Once again, Costco, the publicly-traded purveyor of anything from car batteries to bite-size quiche, is in the surf business. At least five Southern California Costco outlets are now selling surfboards.
The surfboards are marketed under the name Realm Surfboards. As of Thursday, April 25, the Costco in Carlsbad, California, had at least 50 Realm Surfboards on hand ranging from six-foot shortboards to seven-foot “fun boards.” The boards are being sold for $244.99 — less than the amount it would cost a major surfboard manufacturer to make a custom board in the U.S.
Realm Surfboards are being distributed by Anaheim, California-based Motiv Sports, a company best-known for its pricepoint bicycles found in big-box stores like Target. According to former Realm CEO John Vance, Motiv acquired the rights to use The Realm name and logo last fall. Phone calls to Motiv Sports were not returned.
“The financial backers, the guys who owned the trademark which at one time included Vance, have licensed the trademark to a company called Motiv, and they’re the guys who have produced the surfboards, the boogie boards, the skim boards, and all the other stuff and are distributing them to Costco,” says Vance.
Realm Co-Founders Mike Parsons and Pat O’Connell are no longer involved with The Realm and have no affiliation with Motiv’s operation, but the two say they were shocked and disappointed when they heard about Realm Surfboards.
“It’s a bummer for us to see,” says Parsons. “We felt like we started something that would be cool. I’m kind of bummed when I see a Realm surfboard in Costco. It’s not exactly the vision we had for The Realm.”
Adds O’Connell: “It’s a bummer for John Vance too, because I’m sure he feels somewhat responsible. Those guys were in bed with him in the beginning, but I obviously don’t think he realized those guys were going to do what they did.”
Each board comes meticulously packaged with literature describing for whom the board is designed. There are three basic shortboard sizes: Small, Medium, and Large — much like that on a package of Hanes undershirts. According to the package, the 6’6″ by 19.5″ “Large” shortboard is “designed for surfers up to 6’0″ tall and up to 185 pounds. Ideal for larger surfers with surfing experience.” All boards come with FCS fins.
Surfboards in Costco are nothing new. Last summer Costco sold hundreds of boards priced from a rock-bottom $199.99. What’s new, however, is how the warehouse chain acquired the boards.
Last year TransWorld SURF Business reported that Costco obtained the surfboards from a third-party distributor, much to the apparent dismay of the surfboard manufacturer who sold the boards to the distributor under the assumption they were going to be delivered to shops in South America. But this time Costco has acquired the boards directly from the manufacturer. What’s more, it appears the boards are being manufactured with the sole intent of being sold in Costco stores — and this is probably not a one-time shot.
Even though Realm Surfboards come with FCS fins, Tyler Callaway, president of Surf Hardware U.S.A., which handles the U.S. operation of Gorilla Grip and FCS says he was unaware of them until he heard about them appearing at Costco. “Our company never had any dealings with Motiv Sports,” he says. “Motiv Sports went to a factory in Asia that has been a customer of ours for a long time to build surfboards.”
That factory is in China, and Callaway says Surf Hardware has been doing business with it for more than two years. According to Callaway, the fin sets and plugs used in Realm Surfboards were sold to the factory from Surf Hardware International headquarters in Australia.
“The product has never passed through Surf Hardware U.S.A. hands, nor do I have any say of what transpired between SHI International and their customers,” says Callaway. ‘m not happy about the situation, but I do see the big picture.”
Callaway was disappointed that FCS was bundled in with Realm Surfboards, but says there’s not much he can do about it. “As a supplier, it’s pretty hard to police who’s buying your product or deny customers because you don’t like their zip code,” he says. “With fair-trade practices … you can’t really do that. There are garments in Costco with YKK zippers and Velcro in them. Are Quiksilver and Volcom going to go to other zippers and fasteners manufacturers because of that? Are surf shops going to not sell those items because of that? It’s not that different.”
But some surfboard manufacturers do see a difference. “I’m not anti-FCS, and I think Tyler’s a great guy and has made many positive contributions to the industry,” says Rusty Surfboards General Manager Peter Johnson. “But what Surf Hardware International is doing is a bad business decision. By endorsing these boards, FCS is undermining not just surfboard makers, but this entire industry.”
Johnson feels that FCS’s association with Chinese-produced boards could alienate its customers. “The Chinese and Third World pop-out boards will not make up for the lost revenues that will come from the custom market,” he says. “FCS is forgetting that the largest surfboard manufacturers only make up about ten percent of the entire surfboard market. The rest comes from all the small manufacturers and backyard builders that make up the bulk of this industry. I believe FCS will lose a major portion of the custom market if they continue to support the boards built in Third World countries by non-surfers to make a few extra bucks.”
It should be clearly noted that FCS does not endorse Realm Surfboards. “We have no affiliation with Motive Sports or Realm Surfboards nor do we endorse their products,” says Callaway.
Johnson says that the cost to make a 6’6″ thruster without an airbrush is more than the boards are retailing for in Costco $244.99 — and that’s not including overhead such as rent, taxes, workman’s comp, teamriders, and marketing. He says boards selling at big-box discount stores like Costco and Wal Mart for below cost here in the U.S. will impact the livelihood of not only shapers and manufacturers, but the surf shops who carry the boards.
In addition, there could be ramifications at the international level — especially to The Realm name. “What’s really heavy is the brand is still up and running oversees and they’re trying to run the brand with integrity,” says O’Connell. “Some people still believe The Realm has some life to run on, and essentially what they Motiv Sports have done is just ruined it.”
The Realm has licenses in Japan, Europe, and Australia. One industry source says the biggest effect will be in Japan, where wind of Realm Surfboards could damage the brand’s image, as well as jeopardize its distribution. But the source also notes that some brands that were tainted in the States have continued to operate strongly in Europe.
So is there a silver lining here?
“The silver lining,” says Callaway, “is that we’ll get a number of new people that wouldn’t have been surfers this year. There are going to people who get their first surfboard at Costco, and there are probably going to be people who wouldn’t have gotten a board otherwise, but they did because it was that cheap, it was in mom’s space, and she couldn’t say ‘No.’ And that person is going to need to buy all their other stuff and they’re going to start doing that at a surf shop.
“The issue isn’t with the specifics of what Realm Surfboards is doing,” Callaway continues. “It’s what can we do to educate the retail channel and the consumer. We’ll strengthen our industry by setting our quality and customer service apart so that the consumer knows why they should spend the money for a quality surfboard. Knowledge, image, and customer service drive the business — not price. That is the strength of our industry.”
Surf Hardware International has issued a statement regarding surfboards with FCS installed being distributed through discount chain stores.Click here to read it.f Hardware International has issued a statement regarding surfboards with FCS installed being distributed through discount chain stores.Click here to read it.