’t still an issue (see “The Bad News” below), only that the conditions that lead to forty dollar wholesale board prices are pretty much gone. At least they are gone until confidence in Chinese production quality increases, but that’s a discussion for another time.
 
The next thing I noticed was that all the booths looked more or less the same as they each looked last year. Oh, they’d been renovated or dressed up and rearranged, but they were basically the same. Let me explain why this is really good news.
 
When an industry consolidates, managers have to start running their businesses differently if they are going to be counted among the survivors. The cornerstone of these changes in management perception and focus are financial. There’s a seminal moment when the realization hits home that all these cool marketing things would be great, but if we do them, we won’t be around to enjoy the benefits. At that moment, the competitive environment begins to get a little more rational and the tendency for new companies to enter starts to decline. We’re there.
 
I’ve always looked forward at Vegas to walking around to see who had thought up “the next snowboard.” Usually, it was some strange contraption that might have made technical sense but had no chance from a marketing perspective. It wasn’t there this year. But there was one new board with an unusual technical innovation- a double flex.
 
Nobody I talked to had ridden it, but the consensus was that it made conceptual sense and might work. It’s important that it wasn’t just a board being introduced by somebody who wanted to be involved in snowboarding. It appeared to be the result of cautious development and careful market analysis and timing. Based on the background of the owner, I expect there’s enough capital behind it and the risk has been carefully thought out. I’ll bet they wouldn’t have introduced it two years ago even if it was ready given the market conditions that existed then. In other words, it’s a rational product introduction based on a competitive advantage which the owner believe can be validated in the market. He doesn’t care if he’s cool. 
 
That’s another positive indication of a market that is starting to behave rationally.
 
I say this every year, but the show was more businesslike than the previous year. As long as there continues to be free beer in the booths after the show closes, I can stand it. I say that every year too.
 
At least partly due to SIA’s good work on the subject and its decision to cancel the Snow Show, the buy sell cycle is progressing more smoothly. There was plenty of business done in Vegas, but it wasn’t, and didn’t have to be, done in a frantic way. In the first place, it’s a lot easier to choose between fifty brands than three hundred. In addition, brands and retailers are doing more work before Vegas. More retailers, planning to carry most of the brands they carried last year, are coming to Vegas to confirm decisions they have largely made- not to begin and conclude the information gathering process in five frantic days like they use to.
 
The final piece of good news is that there are 60 million people in the United States between the ages of 5 and 20, over half of who have not yet moved into adolescence. There’s plenty of room for snowboarding to grow. We’ve also got the attention of every big company in the country with a brand name, because they know that if they can’t get the loyalty of some piece of this group, their future success is doubtful. I guess that’s good news…..maybe.
 
The Bad News
 
When a consolidation happens, profits drop. That drop can be temporary or permanent. I am not going to conclude that it’s permanent in the snowboarding industry- the demographics alone suggest there’s some money to be made- but the same handicap that has kept skiing among the financially disabled has the potential to do the same to snowboarding.
 
That handicap is too much production capacity. There are always more than enough soft goods factories. If every ski and snowboard factory in North America closed, there would still be enough manufacturing capability in Europe to supply all the skis and snowboards the world wants. Hell, there might be enough if all the plants outside of Austria closed. I don’t expect our excess capacity problem to go away.
 
The capacity problem is reflected in the actions of the (mostly) ski companies from Europe trying to establish their snowboard businesses in the United States. Unfortunately, I observed in Vegas some tendency on the part of European owners to interfere with the marketing direction the U.S. managers are trying to set, and I suspect that will be to the detriment of the brands’ success here.   Oh well, I’ve seen lots of U. S. companies have the same problems when they tried to move into Europe. People who live in glass houses….
 
The point, however, is that these companies, with tens of millions of dollars invested in snowboard and ski production equipment, really, really, really want to make product to keep those factories running. They look at the whole market from a production, rather than a market, perspective. I have some personal experience telling companies with factories that the market required less product. Their first priority is simply not brand positioning- it’s maintaining and increasing production.
 
Then there’s the fact that we’ve still got fifty plus brands competing in North America. It’s too many. I still believe snowboarding can support more brands than skiing, but not fifty. I expected to get to Vegas and see fewer.
 
The big brands, and the brands owned by big companies, making money or not, are likely to survive. They either have a balance sheet or an access to capital that insures it. The small brands that have pursued a consistent strategy and niche also have a reasonable chance to be successful. They all report anticipated sales increases consistent with their historical growth. It’s potentially a breakthrough year for them because if a retailer wants any product from a smaller brand, there aren’t many choices. Of course, sometimes the managers at these brands can be a little disingenuous when they talk to me, but I asked the same question in enough different ways that I think they mean it. I hope so.
 
