Hurley: Innovation Without The Worry

Genius or madman, devil or saint?

In the hours after it was announced that Bob Hurley had sold his namesake brand to Nike, there didn’t seem to be a consensus either way. But now that the dust has settled and pundit hand-wringing hyperbole has spun out, what’s left as fact and what’s fiction when it comes to the Nike-Hurley deal? Is Hurley really planning a coast-to-coast Foot Locker footwear invasion? Is Bob really buying the Mentawais and chucking it all? Has the deal turned the Hurley offices into a den of jaded millionaires? Is it now full of number-crunching suits from Oregon?

After sitting down and talking to Bob Hurley, all those whispers seem laughable in retrospect. But at the same time, the idea that nothing‘s changed is equally surreal. It’s clear that the deal is a watershed moment for both the Hurley brand and the surf industry. So what’s it all mean, and where’s it all going? Let’s ask.

What’s your opinion about the current health of the surf market and compared to the overall action-sports market?

Bob Hurley: I’m not a super big student of it, but my general perception is that overall apparel market in the U.S. is a bit slow right now — judging by Gap or some of the big department stores’ comp sales. I’d say the relative strength of the surf and skate industry seems to be on par or better than most.

How does the surf slice relate to the overall action-sports pie?

Surfers nowadays are so much different than when I was in high school. It was pretty cool to put surf racks on your car even if you didn’t surf. You never see surf racks on cars anymore. You can still put them there to say, “Hey, I surf, do you?” “Cool.” But that’s sort of an outdated concept. Surfers today are so much complex people than the Spicoli, Ridgemont High image.

Is there anything that’s grabbed your attention or made you wonder if it was the next big thing for the youth market?

Yeah, definitely. But it’s esoteric, you know? It’s more of an attitude of individuality and freedom. I don’t think the youth market wants corporate America’s views imposed on them. That wasn’t always the case, especially in the late 80s. The surf companies had a lot of power then and were very oppressive. They were saying, “We’re cool. If you want to be cool, you better be like us. You better check us out because we’ll let you know what’s going on.” And I was just as guilty as anyone. That’s a pretty outdated concept now.

Kids have so much freedom. You don’t need Capitol Records and a million-dollar budget to make a CD. You can do it yourself. There’s more power in the hands of the teenagers and the general consumer. If companies are going to succeed, they have to be responsive to that.

Will your customer be changing?

It’s been changing since we started Hurley. In our previous existence with Billabong we were focused on the surf kid and a bit snow and a little bit skate. We still love that. I started as a surfboard shaper, and I still go on as many surf trips as possible. Paul (Gomez, Hurley’s Marketing Director) is a pretty good skater — he loves it. We love working with all those athletes.

However, our primary focus is the teenager, whether they are an athlete or not. We try to be inclusive, not exclusive. In the late 80s, the surf companies had all these slogans. I don’t want to mention any of them because it’ll identify the company, and I would be one of the people I was picking on! But it wasn’t about being inclusive. We’re inclusive — everybody’s invited. If you want to do something with your life, if you have a dream, we wanna back it. And if you’re a Rollerblader or a chess player, hey, we think that’s cool. If you want to set up a modeling agency and you’re a sophomore in high school, great!

Has there been a particular moment since you signed the deal with Nike when it’s dawned on you what it will mean to your brand?

Yeah, there’ve been a couple. I was in Japan with our Marketing Director Paul Gomez and (Nike Apparel VP) Seth Ellison and Joe Kay. We were looking for locations to set up our office, and we were looking to hire a general manager. I was at the fish market with Paul Gomez at about five in the morning checking out all the big tunas, and I was like, “I can’t believe we’re doing this. This is so nuts. We’re here in Japan, we’re going to set up an office, and hire a GM and a marketing guy. Wow, this is it. This is what we’ve been trying to do.”

