Some Positive Trade Show News; Emerald Exhibitions to Acquire the SIA Show

Finally, some positive movement in the trade show space.  I’ve hung back on writing about this for a few days but SIA President Nick Sargent sent out an email to all SIA members announcing and describing the deal, which is subject to approval by SIA’s premium members.

The email from Nick was labeled “CONFIDENTIAL: DO NOT SHARE OR FORWARD,” so naturally everybody in the industry who’s not in a coma now knows about it and has a copy.

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The SIA Show: Dates, Data, Skate, Change, Burton and a Business Model I Like

Well, I guess we might as well get right to it. The date change for the SIA show to three week days in early December starting in 2017 was a major topic of conversation at the show. I got a point of view. Several, actually.

The New Dates

First, I’ve been through this twice before. Or is three, including the move from Las Vegas to Denver? Now, as then, a bunch of people hated it, a bunch of people liked it, and some shrugged their shoulders. I suppose there were people it benefited and those it didn’t. But a year after the change, nobody was even talking about it. Well, maybe except me. I love Denver, but miss playing blackjack. No idea why I’d miss something that usually cost me money.

I guess what I’m trying to say is I’m pretty sure it’s a done deal for better or worse. So let’s get over it and focus on running our businesses better in what are surely challenging times for pretty much everybody.

What did I hear from people? The specialty retailers hate the idea of being out of their shops for three or four days in early December when they are busy selling and don’t know what their inventory position will be like. The large apparel brands are thrilled and I guess pushed for the change. The hard good snowboard brands mostly said, “If the retailers come, we’ll be here. If not, we won’t be or if we are, it will be with a booth one third our current size.”

Now, if it wasn’t a done deal, what I’d like to see is a merger of Outdoor Retailer and SIA into one show. No, it’s not impossible. Yes, it would be difficult, maybe expensive, highly charged, and have lots of obstacles. But not impossible and, I think, responsive to the realities of our market. It might even be easier to accomplish than it would have been a year or two ago.

My next point of view- how did Nick Sargent find himself taking over just as this was happening? The timing seems, I don’t know, not well coordinated maybe? Or- maybe it’s perfect. Anyway, it’s a lot of change at one time. What doesn’t kill you makes you stronger, Nick. There must be a story I’ll never hear. Damn.

That’s enough on the change of dates. Let’s move on.

Outstanding Industry Data

Wednesday I went to the SIA intelligence day and heard Goddess of Research (not her actual title) Kelly Davis lay out all kinds of interesting market data for hard goods and apparel. You all need to be aware that the quality of the research SIA is doing and making available has gotten really good and way more valuable, hence I’ve bestowed the title “Goddess.”

Both presentations are available as PDFs to members. They are full of good information and I suggest you get them. The single stat that hit me hardest was the weather slide in the hard goods presentation. What it said on the slide was, “Weather explains ¾ of the variance on snow sports participation and sales.”

Interestingly, I didn’t hear audience members wailing and keeling over when that slide came up. Maybe we’re all just too used to that idea. I have to have a long talk with Kelly about just what that means, and I’ll report back. Notice she said 75% of the variance- not 75% of sales. Still, it implies a certain lack of control over your results in this most seasonal of businesses even when you do things right. And it seems to validate the approach I’ve been pushing for years- only buy (or produce) what you reasonably believe you can sell at good margin in an average year and carry over as little inventory as possible. It’s never worth more the following season.

I’d always rather you were bemoaning the sales you missed rather than the inventory you can’t sell.

The second research related item I want to tell you about is the Downhill Consumer Intelligence Project (DCIP). This coordinated effort collected way better data from way more consumers than SIA has ever collected before. It tries to tell you not just how consumers have acted, but why.

You can see some of the data in Kelly’s presentations. But, perhaps more importantly, you also have access to and have the ability manipulate this data in something called the DCIP dashboard. I’m not sure who gets what access and who has to pay and who doesn’t (I only get access to the top line data) but go check it out.