As usual, being big or having a market niche seems to be the way to succeed. It’s tougher when you’re in the middle either by size or brand positioning.
 
In Las Vegas, I saw light at the end of the consolidation tunnel, but land mines on the cave floor. The demographics suggest a huge opportunity, but everybody wants a piece of it. Knowing who your customer is has gotten tougher as what use to be distinct specialty markets overlap and many new customers are as interested in fashion as they are in the sport. I am reminded of what happened to skateboarding the last time it got respectable. The kids dumped it because it wasn’t cool.

 

 

Three Business Models That Might Work; Ideas From Vegas

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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.

As we’ve watched snowboarding evolve, we’ve noticed how closely products of different brands resemble each other. Differentiation is based largely on marketing and making a buck requires a strong brand, adequate financing, and solid operations.
 
Well okay, that’s basically what happens in any industry as it matures and no, I’m not going to make that speech again. Seems a waste of time at this point.
 
But, the bottom line is that companies that make money tend to have what’s called a “sustainable competitive advantage.” Sustaining it is typically a lot of work. Just because you have it doesn’t mean you keep it. At Vegas, I saw three brands (I’m not suggesting there aren’t others) that I thought had a potential competitive advantage. Whether it’s sustainable or not isn’t clear. That depends not only on what they do, but also on what their competition does.
 
I thought we might learn something by looking at them.
 
Head Snowboards
 
Two years ago, Head had the beginnings of a snowboard program. This year at Vegas, they had a complete snowboard program with a product line that looked as good and as complete as some better-known brands.
 
My more recent information is that their bookings have increased substantially for the coming season, but at the time I asked them, in my usual subtle way, “So are you telling me that the best you can do is to be as good as everybody else? Doesn’t sound like the basis for a competitive advantage.”
 
They smiled and showed me their rental product with a setup time of 59 seconds. Boot sizes are color coordinated with board widths. There’s an embedded microchip for inventory control and to get people in and out fast. The boards are delivered with premounted rental discs. The step-in bindings can be adjusted in two steps for stance and angle without any tools, as can the straps for boot size.
 
Okay, I liked that. Seemed like it would make life easier for everybody. Renters move through lines quicker and get a better setup. Instructors can change things for students on the fly. The resorts save a few bucks by improved efficiency and hopefully lose fewer newbies as they go through the hazing that has too often been lessons.
 
So where should Head allocate their resources? To selling a snowboard line that, at best, will be perceived as being as good as everybody else’s to specialty retailers or pushing their rental system, with some clearly identifiable advantages, to the rental shops at the resorts? Who knows, maybe they’ll both depending on the resources available. Well, you know what I told them.
 
It isn’t of course that easy. Company size, terms, price, relationships and momentum all make a difference. The best technology doesn’t always win. Ask Apple Computers.
 
Nikita
 
“Street clothing for girls who ride.”
 
Let’s just wallow in that tag line of theirs for a minute. Six words don’t create a competitive advantage, but my guess is that some thought went into creating it. When you read it, don’t you know exactly whom their customers are? Certainly the people at Nikita know.
 
At the same time, their potential customers know if Nikita is a brand they should be interested in. Are you a girl and do you ride? If so, how can you not check out Nikita?
 
They also have what’s called “first mover” advantage. That is, Nikita is the first company that I know of that has moved exclusively into this space. First movers often have lower cost of establishing and maintaining a brand name in their chosen category and they may build a reputation that later entrants will have a harder time overcoming. The company also may enjoy temporary early profits from its position and define the competitive rules in their niche.
 
Think of Clive and Nixon. They were early movers who defined their market niches. Sure, they already had competitors. As a result of their success, they attracted more. But they are more closely identified with their target niches than most other companies that sell similar products.
 
Clive and Nixon also share with Nikita the fact that they don’t just sell to snowboarders. Their businesses are less seasonal than they would be as snowboard only businesses and the target market, much larger.
 
Nikita’s positioning statement, and the focus it represents, also gives them some advantages in efficiency and resource allocation. In the fashion business, which we are all in to some extent, you sit at your desk and are bombarded by advertising, promotion, and product opportunities and ideas. Wouldn’t it be great if you spend no more than a micro second thinking most of them? The people at Nikita can do that I think. If it isn’t interesting to girls who ride, then they don’t have to think about it. And they don’t have to spend (or misspend?) money on it.
 
The downside, I guess, is that when you position your company so specifically, you give up some potential areas of growth. In my experience, that downside is largely illusionary. Nikita certainly has plenty of room to grow. Well-defined market niches aren’t necessarily small.
 
