Manufacturers And/Or Distributors

Hypothetical Scenario

Giant Distribution calls me one day to ask how my shop isdoing on inventory, and to let me know that they have the new issueof 411VM and the new Element Tosh Townend Welcomeboard in stock. But I don’t go direct with Giant because I can get allthe Giant brands from AWH. I am a loyal customer there, and alsoget terms and free freight. AWH is also the only place that hasMonkey Business, and they have Lib Tech. However, they don’t carryenjoi, Blind, Deca, or Darkstar, so I get those products direct fromDwindle, who gives me a free deck for every twelve I buy, and somefree wheels depending on how many sets I order. Sometimes theDwindle orders take over a week to get to the store, but AWH doescarry Tensor and Speed Demons, so I leave that out of my Dwindleorder to get it here faster.

A friend of mine is pro for Habitat, so I want to support hissponsor, and DNA Distribution offers free freight, treats my shopwell, and is located relatively close to our New Jersey store, so Iorder direct from them. Otherwise, I would probably order my Alienand Habitat goods from Eastern, where I order all my Tum Yeto,Birdhouse, Hook-Ups, and a few Ramptech goods because Tum Yetoand Blitz cannot offer our shop terms, and Ramptech is not aregular “order” that I do often. But I can get Flip, Fury, Baker, andThe Firm from AWH, so I leave those Blitz brands out of the Easternequation. And even though Bootleg is a branch of Baker, it’s underthe NHS roof. But no one has come into the store asking for it yet,so I just hold off. Back to Eastern, who has a great selection and thestuff shows up at the store quickly, but I can’t expect them to alwayshave the selection that World has. And World, like Dwindle, offers afree deck when I buy twelve, and the same wheel deal. And since, aswith Dwindle, our shop sells so much World Industries, going directand getting a ton of stuff seems to make sense.

I used to go directly to Girl for Girl products, but theyrecently opened up distribution with AWH, so now instead of gettingChocolate from AWH and Girl from Girl, I can get them both in thesame place with a lot of my other products. Then the phone ringsand it’s my rep at Deluxe. He tells me he hasn’t heard from me in awhile, and that they have a Spitfire sale going on and some new Realstuff in stock. But I tell him I am good for now because AWH prettymuch offers the same deals, has all the same stuff, and it gets herefaster.

This is just one week’s worth of shop orders. And thistangled web will happen all over again in another week or two. Forsimplicity’s sake, I left out the instances of reps, manufacturers, anddistributors who call repeatedly that we choose not to buy from orwhose products we don’t need in the shop.

Back To Reality

Sound complicated? It is. And it took me a few years tojust comprehend it all, because the distributor/manufacturerrelationship in the skateboarding world is an odd one.

Although it’s not rocket science, being the buyer for askateboard shop can be a bit confusing at times. I mean, justknowing all the product, trying to predict what customers are goingto want, then getting them to come and buy it so you can makesome money is difficult enough. But now it seems getting thatproduct in the store and the decisions and logic as to where it’scoming from is a whole drama in itself. And all of this doesn’t reallyinclude a significant amount of apparel or any footwear.

Sure, it’s convenient to go to distributors, and if it weren’tfor them I would have to call in twenty orders a week instead of five.But sometimes even those five different calls to distributors andmanufacturers are a lot to take care of. And after five years of beinga buyer, certain things still baffle me. Other shop buyers surely feelthe same. Hell, I even know some people at the independentdistributors who feel this way. So I decided to ask, “Why?”

Separation Of Church And Skate

Historically, companies made equipment or had it made,and sold it to independent distributors like Eastern SkateboardSupply, AWH, South Shore, Smoothill, Atlantic, and RAX. Thesedistributors then sold the products to shops. The distributors didn’tmanufacture, and manufacturers generally didn?t distribute. In thelate 1980s, it was common to see larger companies with huge linesselling directly to shops, and they often took on a truck or bearingline that they didn’t manufacture themselves just to have a completeinventory. Companies like Vision and Powell Peralta were among thelargest manufacturing distributors at that time.

When the small-company revolution hit in the early 1990s,companies like World Industries and Foundation were selling directto shops from the outset. They had independent distributors on theEast Coast but were growing their businesses primarily throughdirect sales to shops. Soon they launched additional brands andhave been growing ever since. This has greatly shifted the roles ofcompanies and independent distributors, and continues to do so.

