Globe International Executive Directors and Founders Peter and Stephen Hill aren’t trying to squeeze water from a stone.
From their office overlooking Port Phillip Bay in Melbourne, Victoria, Australia, the Hill brothers — both former professional skateboarders — manage six proprietary brands: Globe, Trans Element, Gallaz, Sista, M-One-11, and Mooks. In addition, they hold the license in Australia for eleven American-based brands: Stüssy, Freshjive, Paul Frank, Split, Fourstar, Ecko Unltd, Independent, Undergirl, World Industries, Mossimo, and Girl Star. (They also distribute no less than sixteen skateboard hardgoods brands.)
Each brand they deal with speaks to its own niche in the action-sports market, from the hardcore skate crew and the crossover surf/skate kid, to the hip-hop crowd and set of fashion-forward girls and guys. Combined, the seventeen brands act as a safety net for the 91-million-dollar company, which is just finishing up its first year on the Australian Stock Exchange with better-than-forecast results. If one faction of the business ebbs, another segment will flow.
“Someone who’s doing 100-million Australian dollars — like one of our competitors — they might run 20,000 SKUs through the year,” says Peter. “We’re going to have to do like 120,000 SKUs. That’s hard. But on the other hand, it hedges our bets and makes us safe.
“Hip-hop’s big,” he continues, “but the surf guys like Billabong or Quiksilver — they can’t jump on that. They can’t get the kind of Eminem-sideways-visor guy, right? People tried and everybody looked ridiculous. We didn’t. We’ve got Ecko, so we just throw it out there.”
Adds Stephen, “That’s all right with us because Ecko’s going to blow up big and we won’t have distort Globe and get all yo and bling-bling. But the other guys are going, ‘Damnit. How are we going to get that trend?’
“That’s why we do it license diverse brands,” continues Stephen. “It provides safety. It provides a network into all that’s happening.”
That network of seventeen brands wasn’t built in a day. Launching brands and acquiring licenses has been a slow and deliberate process for the Hill brothers.
“We don’t go to a trade show going, ‘Right, we’re going to get two brands,'” says Peter. “We never think like that. What we do is go there and everyone looks and says, ‘Jesus, that brand looked good — you just can’t resist how good the thing is.’ The motivation is from wanting to be a part of something from the start of a brand, not from trying to fill a box in. It’s more about what inspires you.”
Peter and Stephen first got into the business in the early 80s as a means to keep doing what they love: skateboarding. At the time they were traveling around Australia sacrificing their bodies in skate demos, but being a pro skater meant having an uncertain future. One day a key retailer in town convinced the two they should distribute the products they were promoting. After all, they knew the retailers, they knew the market, they knew what kids wanted.
Picking up lines to distribute wasn’t easy, however — especially for a couple of skateboarders. Back then the skate business was predominately run by suits, not skateboarders, and companies were reluctant to give Peter and Stephen the green light. “The skate business was not skater-friendly,” says Stephen, “it was business friendly back at that time. So you’d go to all the industry guys and they’d go, ‘Oh, it’s a couple of skaters trying to distribute.’ It wasn’t a good sell at all. They all just saw that as nothing but the likelihood that you wouldn’t be able to do the job.”
But Variflex gave the Hills a chance to distribute its skateboards in Australia, and they quickly proved skeptics wrong. The Hills approached their new venture with they same tenacity they approached skateboarding. They turned profits faster than expected. “You wanted to skate all the time, but on the other hand, you wanted to make the money,” says Stephen. “You would skate two, three hours a day and then work ten, eleven hours — it was a pretty long day. We had the ramp in the warehouse. We lived together. We had boards stacked behind the ramp.
“Peter was 21, I was 23,” continues Stephen, “and within eighteen months of doing business we were both driving 911 Turbo Porsches — current models. Those were the days.”
With a flourishing skate hardgoods operation, the Hills researched other distribution avenues. Vision Streetwear was popular in the States and the Hills saw potential for a similar success Down Under. When they took a closer look at distributing the skate apparel, however, the Hills discovered it wasn’t practical to distribute U.S.-made garments in Australia. Import tariffs, coupled with the cost of shipping, priced the apparel out of the market.
But that didn’t deter Peter and Stephen from getting into the apparel business. They figured they could produce their own clothes under a licensing agreement with U.S.-based companies. “We knew nothing about clothing — we had no background in it at all,” says Peter. “But we did know everything about what skaters wanted to wear, what styles were right.”
The most dynamic faction of Globe’s business is its stable of licensed brands. Nowhere else in this industry do so many brands coexist in the way they do on the hardwood floors inside Globe’s world headquarters.