Below is a sample page from that program which, I think, shows some of the variables you can manipulate. Anybody who doesn’t focus like a laser when they see that 49% of skiers and 60% of snowboarders don’t own their equipment is not in touch with reality. That’s either a problem or an opportunity. I imagine it’s both.

dcip chart for sia show article 2-16

















You know what I found out at the show? Among all the hundreds of people who have free access to this program and data, literally nobody has used it to write a report that slices and dices their market.  That makes me want to tell you a story about a sister industry.

Skateboarding: A Cautionary Tale for Snow

Even before 2003, skateboarding had been through its cycles. But it was around then that its popularity really took off and the Chinese decided it might be worth making some skateboards because the market had gotten big enough to be interesting.

There were maybe half a dozen “core” skateboard companies at the time mostly founded by former pro skaters. They enjoyed a great business model where they sold their product mostly to “core” skate shops. That provided retailers and brands with enough margin to fund traditional marketing programs focused on their team riders. There hadn’t been much (any?) product change in a long time. The industry had convinced skaters that a skate board was made from seven or eight laminated plies of Canadian hardwood maple and not any other way.

After some fits and starts, the Chinese (and now others) learned to make a skateboard that was the same as that made by the core brands. But they made and sold it at a much lower price and skaters (and skaters’ parents who were footing the bill) realized that there was nothing wrong with paying less for a product that tended to wear out anyway (When wood contacts concrete or asphalt, wood loses).

I’d characterize the core brands as having resisted this major change in their business model, though eventually they started to adjust.

Meanwhile, the former riders who’s started these brands got a little older (it happens). Pretty soon they were in their 40s or more. Somehow, though they still thought they could be the arbiters of the skate industry.   So when longboards, and plastic boards, and scooters came along (not necessarily in that order) they said, “Nah, that’s not skateboarding and it’s not cool.” But of course, the 14 year olds didn’t much care what these older gentlemen thought and went by on their longboards, plastic boards, and scooters and said, “Yeah, well, whatever.” With one or maybe two exceptions, the “core” brands have lost most of their relevance to the market. They didn’t change when the market changed.

And We Snow Sliders Care Why?

In skateboarding, there are always new brands popping up. Getting 100 good decks made is easy, and the kids (amazing how many people I call kids these days) are having so much fun having their own brand they don’t care that they aren’t paying themselves.

It’s not that easy in snowboarding, and I noted I didn’t see the usual 6 to 10 new brands I’ve become used to seeing there. Yes, there were a couple, but not many. That kind of bothered me.

It bothered me because even though there isn’t the kind of disruption China and longboards brought to the skate industry, there is certainly the issue of the management of leading companies (ski and snowboard, resorts, brands, retailers) getting older and, whether they admit it or not, inevitably less in touch with their core customer who, Kelly Davis tells us, is young. Only 6% are baby boomers (though they spend a lot of money).

Last year I made a presentation at the show and said, “Hire some 14 year olds.” I wasn’t kidding. We’re faced with a slow economy that’s been, and continues to be, particularly hard on our primary customers. It’s also changing faster than the people in senior industry management positions have ever seen. It’s making traditional organizational structures and management processes less relevant. I’m not quite ready to say “obsolete” but maybe I should be.

You have to follow your customers not lead them. Your business will be more reactionary than you are comfortable with (or at least more than I’m comfortable with- that’s why I want the 14 year olds). I expect successful companies will be taking little risks every day in their advertising and promotion, and long term print campaigns will become a thing of the past. The way younger employees work is going to befuddle and annoy you, but you’re the one who will have to adjust.

A senior manager (or owner’s) job has always been to hire the right people and let them do their job. What I’m concerned about is senior managers (or owners) not being clear on just what that job is and how they will know if the employee is or is not doing it. The skate brands got stuck in the past. My perception is that the past is receding way more quickly in snow in 2016 than it did in skate starting in 2003.