Most independent distributors I spoke with all describedtheir business/service in the same way: They’re a one-stop shop forretailers to call toll-free and order a lot of different brands fromone place, with one invoice, and get it all in a timely manner(sometimes the next day). All this rather than having to call eachmanufacturer separately to get the goods and wait for them toarrive from the West Coast or somewhere else far away.

Independent distributors are service-oriented businesses.Their customers are looking for variety and don’t necessarily wantto buy a lot of the same brand–they prefer a few of each company.All of the distributors proudly sell nationwide, but have their betterregions.

For example, Eastern is located in Wilmington, NorthCarolina and is very dominant on the East Coast. Smoothill is justnorth of San Francisco, and their strong areas are in theNorthwest–Washington, Oregon, and Northern California. SouthShore is based in Houston, but is strong in the South, Midwest,Colorado, and Florida. RAX is in San Diego, and they and Smoothilloverlap markets a bit. Atlantic is in Ocean City, Maryland andcompetes with Eastern, but has its own loyal customers in the East.

Dave Harris of AWH, whose strength is the Midwest andEast Coast, says he sells all over the country but focuses on his localregion: “Things have really gotten a lot tighter with distributors.There used to be a kind of battle going on between South Shore andEastern, as far as people getting into other people’s territory. But Ithink everything is pretty well laid out now. Although we do havecustomers all over the country, most of our business is generatedwithin our region.”

Elbow Room

And region is a big deal to the manufacturers–oneof the main reasons for them distributing the way they do, actually.”Geographically, we’re in Dayton, Ohio, and we distribute our ownproduct,” says Chris Carter of manufacturing distributor DNA. “AWHis very close to us. So proximity has a lot to do with it. I think it’squite clear that the reason Eastern is the biggest in the United Statesis basically because the population center of the country is theNortheast. I don’t think a lot of people understand that. We haveSouth Shore in Texas. We ship to West Coast. We don’t have aCalifornia distributor (anymore)–they weren’t doing the numbersand the volume that I needed to really constitute giving them thedistributor discount. When a distributor is doing less buying thansome of your good shops, then you’ve got a problem. Shouldn’t Ijust give the shops a discount?”

Frank Messmann at Dwindle has slightly differentreasoning: “We basically decided that one distributor is enough. Wehave such a good distribution network that we really just need oneon the East Coast, therefore we stuck with Eastern for pretty muchall our product categories. But it’s a constant debate: “Why wouldyou not open up distribution even further or vice versa? Why evensell to a distributor? Why not do it yourself?” Clearly in clothing andshoes, there are no distr
ibutors–they just distribute themselvesthroughout the country. The DCs and the Quiksilvers of the world,they don’t have East Coast or geographic distributors.”

Messmann thinks the bigger question is whether or notskateboarding needs independent distributors spread throughoutthe country. “I think the answer is ‘Yes, as long as skateboardingremains a business where it needs weekly replenishments,’ which iswhat’s going on. Then a geographic presence of distributors hasmerit, whereas for shoes or clothing, it probably isn’t going tohappen?ever. It’s a pre-book business, it’s not weeklyreplenishment. It’s seasonal–like four major deliveries a year andthen a couple of refills.”

Steve Douglas says that Giant was set up with region-baseddistribution from the beginning: “We have four distributors in theUnited States that carry all of our products–Eastern, AWH, SouthShore, and Smoothill, and that’s all geographic–taking care of theareas.”

A second reason for distribution preferences seems to bethe personal relationships that have developed in the industry overthe years, and how well the distributors support skateboarding. “Wesell all of our brands to Eastern, and we sell some of our brands toAWH,” says Girl’s Megan Baltimore. “We all knew Reggie from thepast and started dealing with him from day one. He has a goodreputation, and we give him that exclusive with the brand becausehe’s done such a good job.”

Douglas also considers a distributor’s connection to thesport. “We also look at people behind the business, and if they’regood for skateboarding–that’s a key thing for us,” he says. “Whenwe first set up, we didn’t sell to AWH. Around 1993 or 1994 wedecided to open up AWH, and it was purely for geographic location,and the fact that they’re a great bunch of guys. Their familyapproach to things and how long some of those guys have beenworking for AWH blew me away.”