Each of Globe’s six proprietary brands and eleven licensed brands are run as separate entities (even employees’ salaries and options are tied to the performance of their respective brands — not to Globe’s overall bottom line). Each brand has dedicated design, sales, and distribution teams, and each one chooses its own production facilities. That way, says Peter, the brands maintain their authenticity.
“The production resources you use drive product development,” he says. “The designers have their own production staff and they decide where they’re going to develop stuff and where they’re going to produce it, because otherwise everything’s going to look the same.”
Stephen says the autonomy fosters a competitive — if not cut throat — environment among the brands. “They want their rack space,” he says. “The people driving Paul Frank — they don’t care whether the sales come at the expense of Quiksilver or Globe or Stüssy.”
Obviously, the Hills would like to see each brand they license achieve double-digit growth every year. But they’re realistic. They concede that as trends rise and fall, so might sales in some of their brands.
Of course, they’ll do everything they can to avoid that. “We put energy and resources into all our licensed brands as if they’re ours,” says Peter. “We just own them when they’re here. We protect it — we protect the longevity of the brand. We feel part of the team.”
In some respect, the brands they license are their own. In most cases, the brands they pick up are just a blip on the U.S. action-sports radar screen. Or, as Stephen puts it, they pick up brands when they’re in a ten-by-ten booth at ASR — ten-by-twenty at the biggest. (By the way, Stephen has attended every single ASR since 1985.)
When they pick up a new brand to license, it’s going to be a long-term partnership — not an instant revenue generator. The genesis of each brand begins with a multiyear plan of slow, meditated growth. “You don’t make money until you’re doing about three- or four-million dollars Australian — until then you can’t make a cent out of them,” says Stephen, “And you’re not going to do that for a few years. For the first couple of years, you’re a net-loser.”
Globe could accelerate the growth of a new license by opening distribution. But Stephen says going into a wide account base would not only dilute the brand, it would also jeopardize licensee-licenser relationships. “If we started whoring those brands out like that, licensers will be saying, ‘What are you going to do with Stüssy?'”
Adds Peter, “We never have that conversation because our trac
k record is clean and our reputation really speaks for itself.”
So what are the key steps to successfully handling such a diverse group of brands? Besides letting each brand govern itself, the Hills say the direction they get from their licensers — especially in the form of artwork — is invaluable.
“If we’re not getting art direction, it’s very hard to send the right message,” says Stephen. “The surf market, and the skate market, is a graphically driven business. You need a graphic personality or no one’s going to understand what you’re talking about.
“World Industries is kicking ass down here right now with the whole Flameboy and the Wet Willy thing,” he continues. “It’s been here for a lot of years admittedly, but they develop it all the time. It’s got a point of view — it’s graphically strong. Paul Frank is kicking ass. Again, look at it: Paul Frank’s a machine for generating graphics.”
That, Peter says, is a problem he sees among the major surf labels: they don’t have distinguishing marks. “A lot of the surf brands you could just swap the names around and the art direction is totally interchangeable,” he says. “That’s why when an alternative brand like Volcom comes along you go, ‘Now that’s a Volcom print.’ It’s all about having a fingerprint.”
Along with a distinguishing signature, the people behind the brand are just as important to Peter and Stephen. “What makes you want to license a new brand?” asks Stephen. “Is Freshjive Founder Rick Klotz there? Is Paul Frank there? Is Mark Ecko there? Is there someone who’s got that edge? Because they’re rare. They’re the ones, I reckon, who set the agenda.”
The Crown Jewel
Even with its formidable list of licensed brands, the crown jewel for Globe International is the lone Globe brand. “It’s like 60 percent of our group sales,” says Stephen.
Globe Shoes was launched in 1995, followed by Trans Element in 1999 and Gallaz in 2000. While Globe International is run out of Melbourne, Globe Shoes (including Trans Element and Gallaz) is essentially run from Globe’s North American headquarters in Torrance, California, headed by Globe U.S.A. President Gary Valentine. In fact, 70 percent of the key staff that relates to Globe is based in California. “It should really be called ‘Globe U.S.A.’ now,” jokes Peter. “That would be more accurate.”
So why does Globe choose to run its footwear program from Torrance? Because Southern California’s the worldwide epicenter for action sports and North America is where Globe plans to grow the most. According to the company prospectus, “North America is currently the second-ranked division of the group by sales, but on the basis of forecast sales for fiscal year 2002, turnover is estimated to be growing at a compound rate in excess of 93 percent per annum since fiscal year 1998.” Globe expects its North American business to surpass its operation in Australia to become the company’s largest market.
