The splashy March debut of Billabong’s new flagship store at The Camp in Costa Mesa, California, Quiksilver’s ever-expanding number of Boardriders Clubs (more than 270 company-owned stores worldwide), and Rip Curl’s emerging retail presence (eleven stores worldwide), indicate manufacturers are serious about their leap into the retail world. But what do Billabong, Quiksilver, Rip Curl, and other major brands expect to gain from opening their own storefronts; and what does it mean to retailers who’ve sold their products for years and now wonder if they’re facing competition from the brands they helped establish?
According to manufacturers, brands are opening company-owned stores in order to get a better handle on consumer trends, find out which lines work and which are dogs, and then modify their offerings accordingly. Every 90 days many of the larger brands release hundreds of new styles, but only a small fraction of those SKUs show up at retail. Company stores, some argue, give brands a chance to show consumers what they’re all about.
“Creating our own retail environment allows us to showcase our entire product offering in one location, test new products, and get direct feedback from consumers,” says Steve Culley, vice president of retail operations for Billabong.
Rip Curl Marketing Director Mark Price agrees. “We want the ability to showcase our products in their entirety, as well as have complete creative control over that presentation,” he says. “They give us real-time feedback in regard to product direction and in-store presentation.”
Of course, it’s no secret the stores are also a significant contributor to the companies’ bottom lines. According to the Quiksilver 2001 annual report, “Combining our company-owned stores with our licensed stores, twelve percent of our consolidated sales or about 74-million dollars were generated in our own stores in fiscal 2001.”
Not only are company-owned stores here to stay, all signs indicate there will be more of them in the near future. No one from Quiksilver was available to comment on its burgeoning company-store program, but Quiksilver CEO Bob McKnight did comment on the Boardriders program in the company’s 2001 annual report. “The table is set for growth in our retail stores,” it reads. “The first Boardriders Club was built in Hawai’i in the early 1990s. Since then, we have developed flagship Boardriders Clubs, mall-based Boardriders Clubs, Roxy stores, Hawk stores, Youth stores, Quiksilver outlets, Gotcha stores, and multibrand stores in Europe. And most recently, we have begun the development of a ‘megastore’ concept in Europe.
“The geographic breadth of our retail operations is another demonstration of the global significance of the Quiksilver brands,” the report continues. “We now have flagship stores in key markets such as New York, Los Angeles, Paris, London, Miami, Maui, Melbourne, Sydney, Munich, Berlin, Tokyo, Boston, and Moscow.”
Manufacturers maintain that their company-owned stores will benefit their vendors. They posit that the stores give the brands additional exposure that will in turn increase consumer demand. “By focusing on showcasing the Rip Curl product range we hope to increase the profile of the brand, which will lead to more sales of Rip Curl product for all of our retailers,” says Price.
Companies say the stores also contribute to the brand’s marketing story, as well as the boardsports lifestyle in general. “The stores are designed with the same integrity as our in-store fixture programs that we are currently running with many of our retailers,” says Culley. “We design the interior of the stores to be representative of the boardsport lifestyle with an earthiness and modern feel and look. The Billabong brands and marketing properties are incorporated and represented throughout the store to reinforce the brand and its authenticity. This environment enhances brand image from which all Billabong retail accountts will benefit.
“We’re careful in selecting locations in as neutral positions as possible,” he continues. “We’re up front with the retailers in the area as to our plans and can hopefully drive customers to their stores as well. So far, the reaction has been positive.”
But not all retailers are on the bandwagon. Many feel company-owned stores are eating away at their sales. “I’m absolutely not happy about it,” says Frog House Owner T.K. Brimer, whose Newport Beach, California shop has been a local landmark since the 1960s. “When I heard Billabong was opening up their store at The Camp, my Billabong reps tried to spin that it’s out of my area. But I advertise in yellow pages and pull clients from all over — Riverside, Garden Grove, all through south Orange County.”
However Duke Edukas, owner of Surfside Sports in Newport Beach, sees it differently. “It’s not the end of the world as long as manufacturers keep it under control and use factory stores for what their designed to do — showcase product that isn’t perhaps available at all merchants because they don’t opt to carry it,” he says. “But if they use them in a competitive-type environment where they compete for sales from our customers, then it becomes a big problem.
“I can play devil’s advocate too,” continues Edukas. “There’s a lot of retailers out there that use products from Quiksilver or Billabong to attract customers to their stores and give their stores the right image in order to sell more of the shop’s private-label.”
Price says Rip Curl has addressed the potential conflict between their company stores and their vendors by limiting the amount of company-owned stores. “Our retail profile is limited to select flagship stores worldwide, and as such is not a serious issue for us,” he says.
For some shops, the issue isn’t whether manufacturers are opening storefronts, necessarily, it’s whether or not their product is selling because of them. “The bottom line is, if their stuff stops selling in our store, we’ll stop ordering it,” says Mickey Bednarek, general manager of WRV of Kitty Hawk, North Carolina. “That’s the risk they run. If they opened a store in our area, I wouldn’t be totally overjoyed. If we notice the trend is down and out, then we’d have to seriously consider whether or not to continue selling those products. That would be a direct impact. I love anything that sells within the context of a hardcore surf shop.
“As long as they can walk the tightrope and protect us guys, we don’t necessarily have a problem with it,” he continues. “They run the risk of oversaturation and having their dealer support erode. If that’s what they want to do, be my guest.”
— By Gary Taylor