Many of the largest West Coast manufacturing distributorshave worked with Eastern since day one. But it wasn’t always so easyfor Barnes. “When I started out, I was the new kid on the block withabsolutely nothing, and a lot of people wanted to help me becauseof that,” he says. “Other people maybe wanted to help me, butbecause of their long-term relationships with other distributors,they didn?t feel like they were doing them any justice by opening meup. I might have been frustrated, but I couldn’t help but respectthat. Powell is a perfect example–they wouldn’t sell to us for a longtime because of their relationship with AWH. But I still wanted it,and I respected George (Powell) for his reasoning.”

Distribute It Yourself

One reason that new companies in the early 90s relied lesson the traditional manufacturer-distributor-retailer chain ofcommerce is the very DIY (do-it-yourself) ethic that inspired themto launch their companies in the first place. Tum Yeto Owner TodSwank still questions the logic of channeling his products throughthe various independent distributors. “We consider it, but nothing’shappening with it,” he says. “(Independent) distributors pretty muchdon’t do anything in skateboarding except distribute. As far aspromoting skateboarding or sponsoring events or helpingmanufacturers sponsor tours, I think some people have done a little,but I haven’t heard of anything significant. They’re pretty muchgetting 25 percent of your revenues and just pocketing it, where themanufacturers have to kick down for pretty much all promotion forskateboarding.”

Swank doesn’t sell to anyone but Eastern: “I follow themodel that Rocco used when he started World Industries (in 1988).Before he was doing it, if you wanted to have a skateboard company,you had to sell to all the distributors, otherwise you wouldn’t beable to sell your stuff. He went out and just didn’t sell to any ofthem, and the only place you could get World stuff was from him.”

The extra margin Tum Yeto keeps by selling direct offsetsthe company’s promotional budget (ads, team salaries, tours, etc.),and it puts Swank in a proactive role where sales are concerned. “Ilike being in charge of my sales, as far as pushing our products,rather than depending on an (independent) distributors’ sales staffof the same size pushing the products of the top fifteen or twentycompanies. Some things we don’t sell to any distributors,even foreign, just because the margin isn’t there for anybody.”

It seems that margin and control are common themeswhen talking to manufacturer distributors. And once a company setsup a sales department, it’s in their best interest to keep theirsalespeople busy. “If you have a strong distribution networkyourself, you are basically cannibalizing your own sales if you sell toa distributor–theoretically,” says Messmann at Dwindle. “So youneed to find a balance. The stronger your own distribution network,the fewer distributors you need. We make a lot more money sellingthe product to a shop than to a distributor, and since we view ourdistributorship here to be quite strong, we feel we have the rightbalance with the mix between Eastern and us.”

“By limiting distribution you have some sort of control andknow where it’s going,” says Douglas. “If you sell to everydistributor, you really don’t know.”

The key, says Baltimore, is to find independent distributorsthat understand the goals of your company: “Our feeling has alwaysbeen that if you spread it out, it’s a little harder to control. It feelslike Eastern and AWH have always understood where we did anddidn’t want the product (to go), so it’s working out really well.”

One key reason for large companies to push direct sales toshops is to overcome the basic limitation of independentdistributors’ shelf space. “In the United States, we feel that we haveexcellent customer service in-house and the best product knowledgefor our brand–and we should,” says DNA’s Carter. “No distributorcan carry all of my products. So if a shop wants anassortment of brands, he’s going to go to a distributor. If he wantsto go deep into any one brand, he is probably going to go direct.”

Battle Of The Independents

All of this leads to some heavy competition between theindependent distributors. While some of them have exclusive dealswith manufacturers, for others “exclusive” really means “regionallyexclusive.”

Currently, Eastern leads the pack with exclusives fromWorld Industries, enjoi, Blind, Deca, Darkstar, Zero, Toy Machine,Foundation, Hollywood, Pig, Birdhouse, Hook-Ups, Alien Workshop,Habitat, and a few others. Until very recently, Eastern was exclusivewith Girl and AWH was exclusive with Monkey Business, but thatexclusivity has ceased and the two distributors each carry bothbrands. However, AWH doesn?t have Alien or Habitat, which SouthShore has.

Smoothill has no exclusives, and Manager Carol Colgate

doesn’t worry too much about it. “I work on acquiring the brandswe don’t have, but I don’t kill myself over it,” she says. “I know, forexample, Birdhouse isn’t looking for distributors right now, so I’mnot going to bore them or keep pounding them. But at the tradeshows or whenever I get an opportunity, I let them know that Iwould love to carry their product line.”

