California Apparel News

CABO SAN LUCAS, Mexico—Cacti, palm trees and a crystal-blue ocean served as a stunning backdrop to the Surf Industry Manufacturers Association’s (SIMA) seventh annual Surf Summit, held May 13–16 at the Crowne Plaza Los Cabos Beach Resort. Nearly 400 surf manufacturers and retailers provided the conference’s largest attendance to date. They converged to discuss their long-term business strategies—and get a little surf action in between meetings.

This year’s hot topic was retail. Several specialty retailers attended the event to address their concerns about surfwear manufacturers moving in on their territory.

“Core surf shops haven’t really had an organized voice,” said SIMA President Dick Baker, who also serves as president of the Ocean Pacific Apparel Corp., based in Irvine, Calif. “The surf manufacturers’ side can help them do that because we’re all very supportive.”

The event, co-produced by TransWorld Surf Business, presented eight seminars to conference goers, with key topics ranging from how the changing surfboard market will affect business and how to prepare a new generation for industry leadership to the future of the specialty retailer.

Surf Summit featured several panelists from outside the surf industry. “In the past, we’ve offered panel discussions made up of key figures in the industry, and that’s worked well for our members. But with surf’s momentum, we want to include an outside perspective,” said SIMA spokeswoman Megan Tompkins.

New perspectives were not limited to people outside the industry. This year, female surf industry executives played a prominent role in the summit.

“The juniors and women’s market is growing so rapidly, the presence of role models are extremely important—not only from the competitive side, but from the business end, as well,” said Samantha Litman, director of business development at Sea Angel and Rietveld USA.

“Four years ago, only a handful of women attended the summit,” explained Spy Optic Inc.’s director of global communications, Jessica Trent Nichols, who served on SIMA’s education committee, which developed seminar topics for the summit. “It used to be a boys’ club—it wasn’t really inviting. Now it’s more representative of the way the surf industry is today, and it includes women.”

Like their male counterparts, several women at the event took advantage of the early morning hours to catch some waves. An avid surfer, Nichols was one of a dozen or so women who participated in Surf Diva’s women’s surf clinic, hosted by Oceanside, Calif.–based TransWorld Surf Business. Roxy Core Marketing Manager Danielle Beck, host of MTV’s “Surf Girls,” was also on hand to give pointers.

Leading a global industry

Robert McKnight, president and chief executive officer of Quiksilver Inc., laid out the surf industry’s goals in his keynote address. McKnight founded the Huntington Beach, Calif.–based apparel and hard goods maker 28 years ago and took it public in 1986. Quiksilver expects to earn net sales of $1 billion for fiscal 2004.

McKnight urged the audience to provide ongoing support to surf shops—“the place where kids come to connect with their cult”— and warned his cohorts of the threat of private- label makers and non-surf retailers entering the market with their own spin on surf lifestyle. “We need to convince core shops that we are the real deal,” he said.

Several attendees said Quiksilver has done a phenomenal job of keeping its core while expanding globally.

“Besides staying true to its core customer, Quiksilver has paved the way for the industry by opening new distribution channels,” said Adam Sharp, vice president of sales and marketing at Rip Curl in Carlsbad, Calif.

Surfwear makers at a crossroads

The Southern California–based surf industry continues to be one of the fastestgrowing markets worldwide. Between 1999 and 2003, boardsports participation doubled in the United States—thanks in part to the release of films such as “Blue Crush” and television shows such as “54321,” a Quiksilverproduced action-sports show, and “Beach House,” MTV’s surf-themed reality show.

However, many surf manufacturers at Surf Summit said they have found themselves at a crossroads: Do they stay true to their core consumer or expand their businesses and commercialize?

The surf industry, including apparel and hard goods, generated $4.14 billion in 2003, according to Marshal Cohen, a research analyst at The NPD Group Inc. of Port Washington, N.Y., who presented a seminar on market trends.

What is more, the consumers who want to buy the surf lifestyle do not necessarily make up the core business—which includes hard goods. That’s how mass retailers have been able to penetrate the surf market, Cohen said.

