“I Don’t Think We’re In Kansas Anymore, Dorothy.” Skate Retailers in the Lifestyle Market

Let me start by telling you, in no particular order, some things you already know.

1)            Margins on hard goods suck, but carrying them draws customers in and legitimizes you as a skate retailer.
2)            Truth be known, hard goods from different brands are pretty much the same. You may have some brand loyalties, but you’ll buy what your customers wants. 
3)            You make most of your money in higher margin footwear, apparel and accessories.
4)            You’re a “lifestyle” business. Most of you don’t sell just to skaters, but to people who want to be part of the culture.
5)            Your hard goods go beyond skate. Maybe you also sell snowboards, maybe some other stuff.
6)            A lot of your soft goods aren’t skate specific. They come from brands that are focused on the actions sports lifestyle- not just on skateboarding.
7)            With so many brands (hard and soft goods) and so little real product differentiation, price, terms, service and support from the brand plays a larger role in your product selection.
First, the usual caveat. Not all of the items on the list apply equally to all shops and obviously where they do apply, they apply to different degrees.
Look at each item on the list again and think about how each was different a few years ago. How has your customer base changed? Margins? What was the importance of footwear compared to now?
They say a frog will jump out of a pot of boiling water, but will boil to death if you put him in cool water and raise the temperature gradually.   All these changes have happened gradually. Sitting here, writing this, I’m struck with just how dramatic the changes are for retailers. Looks like I’ve got something good to write about this month after all. What a relief! I was kind of worried when I started this.
As we’re all smarter than the average frog, we should have noticed the changing temperature and clambered out of the pot before the water temperature climbed past that of a comfortable hot tub. Still, it’s been my experience that when you’ve got a business to run, the seemingly easiest thing to do is see if you can stand a couple of more degrees.
Let’s look at the implications of these “things we all know” and see how running a shop may have changed as a result.
Margins and Profitability
My educated guess is that soft goods and apparel account for north of 60% of sales in many shops, and a lot more of the total gross profit. You cannot succeed financially if you try and rely on hard goods sales for your turnover. It’s not possible to sell enough to have adequate gross margin dollars to pay the bills.  
Points one and three from the list suggest some obvious changes that have largely already occurred in response to the financial facts of life. Carry the hard goods you have to carry, but leave the most space, and the best space, you can for the higher margin footwear and apparel. Maybe it makes sense to use hard goods in displays to establish the credibility of the store. What I’ve seen happen is that thoughtful stores tend to put the decks and other hard goods towards the back of the store, making customers move through the apparel and footwear on their way to them. I don’t know this statistically, but my expectation is that skate decks are a planned, purposeful purchase. Soft good purchases can be more spontaneous. If that’s the case, then the location of hard goods isn’t a consideration in people getting to them and buying them. Might as well use that location to encourage other purchases.
Customer Base
The message from points four and six is that your customer base is probably larger and broader, and you can appeal to a much bigger group of people. I am not suggesting you can be all things to all people. You still have to know who your customer is and is not. But the days when all your customers are core skaters are gone for many shops. And if you do it right, having new customers won’t alienate the old ones.
In some ways, of course, life was easier when the definition of the customer of a skate shop was most likely to be somebody who skated. Appealing to a broader customer group while maintaining the edginess and legitimacy that made you successful in the first place isn’t an easy thing to do. I’ve got two suggestions.
First, if there’s one piece of market research you should be doing, it’s to ask each customer (when it isn’t obvious one way or another) if they skate. If you were willing to go one step further, you could mark your copy of their receipt (when they purchase something) with the answer to the question. Based on a few simple calculations involving adding up sales and calculating gross margins, you could make a good start on learning where you’re earning your money, and how your customer base has or is changing.
Second, in your product selection and merchandising, move towards the mainstream cautiously. But move. That’s where skating is going and seems likely to keep going. Whether we like it or not.
Well, it’s always great to sit here and be able to spew forth some fatuous blather like “move towards the mainstream cautiously,” sound like I know what I’m talking about and then move on. Let me try and say a few useful things on just what that means.
It means that the process of selecting the brands you carry, and how deep you go with each, is more complicated. You aren’t going to carry all the shoe, apparel, deck, truck and wheel brands there are. Nobody has a store that big.   It’s complicated because there are more to choose from and you have to select brands that appeal to a broader customer base, but maintain your credentials as a skate shop.
It means, if you want to take advantage of the broader market, that you may need more square feet, or at least creative ways to display more product.
It means changing your product planning and purchasing habits. Decks, trucks, and wheels can typically be gotten pretty quickly. Skate shoes and apparel have an order/production/delivery cycle that’s a lot longer. You either have to take an inventory risk, or accept the chance that you may run out, not be able to get more, and lose sales.
It means recognizing, like it says in point two in the list, that there are few meaningful differences among products of equal quality- either soft or hard goods- and that the differences are mostly created by advertising and promotion (teams are just one method of promotion). This has tremendous implications for how you select and work with brands.
Brand Selection
These days, most brands produce quality products. The differences the consumer perceives are largely marketing driven. If, as I’ve suggested, your customers are more mainstream and more diverse, your product offering has to be too. But you are limited in the number of brands you can carry in each product line and in the number of sizes and styles you can carry of each brand. At the end of the day, like buying stocks in the stock market, you’re going to have made some good choices and some bad ones.
To carry the stock market analogy one step further, there’s really no effective way for you to evaluate all possible brand purchases and combinations of purchases for your store and to select “the best.” While you can, by careful study and based on past history, make selections that are more likely to be successful, there are no guarantees. As in the stock market, you want to purchase quality brands for your shop at good prices. Most of your portfolio, as a stock market investor or a buyer in a skate shop, should be in known, quality companies.
New brands, like the stocks of Internet companies, aren’t likely to make you rich any longer. You are better off with a portfolio of consistent, if not spectacular winners which, if they won’t make you rich overnight, won’t leave you in debtor’s prison either.
These are the brands your more mainstream customers are going to want anyway. They are the ones who can afford the ongoing advertising and promotion to differentiate themselves. As a group, they are the brands the customers usually ask for and, with a few obvious exceptions, if you didn’t or couldn’t carry one of them your shop could probably get by with another.
The result, as it says in the list, is that pricing, terms and service move up the list in importance as you consider which brands to carry.   
Next Step
By necessity, I’ve had to discuss these issues in general terms. To bring the discussion around to your specific situation, begin with the seven items listed at the beginning of the article. Maybe add one you think I’ve missed and throw one out if you don’t think it applies to you.
Next to each point, write down the situation as it existed with regards to that particular issue, say, three years ago in your shop. Where have the biggest changes happened for you? How, specifically, have you modified the way you do business in response? Where is it obvious you need to change and haven’t?
We all know how much retailing has changed. Take a little time and evaluate how you’ve responded to those changes.