I continued to hear too many anecdotal stories at the show about brands, retailers, resorts that won’t make even small, but fundamental changes to the way they run their businesses. We’ve all watched as brands, retailers, resorts have gone out of business.

Somebody once wrote, “The biggest risk is taking no risk at all.” Still makes sense to me. What you perceive as risky, or just as too much trouble, isn’t, but only the 14 year old can see that.

The Burton Conundrum

It isn’t any secret that Burton hasn’t been doing as well as it used to. Whether due to issues with distribution or lack of focus, it’s been through a period where it’s not as dominant as it once was. That was widely acknowledged at the show, though by all accounts they still make outstanding product.

I feel strongly both ways about this. On the one hand, there’s no doubt that some other brands have found opportunities as a result, and I like healthy competition+. But at the same time, Burton is closely identified with snowboarding, and with many non-riders, it may be the only pure snowboarding brand name they know.  In addition, a number of Burton programs (Learn to Ride comes to mind) have been important in supporting and building snowboarding. As an industry we rely, and I imagine will continue to rely, on their efforts in these areas. A focused and successful Burton is important to the industry.

Burton also enjoys the benefit of not being a public company. As a result the company’s goals can be (and I perceive have been) not entirely focused on growing revenue every quarter.

So what do I want? My cake and to eat it too of course. I want Burton strong and prosperous. Just not too strong and prosperous.

A Brand Model I Liked

Karakoram has been around six years, but this is the first time I’d had a chance to talk with them. They make high end, split board bindings for use in the backcountry. What do I like about them?

They told me their product improves the way split boards function and the explanation made sense. They sell an expensive, high end product that meets a clear need. They know their target customer group. That group will not be turned off by the price. In fact, I’d guess they associate it with the quality and reliability they require.

Their product development is clearly focused; they only make changes that improve performance. Feels like that might take some costs out of the annual product cycle. Split boards and backcountry seem to be growth markets. Finally, they’ve got a bunch (six?) of patents on their product.

There’s nothing better than a high end product with some barriers to entry in a clearly defined and growing market. How many of those factors does your business have going for it?

Get over the show date change. Use SIA’s data. Don’t follow in the skate industry’s footsteps. Follow your customer. Embrace change since you have no choice. Identify your business’ strengths.  Yeah, I know.  Easier to say than to do.

Learn to Ski and Snowboard Month; Can’t We All Do Just One Thing?

Last week or so, SIA President David Ingemie sent out an appeal for support for the Learn to Ski and Snowboard Month bring a friend initiative. Check out the web site. Look under “The Challenge.”

While I’d love to say something strategically brilliant about the program and give you some blinding insights into its value, that should be pretty obvious. I’m afraid this is going to turn into a short commercial for the program.

If you take just a few minutes to wander around the Learn to Ski and Snowboard web site, you’ll probably figure out what I figured out- that’s there’s no reason a person planning a trip to a winter resort wouldn’t use this site. It’s full of deals and good information. Looks to me like you can pretty much plan your whole trip here.

I wonder if retailers point their customers to this site while they are in the store. Maybe they don’t like the deals on equipment part. It just seems to me that a retailer who can not only sell stuff but help the customer plan when and where to use it might have leg up. Kind of like scuba diving retailers acting as travel agents for diving trips. Of course, they make money on that.

As you all know, the snow sliding business faces the challenges of dependence on aging baby boomers, stagnating middle class incomes, an economy which, while strengthening, isn’t likely to go back to the way it used to be for a while, global warming, competitive from other leisure time activities, complete transparency (for better or worse) of pricing and costs, and the fact that our activities just don’t seem to be perceived by our potential customers (of which there are a lot) to be as cool as they once were. We aren’t alone. Other industries face some of these same challenges.

Meanwhile, among the good news I see from the winter resort is the extent to which those resorts are managing to sell summer products- hiking, mountain biking, golfing, water slides, zip lines, etc. You have no idea (well, some of you do) what a difference just getting 10 percent of your revenue during the summer makes.

Summer activities relate to winter ones because getting somebody to come to your resort in winter is a chance to convince them to come back during the summer.