Then in some of the product meetings I’ve been in on, just talking about new product categories like footwear, I’ve been amazed at quality of the people we’re working with, and the purchasing capacity, and the ability to do what we’ve always dreamed about without there being a lot of complications. I was pinching myself going, “Is this for real? Where’re the guys in the suits telling us what to do?” They simply aren’t there. It’s great.

Has the deal changed your life much?

Honestly, my life hasn’t changed at all.

Are you surprised by that?

No, I wouldn’t have made the deal if I thought it would. My life was already really good. My family’s healthy. I have good friends. You know, I still do the same thing every day. I get here at seven in the morning, and I goof around, and we laugh and heckle each other all day. It’s like high school. Well, it’s actually like college, because you have to be at high school. At college, attendance is voluntarily. We don’t make anyone stay here. So, it’s super fun.

Some people, after they heard about the deal, were worried about Nike getting involved in the action-sports industry.

Yeah, there was a lot of that.

What’s your response about the validity of those concerns?

Well, let’s see, a couple of concerns I heard was that we’re going to change our distribution channels because Nike has some big ones — like Mervyn’s and Foot Locker. That was never the plan and never will be. Nike understands and loves our distribution. In fact, it wants us to tighten it up where possible.

What was another concern? Oh, that there were going to be a bunch of Nike people in here running stuff and they would change the vibe of the company or the feeling at work. That hasn’t happened either — and it won’t.

My job hasn’t changed and I still love it. I guess people were wondering, “Is Bob still going to be in charge?” “Is he trying to retire?” “Is he going to walk away from this?” None of that has happened, and it’s not in the cards. Any insecurity that was out there — and maybe is still out there — is pretty unfounded in my opinion.

Every day there are deals being made (like ours) and new ideas coming into the market, and I think the future probably is for companies like us with a lot of talent and a lot of good ideas to partner up with companies with big resources — maybe even their own competitors. Why not? It’s all about pleasing the consumer and delivering value and quality of design.

Are you comfortable with the idea that you’ve been the gateway through which Nike has entered our market?

I don’t see it like that. Some people do and have even chided me for that. But I see it as Nike believing in the Hurley vision and helping Hurley achieve its dreams.

I guess we look at the same set of facts and see them differently. I see increasing our ability to get our ideas out there. Not that we’re on a philosophical mission, but the deal allows us to get our philosophy out there of being an achiever and making things happen. It gives us a lot more opportunity

In all of my meetings, the people at Nike have never been like, “Oh, now we’re getting into a marketplace that we couldn’t get into.” That’s never come up in meetings and has never been a discussion. They view us as the teen lifestyle brand and more along the lines of a men’s brand like Calvin Klein, Polo, o
r Tommy Hilfiger. It’s safe to say that Nike views Hurley more as a competitor to those brands than something like, “Okay, how can we get into Quiksilver’s market? Or Billabong’s market? Or DC’s market? Or Emerica’s?”

The companies that’ll suffer because of this aren’t in our industry. Anyone who is a good company will only benefit by our, our …

… By the involvement of having somebody with those resources?

Well, yeah. If we had to get financing to go to international distribution, we would’ve had to go public or make some really bad choices. We now have the luxury of not doing that. We’re going to make quality choices for our retailers and our consumers. They may not always be popular, but they will be quality choices. We have the freedom to do that now, instead of the really detrimental choices that we could make. We could go totally mainstream with our distribution and that would be letting some bad things happen with our marketplace. Plus, I think the deal is good for our competitors. It obviously ups the ante a little.

Someone told me that Nike is like the U.S. government, it’s very hard to get their attention, but god help you if you do. To what extent is Hurley on Nike’s radar screen?

First off, the impression of Nike being like the federal government is not really accurate. During my first visit there, I was impressed with the cordiality of the place. It’s not oppressive. There are some companies in our industry that are way smaller and really oppressive. I don’t want to name names, but Nike’s a friendly, happy place compared to them. I attended one of the staff meetings for fun, and everyone was younger than me. I was like the old guy of the group. It’s a bunch of young, fun people who have some amazing resources to work with. They’re not evil or oppressive. They’re super fun and into making innovative product.