Harris would love to add a few more key companies toAWH’s inventory, and he also occasionally checks in with them toremind them that they’d be welcome there. Sometimes being able tocarry just one or two brands helps break the ice. But even getting afoot in the door can be difficult, and Harris has been discouragedmore than once. “But we go out and we pound down their doors alittle bit more,” he says. “We’re not real aggressive about it, becausethat just turns people off. But this year we have a meeting set upwith Tum Yeto, because we want to get Ruckus Trucks.”

Gray Area Matter

Trucks are a perfect product category for independentdistributors, and Harris feels AWH’s Chicago-area location makesthe company ideal as a source for the relatively heavy, freight-intensive products. “With trucks there is no exclusivity,” he says.”Manufacturers want to get their trucks out to as many people as
they can for distributing, and because of our location, the weight oftrucks, and the cost of shipping, we sell a lot of trucks. We’rebasically the biggest Krux and Tensor distributor. So that is one footin the door with at least one of Tum Yeto’s lines. They will be able tosee just how much volume we do, and once they see that, they mightconsider opening us up with a board line.”

The old manufacturer-distributor-retailer chain workedpretty well, says Harris, and while manufacturing distributors mightbe making more by selling direct, retailers work a lot harder tostock their shops: “Customers love coming to us, but they have ahard time with it because there are products that they can’t getfrom us. Most of them don’t like having to go direct, and havingorders spread out between twelve or fifteen vendors is kind of apain for a lot of people.”

West Coast independent distributors are at a disadvantage,because they’re literally in the manufacturing distributors’backyards. “Since we’re on the West Coast, some brands won’t sellto us because we’re so close,” says Bill Reilly at RAX Distribution.”We have been working very hard to get those brands somehow.What we have done in the past to open up with certain brands isabide by their rules and regulations. They might say we can sell theproduct, but not in certain areas. And that is what we do. When weabide by those rules, they start to slowly open things up for us alittle bit more. But there are brands that we have been trying to getfor a while, but I just don’t see it happening. We’re going to continueto try.”

Atlantic Skates Distribution in Maryland also has noexclusives, and Atlantic’s Dorsey Truitt doesn’t bother himself tochase companies once they’ve refused to sell to him. “We’resatisfied and happy with what we’re doing,” he says.

Piecemeal

My biggest question as a buyer has always been, “Why dosome manufacturing distributors sell certain items, like a video, or asmall part of their line, to an independent distributor, but only someor no boards, wheels, or softgoods?” I asked a few manufacturingdistributors and got almost as many answers. “As far as Black Labelgoes, when we took them over, Black Label had all thedistributors set up,” says Giant’s Douglas. “So we kept it that way,we didn’t want to say, ‘Okay Black Label, you are with Giant now, soyou are going through our distribution.’ We just kept it as it was,and that’s how (Black Label Founder) John Lucero wanted it.”

Douglas reasons that different products serve differentpurposes, and therefore can’t all be governed by the same rules.”Videos promote skateboarding, so our approach with videos is that99 percent of the distributors can carry our videos, because we justwant videos to get out there,” he says. “The majority of distributorsalso sell our trucks.”

“When Tensor trucks came out, we decided that if Tensorwas going to make it into the marketplace with the bigbrand-name trucks–so to speak–we needed as wide a distributionas possible,” says Messmann at Dwindle. “So with Tensor, we openedup to other distributors like South Shore and AWH, as well as acouple of the other competing skate manufacturers that also havedistribution houses, like Giant.”

Along with its own truck brands–Destructo, Destroyer,and Monster–Giant also distributes Tensor. Other Dwindle productlines to get wide play are Speed Demons and Blacktop Griptape. Butwhat criteria determines if a brand should be opened up to moredistributors? “Basically the brands where proximity to the customeris really important,” says Messmann. “Whereas the key brands, likeBlind, enjoi, Darkstar, and Deca–we sell them, and Eastern sellsthem.”

Because Dwindle has multiple deck brands that areexclusive to Eastern only, I asked Messmann if Dwindle everconsiders opening distribution on one if it isn’t selling as well as theothers. “We have never looked at it like that,” he answers. “But whatwe do address if the brand doesn’t take off well is, ‘What do we doto change the brand? And if it cannot be changed, then let’s not dothe brand at all.’ Obviously we did that with A-Team, which becameenjoi. We did it with 101 and Prime back in the day. It has not beenon the table to see if blowing up the distribution would make adifference.”