There’s no magic bullet. Neither SIA nor any organization is going to “fix” the participation problem. What we’re facing, and have been facing, is a multiyear, and I am comfortable saying multidecade, ongoing issue that we can never resolve, but always work to improve. Wait- maybe I did just say something strategic.

And that’s where programs like the Learn to Ski and Snowboard Month come in. It won’t “solve” the problem. But every time this program and others like it get somebody to the hill for the first time, they create a potential customer for life. And every time a resort or a retailer makes sure the newbie has a good time and easy experience, they help do the same.

So look at the web site and think about what you can do for one person that might help get them on the hill.

Thoughts from the SIA Show

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

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



SIA’s Numbers Through January: The Silver Lining

Like me, you probably got the SIA press release this morning with the snow sport industry’s numbers through January. And, if you’re like me, you know that SIA always cherry picks the good news and leads with those numbers, so you immediately clicked through to the Leisure Trends web site where, as an SIA member, you can see the actual top line numbers.

What those numbers show is that through January, sales in dollars were down 4.5% to $2.657 billion compared to the same period last year. What you will also see, however, is that unit sales for the same period are down 12.2%. In chain stores, the dollar decline was 10.6% while units fell 17.2%. Specialty dollar sales fell 7.5% while units were off 15.6%

I’m sure you’ll all be stunned to learn that internet sales grew 12% in dollars and 10% in units.
If you break the numbers down by equipment, apparel and accessories, you see the same pattern.
Well, not a great year. But we all knew when our snow dances didn’t work that it wasn’t going to be.
What I want to point to, however, is that for all three categories in chain and specialty, the decline in dollars was less than the decline in units sold. Why? Because we’re genius sales people in tough conditions? I hope so, but doubt it.
Prices held up because two year ago and more as an industry we made some decisions to control inventory. We benefitted this year from decisions we made way back when. How would we be talking right now if the revenue decline had equaled the unit decline? Ugly would be an understatement. Imagine having lower revenue and higher inventories.
I’m not trying to cheer you up in what’s a poor year no matter how you look at it. But this is a clear example of the benefit of considering the impact of your decisions beyond a week, a month, or even a season. True, we were all kind of terrorized by the economy into managing our inventories better, but look at the long term benefits in terms of inventory, working capital investment, and consumer perception of the product.
Find some time to think longer term. The benefits are amazing.            



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

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

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

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



The Lesson to be Learned from SIA’s Sales Report

SIA recently reported that the snow sports market in February exceeded $3 billion. You probably get the same emails I get, but if not, you can see the announcement and analysis here. SIA expects the industry to set a record by the time the season ends. Through February, sales are up 13% in dollars and 8% in units. In February unit sales were down 2% and dollars sales 1.5% compared to February last year. But gross margins rose 8%.

With the usual cautionary note that we always do well when the snow gods favor us, let’s look briefly at the opportunities these results present us with.