They certainly have amazing horsepower behind them.

Yeah, but they aren’t targeting other companies trying to wipe them out or anything like that.

So we’re a tiny, tiny company that hardly makes a blip on their radar screen. They hope we become a bigger company, but day in and day out people aren’t frying me about expenses or where the ads are going. Nobody’s made me make a decision I didn’t want to make, nor has there been any resistance to any decision I’ve made. The answer is always, “Whatever you want to do, that’s up to you.”

Who do you bounce things off of?

Tom Clarke (Nike president of new business ventures) and (Nike Vice President) Scott Olivet

How are they?

Friendly, happy, fun, brilliant. They’re great.

How often do you talk to them? Daily? Weekly?

No, I talk to Tom about once or twice a month.

That’s it?

Yeah. It’s more about organizational issues like, “Hey, so when do we want to have another meeting about footwear?” It’s that kind of stuff, not, “How were sales yesterday?” Almost all our conversations revolve around creative ideas for the future.

Most action-sports brands have been very incremental in their growth. Do you think Nike will be patient with you?

Yes. I gave them our ten-year plan that we’ve had from day one of Hurley, and they said, “It sounds great, let’s do it.” It’s pretty much that simple. The yearly goals I established back then are still the goals that are in place. Those goals are imposed by our management team, not by Nike. And there’s no pressure to increase those goals at all.

If everything goes as planned, how will Hurley be different two years from now than it is right now?

It’ll be a far better brand. Our quality of our design will continue to get better. Our sourcing and pricing will get better. We’ll service our customers better. We’ll make some exciting, innovative moves when it comes to serving the marketplace, and ideally we’ll be in Japan, Europe, and Australia — which we aren’t in at all now.

How’s the shoe program coming along?

Good. Slow. We’re taking a good, careful look at the market and seeing if there’s any way we can fit in, and if we have any valid new designs that aren’t in the marketplace.

Is there a time frame?

Not really. We’re trying to get it done as soon as we can, but if that takes three months, six months, a year — it doesn’t really matter.

How big of a line is appropriate?

Small.

Like twenty styles?

No, not even. Way smaller than that. We’ll start out small, with limited distribution, and try to build a demand. There’s not that many valid (shoe) ideas that aren’t out there already, so we’ll have to start with a few and build on those.

Yeah, the footwear market is pretty saturated, and unless you had somebody like Nike behind you, it’d be difficult to make a splash or get production time with a small line.

Right. But it’s more important to have innovative ideas. We don’t want to do a “me, too” design concept and use Nike’s horsepower and Hurley’s marketing to try to edge people out of the market.

What we want is a valid design concept that will get our retailers excited, our consumers excited, and one where even our competitors will go, “Wow, that’s a great idea!”

We have lots of friends at DC and Sole Tech, and obviously making footwear will compete with them. They make apparel, but we don’t care. We’ll work together and endorse their athletes and feature their logos in our ads. We aren’t going to make skate shoes or anything like that.

It’ll be more casual?

Yeah. Casual footwear.

But Nike makes the whole thing possible, right?

Where it really helps is with the sourcing. Let’s face it, if I go to Hong Kong or Korea with a good shoe idea, everyone’s going to see me coming and go, “What? You want 300 pairs? It’s going to cost you 40 dollars a pair.” Now we have the luxury of going through one of the biggest shoe purchasers in the world and saying, “Hey, we need to get 300 to 600 pairs of these made, can you help us out?”

And they’ll say, “Sure, no problem.”

Yeah, because they want all that other business, they’ll say, “Sure, we’ll do a good job for you, and we’ll make it at an affordable price.” That’s a huge luxury.

You’ve mentioned that Japan was the first place where you’ll expand. How soon will that be?

