The BRA/IASC Roundtable at ASR

As they do every ASR, IASC and BRA hosted a round table meeting by invitation only to discuss issues of mutual interest and, as usual, I attended. The meeting was well attended and the exchange lively.

The first issue on the table was Manufacturers’ Suggested Retail Pricing (MSRP) and Minimum Advertised Pricing (MAP). I’ll assume you know what those things are. People in the room were generally in favor of both and I’d have to admit that I’m not necessarily against them. Though as I mentioned in the meeting, managing distribution well is perhaps more important in keeping prices up.
What concerns me about both MAP and MSRP is that they feel like potential excuses not to manage your business well. I was impressed with the retailer in the meeting who said, more or less, “We got some belts with price tags on them but we ripped them off and priced those belts $5.00 higher because we knew that’s what we could sell them for. MAP? MSRP? How about knowing your customer, your market, and your inventory? Don’t let these kinds of tools, which may have their uses, have too much influence on your thinking.
Honestly, I’m not quite sure what the second issue was, but it ended up with the usual hand ringing about margins on skate hard goods needing to be higher.
I worked up some righteous anger, but then Don Brown ended the meeting before I could get a word in. Probably just as well.
But after the meeting I reminded everybody who would listen that the previous ASR, IASC had sponsored a seminar where a major topic of discussion was Gross Margin Return on Inventory Investment (GMROII). Cary Allington from Action Watch had presented some very interesting numbers showing that if you took inventory turns into account, the margins on skate decks were not nearly as bad as people thought.
I had been arguing for a while that our new economic circumstances required a focus on gross margin dollars- not just gross margin percentages. Actually, I first suggested that years ago.   Cary brought GMROII to me attention and I wrote an article about it. I knew that inventory turns and inventory dollars were important, but GMROII gave me an elegant and effective way to put them together and compare how profitable it to sell a skate deck compared to, say, a pair of skate shoes.
So the source of my pissedoffness was that here we were again lobbying for higher margins, while ignoring turns and margin dollars and data suggesting that on a GMROII basis, margins on skate decks weren’t half bad. And I’m sure we’ll have the same discussion at the next ASR.
The article is on my web site and has a date of August 15, 2009 on it.  Cary’s numbers are in there and I think they will surprise some of you.

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

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

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

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