Volant
 
Yeah, I know it’s a ski, but look around the snowboard industry and you can’t take too much umbrage at that. The point is that the transition of Volant from an independent company making its own skis to a brand owned by GenX changes the whole dynamics of the brand. My expectation is that GenX will make money on the brand where Volant couldn’t make money as a stand-alone company. Let’s talk about why and the source of Volant’s new competitive advantage.
 
You remember the Volant story. They made steel skis at their own factory in Colorado. They had some ongoing production problems, expensive labor, and difficulty getting to the volume they needed if they were going to have their own factory. In an attempt to solve these problems, they tried an ill-fated internet venture that really pissed off retailers. That seems to have been the last nail in the coffin.
 
But Volant, with the only steel ski, had a ski that was really different from all its competitors and, according to Volant anyway, worked better.
 
Certainly GenX knew that, but they also had a different business model in mind.
 
They bought the production equipment for not so much money and moved it to a factory in Europe where they were already having some of their various brands made. In one easy step, they set up that manufacturer to make the Volant ski. They hired just a couple of key people from Volant, and moved them to the GenX headquarters where they could share facilities and expenses.
 
Since the factory was already making various other skis, the cost for each pair of Volant’s, I assume, went down. GenX didn’t have to worry about running a factory. Back at their headquarters, their overhead could be spread even more efficiently over more sales. The number of pair they had to sell to break even dropped.
 
True, they still have to run a marketing campaign, and I’m assuming you’ll see some Volant ads. But I wouldn’t be surprised if the most critical part of the marketing campaign was the part where the sales manager tells the retailers, “Yes, we’re going to deliver on time, the prices will be better, the ski is really different and works, and those guys who tried to hang you out to dry by selling on the internet are gone and we won’t do that.”
 
Sounds like really effective marketing to me. Winning retailers back will be a challenge, but with the lower breakeven point, I’ll bet they can work it out.
 
It’s not like having multiple brands, sharing overhead, and having somebody else make your product is a new idea, but it’s interesting to watch it be put into affect. It’s pretty much the GenX business model.
 
There you have three businesses with three different sources of potential competitive advantage. Head gets its from product improvements. Nikita’s comes from the market niche they have targeted and their early movement into it. Volant’s is the result of GenX’s usual operational efficiencies.
 
Which is best? None. But you’ve got to have some competitive advantage or another. 

 

 

Trade Shows Again, Kind of

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Following Vegas, in the last issue for the season of TransWorld Snowboarding Business, I wrote about trade shows and the issues we have with them. To make a long article short, I basically said, “We’re screwed!”

Lot of people agreed with that, which was hardly a surprise. But I was bothered all spring and into early summer because that didn’t seem like a very productive approach to the problem.
 
Since I wrote that, I’ve been to the Snowboard Industry Conference in Alaska, The Surf Industry Conference in Cabo, and the National Ski Areas Association Conference in New Orleans. Tough job I’ve got. I’d go to the Skateboard Industry Conference if they’d just have one. Well, at least if they had it somewhere nice.
 
The surfers are worried about skateboarding taking their soft goods market. The skateboarders are worried about Chinese skateboards. The winter resorts are worried about retention of people who try snow sliding. The snowboard industry is worried about turning into the ski industry (too late?) Everybody is worried about sales in the aftermath of a (minor) recession.
 
Everybody’s worried.
 
Now’s my chance to say to the snowboard industry what I’ve already said, either in a speech or in print, to the surf, skate, and resort industries. Don’t worry; I will manage to bring it back to the trade show issue. Basically, I’m going to suggest that somebody make not going to one or more trade shows a benchmark of their marketing program and a way to differentiate their brand within the industry. More on that latter.
 
The Speech
 
Here’s what I’ve said to everybody who would listen.
 
Business is a risk. It’s a risk whether you sit on your butt and do nothing or go out and try some new things. If you do nothing new, you may get clobbered anyway.   We all know the list of brands that were around and now aren’t. Try some new things and some of them probably won’t work. But some of them will work, you’ll learn something when you fail, people will notice and you’ll be in control of your own fate instead of waiting to react to what others do.
 
In the final analysis, doing nothing and trying some new things may be equally risky- it’s just that new things tend to make us uncomfortable and therefore seem riskier.
 
I’d argue that new things aren’t riskier- as long as they are based on a careful analysis of your market and customers and are consistent with clearly specified goals. In fact, with that kind of planning as a basis for your actions, I’d expect them not to even be perceived as riskier, but as just the right thing to do.
 
Okay, end of speech. Now I’ve got to tie that rambling soliloquy (but at least a strategic rambling) back to trade shows
 
Why We Go To Vegas
 
Obviously, to see friends, drink beer and party. Uhhhh, maybe I better start again, though it’s interesting that that’s the first thing that came into my mind. I think I’m supposed to be finding new consulting clients there or something.
 