We hope to be in the marketplace within a year. We’re working on hiring a general manager, and we’re finalizing a lease on an office space. That’s how far along it is.

What’s your read on the health of the Japanese market and how will that affect your plans?

I don’t think it will affect our plans much because we have small growth plans. But the Japanese economy isn’t good.

But in all my years of business, I’ve never paid much attention to the economy because nobody needs what we have. We could go away and nobody would care! We’re a luxury purchase, a low-price luxury purchase. Our job is just to be entertaining and have something valid to sell.

So I can’t factor the Japanese economy into our equation. We don’t analyze it too much. We know it’s bad, but if it was good it wouldn’t really change our plans.

Niketown has done a lot to extend the Nike brand. Any thought about having Hurley-branded retail stores?

Not really. Honestly, we’ve looked at it a couple times, and even before the partnership with Nike I was thinking it might be cool not to do wholesale at all and open 150 retail stores nationwide. With a million or two-million dollars a store, we would immediately become a 150- to 300-million-dollar company. Then I realized that retail’s not my love and not the love of any of our management team. You have to have a passion for it.

We’d like a couple of flagship stores worldwide, so you can go in there and see what the brand represents. It’s
sad that you can’t ever walk into a store and see what Hurley means. We have a comprehensive line. So as we develop we’ll probably get a couple flagship stores going.

blink-182 was such a great thing for the brand. It would have to be organic, but is there another iteration of that coming?

There are a hundred other bands that we work with. Literally any one of them could be big. For instance, a band we’re working with called New Found Glory is doing really well.

blink still wears our stuff quite a bit, too, and they’re still good friends. Someday when I die and hopefully go to heaven, I’m going to ask God, “Hey, how much sales did blink make for Hurley?” Because I think it was a lot.

You strike me as being an entrepreneurial type of guy. Does that change now that you don’t own the company? Do you still have that same verve for the brand?

I think so, because 100 percent of the success of Hurley is our management team being allowed to do what they like to do. So with Leanne in the design area, I’m like, “Knock yourself out! Do it!”

Paul Gomez in marketing has probably done the most amazing marketing job ever with a brand in such a short period of time. To a very large degree that helped us get to the dollar volume we are, and I didn’t get in Paul’s way. I’d say, “Whatever you want to do, do it. You’re the man. I totally trust you. I back you.” That hasn’t changed.

As far as being innovative, I feel like I have even more freedom now because there’s no financial restrictions. Every day for the last twenty years that I’ve been in business, I’ve risked bankruptcy. It’s a very risky business. All apparel companies operate off of a credit line — even Quiksilver. But I don’t have that hanging over my head any longer. I can make even bolder decisions. It’s great.

It was a proactive decision (to sell the brand) and Nike was the first on my list to approach.

Was selling the brand always part of the plan?

No. To go global was, and to do it right was, but we looked hard at licensing. And since I was a licensee for fifteen years I realized some of its downfalls. Then I looked at selling off some of the territories, maybe go to a great company in Europe like Diesel. I didn’t approach them by the way, but I think they’re a great company. But I thought I could approach them and go, “Hey, do you guys want to buy Europe?” I actually did approach some companies in Japan and was in negotiations.

Well, I’m so dumb. I woke up one day and said, “Hey, wait a minute! If those companies give us money and then they start messing up, we’re not going to have fun every day. It’s going to wreck our job here.”

Then I thought about the great brands of the world and the three that came to mind — in this order — were Nike, Gucci, and Polo. I approached Polo, they weren’t interested. But simultaneously I approached Nike, and they were interested. I never approached Gucci, but I thought they knew a lot about how to run brands.

But Nike understood how we can complement them. And it was exciting right away. It’s very rare that you get the first choice on your list.

And actually have it work out.

Yeah. I think a lot of people think that Nike’s up there in Beaverton with their oppressive United States government mentality going, “How can we get into this market? Who can we find who will do this for us?” And it was exactly the opposite.