I’m thrilled to see February sales down and margins up 8%. That happened because inventories were tight. For the whole season, sales are up more than units, also reflecting rising margins.
If dollar sales fell 1.5% in February but margins were up 8%, how did you do? I’d say you had more gross margin dollars than if sales had been a bit higher but margins lower. Those gross margin dollars, I may have argued a time or two, are what you use to pay your bills. But wait! There’s more!
You have less working capital tied up in inventory. You could have spent less money on advertising and promotion. Your customer is learning not to wait for a deal. Tons of closeout product isn’t showing up in places we really don’t want it (unless you’re one of those close out people, in which case you may not be too happy). There’s not a pile of left over product in your warehouse waiting to be cleared out before the start of the season next year.
Won’t it be fun when customers start coming in looking for cheap stuff and you can tell them that not only isn’t there any, but if they don’t get what they want now, they may not get it? You’ve already improved your gross margin by next year just by not having a bunch of inventory left and we’ve collectively improved our brands’ images.
As an industry, we go to conferences, hold trade shows, create learn to ski/ride programs, run all sorts of programs, do studies advertise and promote, and spend overall millions of dollars trying to get people to try riding/skiing and stick with it.
But I’d hypothesize that we could forgo a bunch of that if we just didn’t get so damned greedy and continued to control our inventories. Oh, and we- you, that is- could make more money with less risk.
Now, I’m the guy who’s always said every business is going to (and should) make the decisions that they perceive to be in their own best interest. That’s true. But it looks to me right now that what’s good for your business is probably good for the industry in at least this one instance. Everybody left standing in the ski/board industry has figured out, finally, that there’s no way to make money in winter sports if you’ve got a pile of left over inventory. And also you won’t be able to pay your bills.
I know we’re left with the not so simple issue of trying to match production and purchases with how much it’s going to snow and where. And I know that somebody, somewhere (probably more than one) is going to see the inventory shortage as an opportunity and crank up their factory and/or purchasing. But if most of us perceive that it’s in our interest to buy and sell a little less at higher margins, we can sleep better over the summer, have stronger balance sheets, make more money with less investment and help get more people on the mountain.
At least think about that before you say, “Shit, I could have sold more last year” and up your orders.                           



Thoughts on the SIA Show in Denver- It Doesn’t Get Any Better Than This

Before my friends at SIA get too cocky over the title, they should know I’m referring to our industry’s current business environment as well as the show. Granted, I was a bit of a slow convert to the move from Vegas to Denver, and I still miss playing blackjack with friends, but overall I’m glad they made the move.

There were the usual opportunities to see friends I don’t see often enough, get some new perspective,  and see some great new product (and be mildly amused at some other new products that I’m guessing won’t be back next year). If the snowboard section continued to lead the way in sheer noise and excitement, the ski section wasn’t as far behind as it has been in the past. That ski/snowboard distinction ought to start (is starting, I think) going away.

I want to remind you all that no matter how good a job SIA does, it wouldn’t have been nearly as successful a show if, as an industry, we weren’t firing on all four cylinders. I’m saying four because there are four things that went right for us this season that I want to review.
The first, of course, is snow. Pretty much great in North America (with the exception being here in the Northwest where, unfortunately, I live). Europe got good early snow I’m told, though it tailed off after that. We all know that when it snows, we’re great managers.
The second thing was a consumer who, if still cautious, isn’t quite as scared to death as they have been the last year or two. The purse strings were a bit more open.
With apologies to some of the marketing types who want to believe they can influence consumer behavior more than I think they can, I would point out that those two factors are pretty much out of our control.
The next factor, which we can control to some extent as long as we invent something, is new technology. This season has seen the ascendance of all sorts of new rocker and camber technology, which aside from giving us something new to sell, makes it easier and more enjoyable to slide on snow. I don’t think we’ve had this kind of breakthrough in a while. It gives our customers a reason to buy, and may encourage them to replace existing equipment.
But I suppose we can’t expect, and perhaps wouldn’t even want, a big breakthrough every year. We need a couple of years to take advantage of those breakthroughs when they come along. So let’s characterize this cylinder as sort of controllable, but not reliably present every season.
And that leaves us with inventory levels, which are absolutely, positively, completely, and irrevocably under our control. Not so much as an industry. Let’s be realistic- a company’s management will control its inventory and distribution because they believe it’s the best thing for the company; not due to some altruistic concern for “the industry.”
A company can control its inventory. And apparently most of them did last year to the benefit of all of us. I wrote about the benefit of inventory control as it relates to conversion and participation at the show after SIA’s breakfast on that subject.
In the recent past, we haven’t always done quite so well at inventory control. Greed, misplaced competitive zeal, entrepreneurial ego, a misreading of market conditions and prospects or some combination of all of these has caused some companies to produce too much and try to sell it in the wrong places. This has had a negative impact, in some cases, on the whole industry.
Now, having been beat up by the recession, we all seem to have come to the conclusion that it’s really, really bad to have left over inventory in a one season business. Maybe we’ve even figured out that losing a few sales and creating a little product scarcity is way better than having to dump a bunch of stuff at the end of the season or carry it over to the next. The best companies have even crunched the numbers around some lost sales, leaner inventories and better, higher margin sell through and have figured out that, depending on company specifics, they are better off on the bottom line and on their balance sheet in spite of leaving some sales on the table.
But fear fades and greed is eternal. I don’t expect anybody to “take one for the industry,” in planning their growth and managing their inventory. But I do think it will be in all of our interests if, as individual companies, we recognize there are both short and long term benefits to constraining growth and product supply just a bit in the interest of the bottom line.
That way, the next time we aren’t firing on all four cylinders, we’ll just have to change the spark plug wires, not rebuild the engine.   



