https://www.jeffharbaugh.com/wp-content/uploads/2014/08/logo_color_640.gif 0 0 jeff https://www.jeffharbaugh.com/wp-content/uploads/2014/08/logo_color_640.gif jeff2005-04-29 23:39:092014-09-28 09:23:49Look! New Brands. That’s Great! Or These People Are Crazy. Or Both.
Probably both. It’s not like brands haven’t been coming and going for years beyond count in skateboarding.
Historically, there have been two categories of new brands. The first was the truly new company started by some skaters who wanted in on a burgeoning industry that just happened to be something they loved. The second were the new brands that came from established companies where brands came and went as their popularity rose and fell with time and the popularity of the brand’s team.
Let’s look at who may be crazy and who may not be, and why.
The list I was sent of around fifteen “new” brands turned out to be mostly brands started by existing companies. Some of the ones not clearly associated with an existing brand I tried to contact, but in a couple of cases I either couldn’t find a phone number or email address on the internet, or I didn’t get an answer.
The reason I was hoping to reach some new brands not associated with existing companies is because when they are popping up, skating is prospering and dynamic. The level of enthusiasm and optimism that leads to skaters starting new brands or new shops is just what we need in this industry.
Brands being started by existing companies, on the other hand, may or may not indicate any market growth. They may represent just that ongoing brand rotation I referred to above we all know about.
Certainly the almost weekly phone calls or emails I use to get from kids who were going to start shops or brands are a thing of the distant past. I always tried to encourage them to go for it, but also to do it with a certain level of business realism. I wonder if any of them ever pulled it off.
Excuse me as I wipe a tear from my eye, sign deeply and bemoan the loss of “the good old days,” when men were men and margins and prices were high and you could sell everything you could get or make.
Was I suppose to say, “People were people” to be politically correct? Oh, the hell with it.
Anyway, in a desperate attempt to get back on topic, let’s look at how the business model of starting a new independent brand has changed.
Same Old New Business Model
The bad news, I suppose, is that the expense side hasn’t changed all that much. At first, when you’re very small and “underground,” building one shop and one order at a time, maybe you can get away without some of the usual expenses.
As you begin to grow, you will need team riders. You have to begin to advertise and promote. You will find yourself giving away more stickers and promotional product. iThere are magazines to be advertised in and trade shows to go to. My guess is that none of this has gotten much cheaper, though trade show booths bigger than my house (and with more floors) are largely a thing of the past in the core skate industry.
You’ll have to pay rent or a mortgage when you outgrow your garage, and it’s likely you’ll need employees who will, inconveniently, want to be paid. So will the phone company.
And while you do what you can to control expenses like any competent business person, a lot of these expenses are unavoidable. Especially, maybe, the marketing expenses since you’re product is the same as everybody else’s and without brand differentiation you’re ultimately toast. In fact, if skate isn’t growing as fast as it use to, maybe you need even more of those marketing expenses.
Let’s hope, of course, that you also have some revenue. More than expenses, eventually, would be nice. And of course you’d like that revenue to come from selling full price, high margin decks that kids buy because the brand, or skater, or both, are cool. You and every other brand.
But I suspect that part of the market, in both percentage terms and in total decks sold, is not as big as it use to be and may be getting smaller. And prices, at both wholesale and retail, are expected to come down in the broad skate market. You know the drill; Shop decks, China, blanks, competition, fewer core shops, wider distribution, no real product difference, blah, blah, blah, blah.
We’ve been through that analysis enough, so let’s just recognize the danger of less revenue from the same number of products sold even if the percentage margin is the same. You are in general going to need to sell more decks to make the same total gross margin dollars. Those dollars are what you need to pay all those pesky expenses. So breakeven is a little farther away, in terms of sales, then it use to be. Financial risk is higher and more bucks have to be invested in the business.
And now that I’ve got anybody who was actually thinking about starting a new, independent brand standing in a puddle of their own making, let me tell you that you should go for it. But plan for it and recognize the changes in the business as a way to improve your chances of success.
Old New Brands
It’s not a surprise that of the 15 or so new brands on my list, no more than three or four are really independent new brands. And it may not be that many. We all know of cases where somebody has started their “own new brand” that is distinct from a marketing point of view but is supported financially and logistically by an existing skate company.
Which, by the way, makes a hell of a lot of sense. Starting from scratch is a pain in the posterior region. If you’ve already got a warehouse, accounting system, and product source, there’s not a reason in the world not to take advantage of it. Especially since the consumer will probably never know the difference and will be just impressed by a correctly marketed new brand supported by an old company as a new brand from a truly new company.
And many retailers, I suspect, would prefer to have a new brand from a company they know they can count on for quality, delivery, service, and marketing. For better or worse, they aren’t prepared to take the same risks on new brands they use to be.
Just to confirm that, I spoke with Craig Nejedly, President of the wheels and soft goods brand Satori Movement. Within the last year, the company has launched the new skateboard brand Creation.
“Some of our retailers had been asking for a deck for while,” he indicated. “Finally, we couldn’t see any reason not to accommodate them.”
But it isn’t a blow out the doors, grow at all costs kind of approach. Far from it. Unsold inventory is kept to a minimum. Growth, at this point, is determined by pull from the retailers, not by demand created by marketing. Between the terms he gets from the factory and the way the retailers pay, Satori hasn’t had to invest a whole lot of capital in the new brand to make it fly. And marketing dollars only go out the door based on sales dollars coming in. Marketing, at the moment, is based more on limited distribution and scarcity than on advertising and promotion.
I’ve always thought that was a good plan. Demand creation through some level of scarcity is probably better marketing than, well, marketing.
When Taking a Risk Isn’t
From the consumer’s point of view whether a new brand is independent or not may be irrelevant since the consumer doesn’t know. But when I see new independent brands, I know the market is more vibrant and optimistic and probably growing. So my advice to those interested into getting to the skate business is to listen, but not be intimidated, by people like me telling you how hard it can be. That’s true but it’s not the whole story.
As a new brand, you can do things the existing brands wouldn’t even think to do. In fact, if you come out of the shoot doing exactly what everybody else does but trying to do it a little better or differently, with your goal being to take somebody else’s market share, you reduce your chances of success and for sure you don’t do much to grow the market.
Why don’t you make a deal with the local skate park so that a pass to the park comes with each deck you sell? How about arranging a skate demo where people wouldn’t expect it? Include a coupon that’s good for a discount off a deck if you’re over 40. Okay, maybe that’s a retail strategy. Think of the parents that would get dragged into the shop. My point is that as a small brand, there are few rules about what you can do and can’t do.
Forget what all the other brands are doing. As a new brand, don’t benchmark yourself against your competitors. Figure out something new you can give the skater. It’s what the customer wants that matters. Create a new market instead of fighting over a crumb of the existing one. It’s your best, and maybe your only, chance.