But if you sell snowboard products, you’re in Vegas to sell those products, see what the competition is doing, spot trends and meet with reps and distributors. And it’s possible you might see friends, drink beer and party a little too.
 
Those are all valid reasons to be there as an exhibitor.
 
At an even more fundamental level, however, we’re there because everybody else is! There’s concern that competitors will take business if we aren’t exhibiting right next to them. There’s worry about the inevitable rumors that will start about why we aren’t there- obviously, we must be out of business or damn close to it.
 
So we do what everybody expects us to do and what we’ve always done. We book our space at Vegas and other shows and spend a lot of money getting and being there.   It’s not exactly doing nothing, but it’s reactive as hell and it’s certainly not perceived as being risky.
 
Except, of course, that business is a risk whether, as I noted above, you do nothing or you do something. Doing what everybody else does seems closer to doing nothing than doing something.
 
Maybe that was okay when times were better, and trade shows not quite so pervasive. Now, growth and profits are hard to come by, but we keep doing the same thing in the same way, selling the same products that are an awful lot the same as the other guy’s products. Now that’s a risk.
 
New Trade Show Strategy
 
This isn’t a strategy for the industry. It’s possibly a strategy for one or two brands. I’ve already informally suggested it to a couple of people. I’ll be interested to see if anybody actually tries it.
 
Start by asking yourself where you actually write your orders. Do the reps write orders at shop visits? From regional shows? From separate presentations you do for major accounts or buying groups? At the major shows like Vegas and ISPO? Next, ask if where you write the order is where you actually made the sale. Or was the sale made due to an existing relationship or because of the success of your sales and marketing programs over the past year?
 
What’s the real relationship between making the sale and writing the order? If you weren’t at show X, and had let everybody know months and months in advance that you weren’t going to be there, how much business do you really think it would cost you? I’ve had brands tell me they didn’t actually sell anything at the show and that “All their business was done before they got there.” I wonder if they meant it.
 
As a next step, figure out just how much it costs you to go to trade shows. The hard costs are easy. We’ve all got this huge number under “trade show expense” on our income statement. But that’s not the whole number. You’ve also got to think about the management and employee time involved. What could all those people be doing if they didn’t spend all that time preparing for and being at a trade show?
 
Now, remember that business you thought you’d lose if you didn’t go to show X? How does your profit on that compare to the cost of going to the show? But of course we’ve got to be more specific than that.
 
Talk to a bunch of accounts- especially, where you can identify them- those you think have to see you at the show. Could they see you at a different show? Ask them right now- months and months before the show- if they would buy from you if you weren’t at the show and used the money you saved to promote the brand. Or give them POPs, or a better discount, or whatever.
 
Maybe the resounding answer is, “You’ve got to be at that show.” I guess that would be the end of this new trade show strategy. Still, even if that happened, you would have had another contact with important customers, solicited their opinion, learned something and have tried something new- even if this one didn’t work.
 
My guess is that if you approach them in a positive and thoughtful way, you’ll be a positive response in many cases. Get them to acknowledge that the trade show schedule is kind of tough on everybody. Suggest you’d like to work with them to make it easier on everybody. Tell them your plan and see what they think.
 
And if they agree, haven’t you just made a sale? I know it’s never for sure until that elusive paper shows up, but you’ve gotten a customer to agree to work with you to address an issue of mutual concern. Might be the easiest sale you ever made for the best reason you ever made one. Okay, you’re taking a risk. But you’ve also just changed the nature and level of the conversation with your customer. Instead of “Buy our snowboard stuff because we’re cooler” (or have known you longer, have better graphics, are dependable, have a better team, or whatever), you’re saying, “Let’s do something to address an issue of mutual concern that can help us both out.”
 
Pretty good way to create some excitement and brand differentiation it seems to me.
 
This isn’t a strategy you can just adopt a little. A decision to do it means that you announce it immediately. There are phone calls, visits, emails to all your retailers. Explain how you are going to use the money you save. Get your reps together and get them on board. Their job and schedule will change some.
 
To be honest, if I were running a snowboard company again, I don’t know if I’d have the nerve to this. I’m suggesting you try and change, at least for your company, the way the industry does business. But my gut is that that’s all the more reason to do it. Meaningful changes that fundamentally impacts the way business is done typically seem weird and impossible when first suggested.
 
Is it a risky? You bet. But less so if you plan and execute it well. And we’ve all more or less agreed that the present trade show situation is unworkable. Reducing booth size, sending fewer people, staying in cheaper hotels are all tactical responses that leave the situation more or less the same. That’s risky.
 
Don’t just react. Be in control.

