California Apparel News

2009 is shaping up to be another difficult year for the surf and skate industry.

Shrinking trade shows, cancelled orders, retailers struggling with credit issues, lackluster sales and an overall dismal economy are forcing core brands to rethink their business strategies.

“It is a very different reality from what we have ever seen before,” said Dick Baker, chairman emeritus of the Surf Industry Manufacturers Association. “The topics of conversation on the show floors are going to be very different from one year ago.”

Indeed, the show floors are where much of the strife will be evident.

Surf giants Quiksilver and Hurley have dropped out of the January edition of the Action Sports Retailer Trade Expo, set for Jan. 22–24 in San Diego. Volcom, Rusty and others have reduced their footprints at the show, while still others, including Reef and Rip Curl, have opted for the less expensive meeting rooms off the show floor. Some smaller brands, including accessories maker Vestal and Australian surf/skate brand Insight, have decamped to ASR’s smaller competitor, Agenda. Surf Expo, the East Coast action-sports trade show set for Jan. 15–17, is reporting a 14 percent decrease in retailer attendee preregistration but said it could be due to stores sending only key buyers to the show. Agenda, which straddles the core surf/skate industry and the streetwear market, also reported a decrease in exhibitors for its Jan. 22–24 run in San Diego.

Core and specialty retailers are seeing their own share of problems, not the least of which are falling sales, credit issues, languishing inventory, and slashed buying and travel budgets.

To mitigate their exposure and prepare for what promises to be a difficult year, surf/skate brands are changing the way they do business in everything from pricing and product to retailer relations.

“Nothing is the same anymore. Scratch out all the old ideas,” said Mike Martin, vice president of sales and marketing at Irvine, Calif.–based Ezekiel. “Even the most seasoned industry veterans have never seen anything like this.”Retail relations key

Echoed by surf/skate executives across the board is the idea that retailer relations must come to the forefront.

“Relationships are more important than ever, and the more face time spent with retail right now, the better understanding you will have in the retail environment,” said Tom Ruiz, Volcom’s vice president of sales. “From there, you can create solutions to better your business.”

For some brands, strengthened retailer relationships come in the form of shifting trade show budgets to efforts to support retailers. “A lot of brands are easing off trade shows in general and instead pushing initiatives to support retailers with things like in-store events,” said Aaron Levant, founder of Agenda.

“One of our key strategies for 2009 is to build margin-building programs for our retail partners,” said Toby Bost, chief executive of the Irvine-based La Jolla Group, which counts O’Neill, Rusty, Lost and Metal Mulisha among its brands. “O’Neill introduced a program called ’First In,’ which is a derivative of our long-term motto, ’First in, last out.’ The program has been created to give our retailers the opportunity to increase profitability as a result of the partnership and support of the brand.”

Other brands, such as Los Angeles–based skate brand Elwood, are keeping their trade show presence and focusing on finding ways to work closely with their retailers. “Right now it is key to work as closely as possible with each major retailer and figure out how we can best help them. From private label to the customization of product, we have to service their needs and become a solution,” said Richard Freund, the brand’s vice president of operations. “We’re taking away the party atmosphere [at trade shows] and focusing on the customer.”

Charlie Setzler, president of Rusty North America, said his brand is taking a similar approach. “Retailers need to feel confident when they write an order,” he said. “Now more than ever it is important to take the time to meet with retailers, have the difficult discussions, plan together and partner together.” To that end, Setzler and Rusty sales reps will spend more time this year meeting with retailers not only on show floors but in their stores to help decipher their needs and plan their buys. “We need to be more service-oriented this year. We have to go out and find the opportunities, and the only way to do that is to be in the stores more,” Setzler said.Looking for solutions

One hurdle to the happy union between brands and retailers is the tug of war between retailers who want to buy in-season and manufacturers who want to pre-book and cut to order. Another is the delicate negotiations with retailers who are struggling to pay invoices but upon whom brands rely to sell their products. “There’s no easy answer to these [problems]. We are all dealing with them as best we can,” Setzler said.

Brands are also testing the waters with a variety of approaches to product. Elwood has introduced a lower opening price point to appeal to a wider range of retailers and consumers. Rusty’s women’s program is going fashion forward while its men’s program has been slashed to focus on the core classics of T-shirts, boardshorts and walkshorts. Stuuml;ssy has culled its already-focused offerings by 10 percent to 15 percent, said Scott Terpstra, chief operating officer. Fledgling Costa Mesa, Calif.–based Ambission is expanding its offerings. “Retailers need cool brands to be different and generate interest from shoppers. We need core shops to legitimize our brand. There is still so much room for us to grow,” said Dustin Odbert, the brand’s founder.

Even as brands struggle to streamline their operations, industry figures remain cautiously optimistic. “The world is not ending, it’s just tightening up its belt for the year to come,” said Tony Sanchez, clothing merchandising director for Fox Racing. After years of smooth sailing, the surf/skate industry is undergoing a fundamental change—one that could in the end make it stronger and more diverse. “Those that evolve with the market and make the necessary changes will succeed,” Terpstra said.