“Surf companies have to learn how to manage both aspects of their business,” he said. “Some may choose to stay in their core business, some may choose to go commercial, and some may find a path that takes them down both avenues by diversifying their offerings.”

In his speech, McKnight said brand consolidation will continue in the surf industry.

Several surf companies have already tested the acquisition waters. Quiksilver acquired Vista, Calif.–based DC Shoes Inc. for an estimated $115 million in March. More recently, Irvine-based Billabong USA—which acquired eyewear and accessories label VonZipper and skateboard and apparel label Element in the late 1990s—acquired the Honolua Surf Co., which operates 19 specialty boutiques. Billabong is planning to bow a line of apparel under the Honolua banner in Spring 2005.

Manufacturers and retailers seek middle ground

Specialty retailers reported strong sales this spring after experiencing challenges last year. The retailers continue to be optimistic about their prospects, although a few now expect to be down over the next 12 months.

This was not the case at the end of March, said Roy Turner, founder and president of the Wilmington, N.C.–based Board Retailers Association, a 1-year-old association that represents specialty retailers. The association counts many top surf, skate and snow retailers— including Becker Surfboards, Jack’s Surfboards, Huntington Surf and Sport, Modern Skate & Surf, Hangar 94 and Fast Forward—as members.

Turner hosted several seminars at Surf Summit for some 60 retailers. Wholesalers and retailers merged for panel discussions at various times throughout the three-day event.

Surf Summit presented two panel discussions for retailers: “Who’s Minding the Store: Winning Retail Strategies for Manufacturers” and “United We Prosper? The Future of the Specialty Retailer.”

Both discussions served as forums for wholesalers and retailers to discuss manufacturers who open their own retail businesses.

Done correctly, manufacturers that open a retail store are just capitalizing on the natural progression of the brand, said retailer Shaheen Sadeghi, owner of The Lab Anti-Mall and The Camp, both in Costa Mesa, Calif.

“Most of these manufacturers have lots of product categories—it’s not just surf trunks any more,” Sadeghi said. “There are men’s, women’s, shoes, denim and sportswear. There are such wide categories. In many cases, retailers buy very selectively, so I think it is an opportunity for the manufacturer to showcase the entire brand.

“Obviously, there has to be some sensitivity built into the location—I wouldn’t recommend building it right next door to your top retailer. You got to continue to support those guys. There are plenty of geographic areas that they can go to with their message.”

Sadeghi questioned how the next generation of brands will emerge in the market and how specialty stores will allow those brands to come in.

“We’re going to see a maturity,” he said. “The RVCAs and the Ezekiels and those brands really need to kind of now step up, and, hopefully, the specialty people will allow them in because that’s what it’s going to take to keep the juice going.

“What it comes down to is: Who’s going to do it different? Who’s going to have specialty education programs? And who’s going to have the best customer service?”

But buyer Bob Abel of Jack’s Surfboards, which operates three retail stores in Huntington Beach and one retail shop in Newport Beach, Calif., is not happy about competing with wholesale flagships for business.

“I can see if a company wants to open their shops where they’re not represented, like Ohio or Oklahoma, but I don’t agree with them opening shops next door to an existing account,” he said. “If you are competing with me, then why am I representing your brand? The manufacturer should look to protect the retailer who is promoting their brand from competition.”

“We’re retailers, and the average retailer in our group has been in business more than 25 to 30 years, and these days you don’t stay under the same ownership and management unless you know what you’re doing,” said Turner of the Board Retailers Association. “At the end of the day, we’re all confident. If you want to come be a retailer, come be a retailer. But you got to play really hard because we’re really good at what we do.”

This year’s recipients of the SIMA Image Awards were Quiksilver, Ad Campaign of the Year; O’Neill “Superfreak” boardshorts, Product Innovation of the Year; RVCA, Breakthrough Brand of the Year; Huntington Surf and Sport, Retailer of the Year; Channel Islands, Board Builder of the Year; and Billabong, Manufacturer of the Year.