 

 

Well, At Least It Can’t Be Any Worse Next Year; The Trade Show Schedule

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The box on this page contains, as most of you are no doubt painfully aware, this year’s trade show schedule. Pretty intimidating. But of course it doesn’t include any key account presentations suppliers might have to make. Or regional shows. Or shoe shows, or bike shows, or toy shows or whatever other shows some suppliers and retailers might need to attend. And when’s that new ASR back to school show? When’s MAGIC? Granted, these aren’t all winter sports shows, but basically all retailers and many suppliers aren’t only in the winter sports business.

  
Show                                                 Date
 
Outdoor Retailer                               January 5-6
NBS                                                    January 10-13
Supershow                                       January 19-23
Winter Sports Market                       January 27-28
SIA                                                      January 29- February 2
ASR                                                    February 2-4
ISPO                                                   February 2-5
NSIA on snow                                  February 7-8
NSIA show                                        February 10-13
SBJ (Japan)                                      February 28-March 3
 
 
Now, I guess no single person actually has to go to all of these. Well, wait a minute. I can think of one guy. The guy who gave me this schedule actually. Maybe I can talk him out of some of his frequent flier miles. He can’t possibly use them all.
 
I started writing this sometime in mid January and, at that point, it was something of an abstraction to me. Now, sitting here in Long Beach for ASR in my hotel room on a Sunday evening in early February, it’s all too real. Tomorrow will be my seventh straight day of trade shows, and I don’t even have to fly to ISPO. I had a moment of clarity as I walked into the ASR show this morning and one of the security guards looked at me and said, “Don’t worry, you’ll get through this.” Apparently, I had a bad case of trade show stare.
 
What the hell happened? How did we find ourselves in this position? What can we do about it? This number of shows of this duration this close together can’t possible be argued to be in the interest of retailers or suppliers.
 
Apportioning Guilt
 
In that great American tradition, I guess we should start by finding somebody to blame. Can’t be our fault we’re in this mess. I know- let’s blame the associations that put on all the shows.
 
I think pointing a finger there is at least partly appropriate. It’s not that all the show producers got together and decided how to make us all broke, jet lagged and exhausted. All of them, I imagine, know in their heart of hearts that there are too many shows, but it’s unlikely that any of them are going to volunteer to close themselves down. Organizations are almost organic in their tendency to survive and grow whether they should or not.
 
In a weaker economy with, as I perceive it, fewer retailers going to fewer shows and staying fewer days, the trade organizations find themselves competing with each other for “market share.” It’s no different than any other industry. In the computer industry, or the snowboard industry for that matter, too many companies fought for market share and many of those companies didn’t make it. But in the process of that fight, the customer got a constantly improving product for less and less money.
 
The customers of trade shows, of course, are the suppliers and, to a lesser extent, the retailers who attend the shows. But it’s the suppliers who pay whoever puts on the show to be there, in addition to costs for building, transporting and staffing their booth. Retailers pay to attend too, but they don’t have to build a booth or pay for space.
 
In most industries, the customers don’t rush to pay for and use more of something than they really need, want, or can afford. In the snowboarding business, where marketing is critical and many companies try to look bigger than they are, competitive pressures can make suppliers show up at trade shows, do more, and stay longer than they really want to. If they aren’t there, or their presentation isn’t what’s expected, the rumors start flying. Let’s call it the lemming affect- we all scurry in the same direction.
 
The longer shows are and the bigger the booths, the more money the organization sponsoring the show makes. Talk about a potential conflict of interest with your customers. Competition among trade show promoters doesn’t seem to result in the trade show customers getting a better, more affordable, product.
 
To the larger players, the cost, hassle, duration and number of trade shows may be a pain in the butt (an expensive pain in the butt), but it doesn’t threaten their ability to compete and survive. For smaller companies, or brands just trying to get off the ground, the need to make their presence felt at shows can be a formidable barrier to success. They just don’t have the people, booths and money to be everywhere.
 
In an industry that could use some fresh new products and brands, that’s too bad.
 
Hey, wait a minute! We can blame the economy and snow conditions. Well, that doesn’t really work. It’s true that if the economy was stronger and it was cold and dumping everywhere we might not complain as much. Cash flow covers up a variety of sins. But it wouldn’t change the existing issues with the trade show schedule.
 
This is inconvenient, but at the end of the day, I’m afraid we’re going to have to look into the mirror and accept some blame ourselves. We are, after all, the ones who show up and nobody exactly puts a gun to our head.
 
SIA and What To Do
 
Vegas is our trade show run by our association. But, as I’ve made clear above, many suppliers and most retailers have trade show responsibilities and concerns that go beyond winter sports. It’s the interplay of all the trade shows and their schedules-not just winter sports- that really creates the problems. SIA can’t fix all those problems. What might they do?
 