Inventory Management and Customer Conversion/Retention in the Snow Sliding Business

SIA was kind enough to feed me a nice breakfast this (Friday) morning before the show opened. While I ate and drank coffee, people from the various industry organizations that are and have been involved in the industry’s programs to convert first time snow sliders talked to us about what they’ve accomplished and what more needs to happen.

I guess the headline number was that conversion of first timers has increased 2% over ten years to 18%. There was a sense of “that’s not so good and we can do better” in how it was presented. I am sure we can do better, but I’m not quite sure that’s such a bad result. When you talk about trying to change people’s fundamental behavior, ten years isn’t very long and I’m not quite sure that 2% is so bad. We’ve learned a lot over the last ten years (both about what to do and what not to do) and I expect more progress over the next ten.

One thing that didn’t come up was how our inventory management can contribute to conversion. One of the stories in the Snow Show Daily for Friday is called Sold Out and Stoked. It’s about how hard goods inventories have reached equilibrium.
If there’s one thing every retailer, resort, and brand has learned over the last couple of years it’s that having leftover snowsliding inventory at the end of the season sucks. When you’ve got to carry over or close out a bunch of inventory, it can easily mean you make no money on your snow business for the year. Not to mention the impact on your cash flow and balance sheet.
I’ve been arguing for years that you might be better off focusing on your inventory management and gross margin dollar generation than on getting every last sale you could. Now, in the midst of our little ongoing economic inconvenience, I feel even more strongly about that and I want to discuss how it ties into the conversion issue.
Every brand I talked to yesterday told me they were managing their inventories tightly and had next to nothing left. I’ve heard a couple of stories about retailers exchanging product with each other to meet customer requests because they couldn’t get any product from suppliers. This morning at breakfast one long time industry participant I chatted with bemoaned not being able to get a pair of boots he needed for himself.
I’m in favor of tight inventory management, but I sure hope it doesn’t come to us all having to pay retail for product.
So what does this have to do with conversion and retention? Suddenly, the harder to find product looks special to the consumer and finding whatever they need at a discount isn’t something they can take for granted. Under conditions of uncertain supply, price can’t always be the driving factor in a purchase. Retailers are making a good margin, which means they are better positioned to service their customers. Price increases are more likely to stick. The money the retailer would like to have to pay his suppliers isn’t tied up in inventory. There won’t be excess inventory that will keep him from ordering for next season and he won’t go out of business.
Brands will have happy, solvent retailers. I’d even suggest they might be in a position to spend a bit less on advertising and promotion because there’s no better marketing than customers and retailers who want more of a product and can’t always get it.
Want more people to go snowsliding? Or to do almost anything for that matter? Make the product just a bit hard to find and require that the consumer make a conscious, active decision to seek it out because if they don’t, it won’t be there. I think that’s an important step in creating commitment.
And now what’s happened? We go and have all this great snow (unless you’re from the Northwest like me where we have floods instead of powder) and I know that somewhere out there some management team at some brand is planning for next year. And they’re going, “Wow! We had a great year! We’re great managers [We always are when it snows]. We could have sold more if we’d had it!”
And some retailer is thinking, “Damn! I have got to make sure I don’t run out of product next year! I’m boosting the hell out of my preseason orders.”
Well, you can see where this is going. Not for a minute am I suggesting that “the industry” should control inventory levels. It won’t happen and isn’t legal. Every business will and should do what they perceive to be in their own best interest.
I know.   If you’re a retailer that it just felt awful when you didn’t have the product your customer wanted, though hopefully you sold them something else. But forget that bad feeling. Think of the good feeling when you had great margins and less discounting and closing out to manage. And look at your bottom line and balance sheet. What I’m suggesting is that it’s not in your best interest to boost those orders too much. Clean inventory and high margins may well give you a better bottom line result than a boost in sales. I talked about that a while ago in an article you can see here.
As a brand, when that wild eyed retailer comes to you with a greedy look in their eye and wants to books their order for next season 58%, try and calm them down. And you calm down too. Talk about how much it sucked when they couldn’t pay their bill, and you had to either take product back or they had to sell it for cost or through some ugly distribution channels you’d rather have stayed away from.
Both of you try to remember how nice it feels when inventory is clean, margins are high, and customers are clamoring for product they see as special. You just don’t want to return to the days of overbuilding and overstocking for hoped for incremental sales.
 If we can maintain the mentality that has led to just a bit of product scarcity we just might contribute to getting more people snowsliding. And we could make some more money besides.



