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 jeff1995-03-30 18:42:222014-09-28 11:36:23Show Trends and the Business of Snowboarding; “It’s Deja Vu All Over Again!”
In 1903, 57 companies were started to make cars. 32 left the business. I recently heard it on National Public Radio, so it must be true. Snowboarding, of course, is going to be different.
In your dreams.
They say that when you die, your finger nails and hair keep growing for about three weeks. In Las Vegas I saw some companies who’s personal grooming was clearly not part of a fashion statement they were making (except for Gnu/Libtech of course). They sat in their booths waiting for wide eyed buyers desperate for any kind of snowboard or snowboard product to place orders regardless of price, quality, or line completeness.
Four, maybe three years ago, it might have worked. It did work. This year jaded buyers overwhelmed by the number of snowboard brands and companies scurried back to the familiar brands they knew they could count on for delivery, quality, terms, warranty, service and, by the way, sell through.
It’s 1903 all over again.
I asked the same set of questions to perhaps 25 hard and soft good companies. I focused on relative newcomers. The conversations typically went something like this.
“If you’re successful, what will your company look like in three years?”
Long pause and a smile followed by some variation on “We’ll be a lot bigger and making money.”
“So you’re not making any money yet? Are you paying yourselves salaries?
Longer pause and less of a smile followed by some variation on “Well, you know how it is.”
“How much working capital do you need to achieve your sales goals this year?”
“We’re not exactly sure yet.”
“Where are you going to get it?”
“We’re talking to a lot of people.”
“Who are your competitors and how are you differentiating yourself from them?
Inevitable answer: “We’re closer to the market and really know what’s up.”
“Are you really prepared to risk loosing everything you have?”
At this point they were often looking around hoping somebody else would come into the booth for them to talk to. If there was ever a messenger who needed shooting, it was me. I could see it was time to finish up, so I’d summarize by saying, “Let me see if I understand this. You aren’t really sure what your goals are, have no source of capital, no clear competitive strategy, could make more money working at McDonalds, and are risking everything you have. Why are you doing this?”
Finally a question they could answer. Their face lights up. “We love snowboarding!”
Obviously, most companies didn’t fit this extreme profile, but some came close. Almost everybody had at least one of the issues I referred to above and, to everybody’s surprise I’m sure, the most common was lack of financing.
There are quite a few companies with well known brand names that are much smaller than everybody thinks. They are well managed and established in their market niches. They know what they need to do, but don’t have the bucks to do it. The sad thing is that in this competitive environment, where just surviving requires an aggressive marketing posture, investors will not be able to find the returns they require and capital may not be available.
It’s hard to make good business decisions when you are driven by a capital shortage. More than one company had an opportunity to sell a lot of product to a chain. They need the sales volume and cash flow, but can’t risk devaluing the brand and alienating their specialty customers. If the capital requirement is critical enough, they may be forced to make a bad marketing decision for short term survival.
The kind of irrational competition described above is one indication of the consolidating snowboard market. Other indications I saw at the shows include:
1) People trying to create market niches as a way of differentiating their product by a) having separate lines for specialty and chain stores, b) doing graphics specific to a particular region of the country and c) trying to make minor design or construction changes seem significant.
2) The product is becoming more important than the booth and its presentation. As what it takes to succeed in this business hits home, price, quality, service and delivery are competing with glitz and hype in the selling equation.
3) The first rumbling of price declines were seen, but not as much as I had expected. I attribute that to a shortage of quality, volume manufacturing and fiberglass in the U.S., a week dollar, the presence of a lot of smaller brands that can’t afford to sell at lower prices, and the fact that a lot of the big players aren’t really selling direct yet. If you want a peek at the future, look at the pricing on Nale’s boards (Is that Elan spelled backwards!? Gee, I wish I’d thought of that.) One new brand having its boards made at Elan bemoaned the fact that Nale was selling boards to stores for less than he was buying from Elan. How could he compete?
Answer: he can’t, unless he’s very well capitalized and has a well thought out marketing strategy.
I guess it’s just this simple. The snowboarding business is changing in predictable ways. Whether you are a retailer, distributor or manufacturer the way you do business is going to change as well. Success means being out ahead of the curve and using these changes to develop a competitive advantage. Living in the past means being buried there. “More of the same” won’t work anymore.