SIA has a board of directors run by suppliers who are also Vegas exhibitors. They are responsive to our concerns because they are us, though they may not act as quickly as we’d like. Shows like Vegas get planned and contracted years in advance, so perhaps that’s inevitable. We’re the shareholders, so money SIA takes in goes to programs that help winter sports and, according to SIA, Vegas costs us less than a comparable show put on by a for profit organization. That’s all good.
 
This year in Vegas, the number of buyers was down 10.8 percent. Given the new dates, the economy, and, maybe most importantly, a Superbowl weekend, that wasn’t too surprising. The question for me, however, isn’t how many buyers were registered. What I’d like to know (and I guess we don’t have a way to get this number) is how long they stayed. That is, if you take all the buyers who showed up, and add up the days each stayed, how many was it and how does that compare to previous years?
 
My guess is that the total number of buyer days was down and by more than the number of buyers. That’s fine because this is now a preview show. The first thing I’d like SIA to do is cut the show down to three days. That’s a number most people I spoke with seemed to think was reasonable. I understand we’re down to four days next year from January 24th through the 27th,  I further understand that existing commitments can’t be arbitrarily changed. But three days seems about right. On day four I was there and it was very quiet. On days five, I was gone but I’m told that deserted might not be too strong a term.
 
Does that mean less income for SIA? From both a financial and a management point of view, I expect suppliers would rather pay higher dues than spend two more days in Vegas.
 
Next, let’s see if SIA can merge with Outdoor Retailer. Those discussions are apparently ongoing. When OR’s numbers came out, the gossip was that SIA was in the catbird’s seat for the negotiations. At Vegas, as it became clear that show attendance would be down, the handicappers seemed to give OR the edge. If SIA had been before OR, I’m sure the opposite would have happened.
 
Anyway, I think that merger makes sense though I can imagine that reaching an agreement between a for profit and a non-profit organization will require some creative structuring.
 
OR’s on snow is January 28th and 29th next year. Their show is January 30th through February 2nd. For those who have to be at both, that’s tougher than this year unless through some miracle there’s a merger that’s effective for next year’s shows.
 
Speaking of scheduling, I hope and assume that SIA does everything it can to keep Vegas from overlapping with ISPO and ASR. In fact, ISPO is February 1-4 next year, so that’s an improvement from this year for people who want to attend Vegas and ISPO. ASR, on the other hand, is January 23rd through the 25th, offering a two day overlap with SIA compared to one this year. I’d guess that most suppliers who go to SIA don’t exhibit at ASR as well. But there are a lot of retailers who would want to go to both. They have a problem
In Vegas, I saw bigger booths. Never in my wildest dreams did I imagine I’d see that this year. In this industry, at this stage of its development, are there still companies that think that booth size correlates with sales? Maybe, and I’m only half kidding, SIA should limit booth size. Of course, that would cut into their revenue and be in the interest of the smaller companies…… Personally, I think snowboarding could stand to see success by new, fresh, smaller companies, though a viable financial model is a hard thing to achieve.
 
I just got a phone call from somebody I respect who said he thought Action Sports Retailer would start approaching the snowboard companies. In the far distant past, they all went to ASR anyway. The timing’s more or less the same as Vegas, it’s just three days, most of the retailers will be there as they also tend to do either skate or surf, and in terms of the lifestyle and demographic, snowboarding belongs with skate and surf more than with ski. Interesting idea.
 
At the end of the day, the interest of trade show producers, on the one hand, and suppliers and retailers, on the other, aren’t necessarily the same. Perhaps SIA is an exception, at least in part. Change will happen because enough attendees, at whatever show, make it clear they won’t show up if things don’t change.
 
Wouldn’t it have great if five major companies at SIA had put big tarps on their booths at the end of three days with signs that said, “We’re Done. We’re Gone.”

 

 

Another ASR. Anything to Learn

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Lousy time for a deadline. What am I going to say about ASR that seems relevant when what’s left of the World Trade Center towers is still burning? The most talked about issue at ASR seemed to be conjecture about what was holding up the girls’ low riser pants, and it suddenly doesn’t seem so compelling.

 
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.
 
Advertising Trends
 
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.
 
It Is the Economy
 
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.
 
Chinese Skateboards
 
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.     
 
New Products?
 
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. 

 

 

Can’t Live With Them, Can’t Live Without Them; Trade Shows, That Is

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It feels to me like more trade shows are being better produced at exactly the time when we don’t need them in quite the same way we use to. Or maybe there’s the same number of trade shows, but we don’t feel the need to go to as many. Or maybe retailers, who don’t make their living on only snowboarding, could justify going to so many shows that they can’t afford to go to that they just throw up their hands. Or maybe snowboard retailers already know which brands most of their open to buy is going to be committed to. Or maybe they know there’s not as much new stuff to see as there was in the past.

Or maybe all of these.
 