Notes From the SIA Show in Vegas, Uh, I Mean Denver

The beer is a lot cheaper in Denver, assuming you don’t actually consider the beers they handed you at the gambling tables in Vegas to be free. The hotels are more expensive and getting to said hotels from the airport takes longer.   Most of the people I talked with (by no means a scientific sample) would have preferred the show was still in Vegas but I’m sure we’ll all adjust. I have never had so many friendly people ask me if I needed help finding anything and tell me they hoped I had a nice day. If that happened in Vegas I’d probably think I’d done something wrong. They were certainly glad to see us in Denver.

But was it a “good” show? You know, I have certainly gotten old enough, and maybe wise enough to know that you can’t judge a show just by walking around it, though we are all guilty of that to some extent. It was a good show for me, and snowboard industry booths seemed busy enough. I have to confess I didn’t spend much time in the ski part.
So I’ll leave the show analysis to others who have more and better data than I have. At the end of the day, the question is was it a good show for your company? But I do have a few observations we might have some fun with.
Happiest Company
Had to be Never Summer. Not only is their factory in Denver (they were offering tours) but economic conditions have suddenly made their long term business model of high quality, good margins, and limited distribution that leads to strong sell through something that absolutely everybody understands. They swear they won’t screw it up and I believe them.
Best Show Favor
Betty Rides party panties. Owner Janet Freeman gave me a couple of pair, but they were a little snug so I had to give them away.
Interesting Business Model
I ran into Cec Annett, formerly with Adidas, who’s now the CEO of The Clymb (   It’s a membership site where they sell, for only a couple of days for each item, quality overstocks of product at big discounts from industry brands. There’s no charge to be a member, but an existing member has to recommend you. The brand doesn’t have to worry about the product showing up on Ebay, and the presentation is very professional- the brand image is supported. The financial model is also intriguing. Cec, please remember this nice plug when you’re rich and famous and, in the meantime, can you get me signed up as a member?
Small Booths
A number of major brands had much smaller booths than last year and I say good for them. A trade show booth should be exactly the size you need to do whatever business you do and not influenced by the size of your competitor’s booth. I guarantee that if you have a product that sells well at retail with good margins your customer will buy it even if you don’t have a two story booth the size of a house with a helicopter on top (who besides me remembers that?)
Large Booth
Burton and its associated brands took up around 10% of the total floor space in the snowboard area. The Burton brand by itself had the largest footprint of any company there. Things must be going really well at Burton for them to have paid SIA’s standard rate of $11 per square foot for premium members for all that space.
Guy with the Best New Job
It has to be Ryan Hollis who, after 12 years with Quiksilver, is now the General Manager of Mervin Manufacturing. Guess this means Mike Olson can give up doing the accounting.