That shouldn’t be a surprise, however. Just twenty-million people live in Australia, which covers roughly the same amount of territory as the U.S. By contrast, there are more than seventeen-million people living in Southern California alone. “The advantage of driving marketing and design from our U.S. offices is that it allows Globe to keep its finger on the pulse of the world’s largest action-sports market,” says Globe Vice President of Marketing Kevin Flanagan. “The Globe message must make sense to the U.S. consumers.”
How does Globe plan to achieve this phenomenal growth? “We’ve got our sights set on market share and just natural growth in the market,” says Stephen. “In our current account base, we’ll be a growing part of their sales. We’ve got the account base now, and there’s no discussion to go beyond.”
When Globe went public last May, its footwear could be found in approximately 980 accounts in the U.S., representing some 1,230 doors. Globe recently went into to PacSun, which brings the total number to 1,800 doors, Stephen estimates.
“We’ve got no plans to go any further,” insists Stephen. “DC, Sole Tech — they’re both in Journey’s. We’re not going there at the moment, that’s for sure. We’ve never even talked to them and it’s not on the agenda.”
Globe plans to gain more market share in existing accounts by increasing demand through a beefed-up marketing campaign. Globe’s teamriders will play an integral role in this effort. The new ad campaign is fine-tuned to portray each individual athlete. Taj Burrow’s ad will look different from Occy’s ad; Rodney Mullen’s ad will look different from Matt Mumford’s ad.
“Skaters to us aren’t just a tool we use to sell a shoe,” says Peter. “Without our team, we don’t have a product. That’s just the reality. The connection with them is really important.
“Most of our team is really involved and very particular about the design of their shoe,” he continues. “They want to make sure it works and that it looks the way they want it to look. I did a product meeting a couple of days ago and we went, ‘Okay, now — it was Gershon’s Mosley shoe — we really need this colorway to go in there. And then we said, ‘Yeah, but Gershon wants a navy shoe.’ It’s not just to capitulate because it’s Gershon, it’s because he’s probably on to something. You’ve got to be in tune with that — you’ve got to be in touch with your team.”
Look Locally, Act Globally
If there are two guys with a global perspective on the action-sports-retail market its Peter and Stephen Hill. With their footwear distributed in more than 30 countries worldwide, the Hills are aware of hits and misses in the market at the international level.
They use this knowledge to their advantage. For example, when a shoe model thrives in one area, it will likely boom in another and Globe can adjust its inventory level accordingly. This, says Peter, is especially true between Australian and North American surf markets. “Australia is the closest market in the world to California,” says Peter, who estimates that the surf-skate crossover rate in Australia is 25 to 30 percent. Surprisingly, the Hills say it’s Australia, not Southern California, where trends happen first.
“What we find in Australia is that because it’s a smaller pond, when you throw a pebble in that water the ripple hits the edge a lot quicker,” says Peter. “With a brand like Gallaz we’ve done nothing differently here than in the States — it just hit that point here a little earlier. So we’ve been just waiting in the States. The way it’s growing has all the same characteristics in both markets, but it just got to that critical mass here a bit quicker. It’s a fantastic advantage because we can see why it works and then we can sort of turn the volume up on the things that made it work — even though we’ve released it simultaneously.
“Things that are going to work,” he continues, “work six months to a year earlier in Australia than in the States.”
The Hills notice a similar trend with urban brands like Paul Frank. Right now they’re just gaining ground in shops in the U.S. However, in Australian surf shops the brand has already become a mainstay. Says Stephen, “If you look at the accounts and say, ‘What are the key surf retailers in Australia, and how much rack space do we have?’ We have a lot of rack space. Do we truly sell a surf brand? No. That shows you how surfing is changing.”
Peter, 38, and Stephen, 39, are in tune with the skate, surf, and lifestyle markets now more than ever. Both still skate. Among the headshots of Globe board members appearing in the company’s 2001 annual report are action shots of the brothers: Peter’s doing a lien air a few feet out of the pipe, and Stephen’s grinding a backside five-0 on the vert ramp while holding a chainsaw (yes, a chainsaw).
For them, success is based on quality, not quantity — even with pressure from shareholders. “We don’t want to chase sales just for the sake of it,” says Peter.
“Oh, shit no!” says Stephen. “Profit equals sanity, turnover equals vanity.”
In the same manner they acq
uired their eleven licensed brands and launched their six proprietary brands, the Hills’ sights are set on the bigger picture — the long-term goal. And they’ve got seventeen ways to do it.
“It’s a great luxury to have so many brands, and I think it just allows you to make good long-term decisions,” says Stephen. “You don’t have to panic on a daily basis. You just do what’s right and still get growth and preserve the brands.”
Like I said, they’re not squeezing water from a stone.