Still, wouldn’t it be great if there were just one giant trade show a year for action sports? You’d go for a few more days and order all the snow, skate surf, accessories and apparel you needed for the whole year and arrange for it to be delivered when you needed it. And all the suppliers would make sure it all came on time and complete. And all the retailers would get their orders in on time and pay their bills on time.
 
But since I have a vivid imagination and it’s not going to happen quite as I describe it, let’s look instead at the current trade show environment and how retailers might react to it.
 
The Trade Show Industry 
 
It’s a business. Let’s start from there. The people who bring us Vegas, Outdoor Retailer, Action Sports Retailer, ISPO, Supershow, the regional shows and the consumer shows want to make a buck. With the exception of SIA, they are for profit organizations. SIA wants to make a buck too, but they use the money they earn to support snow sports industry consumer marketing and that’s a good thing. Still, they all, including SIA, are to some extent competing with other trade shows and they all want to prosper.
 
When the number of snowboard companies exploded, SIA boomed. ASR lost exhibitors who decided they didn’t need (couldn’t afford?) both it and Vegas. ASR took off again when skateboarding went crazy, and SIA shrank as the winter sports business consolidated. Outdoor Retailer drew some snowboard business as the action sports business homogenized a bit and brands wondered how to reach a wider market.
 
SIA moves the Vegas dates to January 29th through February 2nd to make it a kickoff show. Suppliers wonder how to do Vegas, ISPO (February 2nd to 5th), and NSIA (February 10th to 13th). I heard a rumor that cloning of sales managers is under active discussion. When’s the main Japanese show anyway?
 
The SIA move, of course, changes the dynamic for the increasingly successful regional shows if they are no longer the first place a lot of retailers see new product. But of course SIA isn’t the first place where major retailers are likely to see product. Suppliers will arrange private showings for selected customers even earlier. Meanwhile, too many retailers aren’t making enough money and there’s a recession brewing (maybe) with its potential impact on consumer spending.
 
To top it all off, Surf Expo, known for its East Coast shows, is planning a new surf apparel show for Anaheim, California in March 2002 and ASR, apparently in response, announced it is planning a new show as well for the same time. What a coincidence. Both would be focused on retailers writing back to school orders. Magic, of course, has been trying to add a board sports section to its show.
 
But wait! As I write this, a press release from SIA dated May 23rd has announced that SIA Board Chairman Hugh Harley and the SIA staff has held a meeting with the five professional sales rep associations “…to review the revised show schedule for 2002 and to work through various issues regarding the new buy/sell cycle.”
 
SIA President David Ingemie says the meeting focused on how a beginning of the season trade show is different from one at the end of the year. “It was nuts and bolts oriented,” Ingemie said. Teams of suppliers, retailers, and reps focused on ways to make the show better for everybody. Since there’s general agreement Vegas won’t be a writing show, they discussed things like digital workbooks that retailers could take with them to use in reviewing and managing product line information prior to ordering. They worked on getting food delivered to booths if desired (Say, if we could just get cots and portapotties in there, nobody would ever have to leave the booth, and think of the money you’d save on hotels).  
 
Trade show organizers have two sets of customers. The exhibitors, who pay the bills, and the retailers, who the organizers have to have show up if they want the bill paying exhibitors back. But the interests of those two customer groups aren’t necessarily the same.
 
So- more tradeshows, more complex customer groups based on broader lifestyle considerations and not just a sport, a possible recession, and retailers interested in cutting the cost of trade shows- not increasing it.
 
Doesn’t more tradeshows for the same products if the number of retailers isn’t growing and business is very competitive translate, on average, to fewer retailer days at each show?
 
In the mid 90s, snowboard companies sprouted like mushrooms on damp, warm, spring days (you should see my lawn). Each knew there wasn’t enough room for everybody, but assumed it would be the other guy who would take it in the shorts. People rush in when there’s perceived money to be made- in snowboarding or in trade shows.  
 
I’ve talked before in Market Watch about competitive dynamics, and the possible dangers of competitors reacting too much to the action of other companies instead of focusing on what their end customers want. A new show gets announced. Some suppliers commit to going. Other suppliers worry that people will talk if they aren’t there, so they decide to talk. Retailers start to wonder if they will miss seeing new styles and products they should have. Pretty soon we’re all off to a new show.
 
What is the cost of a new show to suppliers? Travel and lodging, the booth, rep time and expense, the development of a new product line and samples for the show, loss of time. That’s a lot of money. If you’re going to, defacto, create a new product cycle and introduction you better feel strongly that it will increase sales.
 
And there’s the rub of course. It may not increase industry sales, but it may increase your competitor’s sales if they attend and cost you sales if you don’t. What’s a retailer to do?          
 
What Is a Retailer To Do?
 
Retailers, of course, aren’t just snowboard retailers. They are selling skate as well. Or surf. Or camping. Or rock climbing. Or skiing. Which means they have more than just winter shows to go to, and that complicates the picture. Still, there are some things they are all doing, or ought to be doing, to make management of their trade show schedule and open to buy a little easier, and maybe less financially painful.
 
That process begins with the recognition that things aren’t changing in snowboarding as quickly as they use to. You don’t have to go to Vegas to figure out which of the 150 new brands you are going to carry. In fact, you probably know right now (it’s May 2001) most of the brands you will be carrying in the 2002-2003 season.
 
John Coffaney, the Vice President of Merchandising for Any Mountain, a ten shop retailer in central California, agrees that the process of selecting among brands is a lot easier than it use to be. “Twenty percent of the brands we carry get eighty percent of our open to buy, and we know who they are well before the shows.”
 
So you start out knowing most of the brands you are going to buy and having a pretty good idea how many dollars you are going to commit to each. When you go to Vegas in January, what’s your job? Not to place orders, according to Coffaney. For Any Mountain, it will be strictly a looking show. If he buys anything, he expects it to be current year merchandise he’ll use to finish out the season. He’ll meet with supplier executives to discuss marketing issues like coop advertising.
 
The big suppliers he’ll see again at regional shows or at their showrooms, so he’ll spend his time in Vegas checking out other than the usual suspects.
 
Retailers in Any Mountain’s situation should focus in Vegas on the small brands they won’t typically see anywhere else and expect to accomplish two things. First, they can figure out how to use that twenty percent or so (it may actually be a lot less) of open to buy that isn’t already committed. Second, they can troll the backwaters of the show to find the small and/or new companies that offer new products or styles that will help differentiate the store and keep it on the leading edge.
 
SIA President Ingemie points out that seeing new products and brands early in the season, rather than in March, gives you the information you need to accurately do your product planning.
 
Derek Miller, the owner of Bad Boyz Toyz with four shops in the Chicago area, says that’s how he came to order Capita. It was the only place he could have seen it. Besides seeing new brands, what does he get out of Vegas?
 
“Long nights and no sleep,” is his first response. Obviously, I have no idea what he’s talking about. “We look to Vegas to see what’s going on. We’ll write some large lines there, but we’ll lean on the regional shows even harder.”
 
The good news for snowboard retailers may be that if choosing lines has gotten simpler (because there are fewer choices), and this is a preview show where not as many decisions have to be made and orders written, then maybe it gets cheaper for retailers to go there. You don’t need as many people and they don’t have to stay as long.
 
By anybody’s measure, for supplier or retailer, trade shows are expensive. Retailers are looking to reduce that expense. Bad Boyz’s Miller claims he doesn’t know how much it costs to go to trade shows each year. “I’m afraid to add it up,” he says.
 
Any Mountain’s Coffaney has cut trade show expenses using in store presentations and similar mechanisms. He says that as a result, some of his soft goods buyers have not had to attend Outdoor Retailer.
 
He also points to a longer selling season that is emerging for Any Mountain. “February,” he says, “is becoming as big as December. Our open to buy goes up tremendously after President’s Day weekend.”
 
Retailers, of course, don’t want their key people at trade shows during the midst of the selling season. They think they should sell what they’ve already bought before committing to buying more.
 
Originally, I thought the new Vegas dates would be most beneficial to SIA because it made the show a kickoff show and the foundation of the buy/sell cycle. It made the show more relevant again. The exhibitors, I thought, would ultimately benefit from having to get their product acts together sooner and perhaps from some earlier orders from retailers. Retailers would be inconvenienced.
 
But if the retailer’s buying process has changed as I’ve suggested, the regional shows are continuing to improve, and the large suppliers are finding more ways to make it convenient for retailers to see and order product, then maybe we have a win for everybody. Retailers can spend less time and money and do just as good a job ordering. But as you strive to control trade show expenses, make sure you do go to Vegas. If you are a snowboard retailer, this is your show, you need it, and the competitive chaos in the trade show business doesn’t change that.
 
Oh, but then there’s the poor sales managers, who have to figure out how to be in at least two places at once. Maybe for the next Market Watch I’ll check out all those rumors of clones.
 
Jeff Harbaugh has spent 20 years finding solutions for companies managing transitions, the last 10 in action sports. Reach him at (206) 232-3138 or at jharbaugh@email.msn.com.
 
 
SIDEBAR
 
Then there’s the Nixon model of trade show management- don’t exhibit at trade shows.   Since people have no expectation of their exhibiting, not exhibiting doesn’t cause various negative rumors. Of course, they are always there and the product (watches) lends itself to being shown while walking the floor. And even though they don’t have a booth, they have a major presence by being associated with the most important piece of paper at the show- the party schedule.