One dilemma manufacturing distributors face whenrestricting a product’s distribution channels is that some retailers,and ultimately some end consumers, will not be able to find it.”We’re losing some customers that may not have an account withEastern or us,” says Messmann. “Perhaps they have an account withAWH because they’re close by or they have credit, and they willnever see our products. So there is clearly that issue, but it hasn’tbeen so big that we have come close to considering expandingdistribution further.”

Carter feels limiting his distribution works well for DNA,while Douglas says his main concern is that retailers have access toGiant products, and doesn’t favor any particular channel: “If they’rehappy dealing with Reggie or AWH or South Shore, then that’sgreat–we just want to make sure they’re getting the product. Thedistributors are an extension of us. We try to treat everyone fairly,where some other manufacturers hold back product and don’t giveit to distributors right away. We don’t play games with people, andwe just try to be up-front, stand behind our product, and supportthe distributors as much as we can.”

Companies that work with exclusive independentdistributors appreciate the simplicity of dealing with one entity, andfeel they receive better service because of it. “It motivates thedistributor,” says Baltimore at Girl. “They know that if they have theexclusive on it, they want to take care of the line. We have had amuch longer working experience with Eastern and AWH, but ourexperience with both has been that they supported us so much, thatthere’s been no reason to go elsewhere. At one time we did sell toanother distributor, but it seemed to create a little battle withpricing and free shipping, which really doesn’t do anyone any goodin the end, just more of a headache.”

Galapagos Distribution

So with all this “exclusivity” and “competition,” what arethe independent distributors doing, if anything, to adjust? Whatkeeps them on top of their game? With so many manufacturingdistributors spreading their powerful tentacles into every boroughin the country, are the independents becoming obsolete?

Barnes at Eastern is confident that’s not the case, and thatretailers still clearly distinguish between independent distributorsand the manufacturing sort. “I still have such a better selection thanany of them,” he says. “Fortunately, we have been able to continuegrowing even though the competition has increased greatly. We’refortunate enough to have a great selection and to be geographicallyin a good spot. So we have been able to continue growing eventhough all these other people are calling themselves distributors.”

Reilly says RAX constantly does things to adjust: “We’velooked to source some more pricepoint-type product, to provideour customers that service, as well as the top-of-the-line brands. Wejust try to provide a diverse product mix. If Giant and Shorty’s andthose guys are making their own hardware, for example, there arepeople who are going to want that because it’s a brand name. But atthe same time, people want to build shop completes, and they’regoing to want the no-name-brand bulk hardware. And we have kindof gotten into that area and diversified.”

The Internet has also helped RAX expand its service toretailers. “We have an online drop-ship program,” says Reilly. “Forinstance, if one of our retail customers has a kid come into the shopwho wants a skateboard that isn’t in the store, if we have it in stock,he can have it shipped from us directly to the kid’s home, and wecan brand the invoice so the kid thinks it came from the shop. We’relike a blind fulfillment center. We can take orders electronically, wehave ship-confirmation files that we can send back, we have order-status files, we can send tracking numbers–we have it
dialed. Fromthis standpoint, we’re a little more sophisticated than a lot of thedistributors out there.”

After all the business talk was over, the cliché sentiment Iwas left with is that skateboard products are as abundant–andavailable–as ever. Even if some are only distributed through acouple major channels. “I went the way without (independent)distributors, and I like it that way,” says Swank at Tum Yeto.”Damian at South Shore is super cool, and so is the staff. Reggie isawesome, and some of the AWH guys that I know are really cool,too.”

Barnes is still pleased to be the exclusive East Coastrepresentative of most of the major California brands, and althoughEastern grew with and helped grow them, he can appreciate the clearorder of the old system he helped uproot. “I always thought, andstill think, it’s a conflict of interest for a distributor to also try to bea manufacturer,” he says. “It used to be looked at the other wayaround as well–manufacturers wanted to be manufacturers, theywanted to take care of their distributors and not compete againstthem. But that’s not necessarily the case anymore. Manufacturerslove the checks that distributors write them because most of thetime they are big checks, paid on time, and don’t bounce. But at thesame time, they’re still doing all they can to drive people to buydirect and not go through distributors. So it’s a double-edged sword.But I’m thankful for the relationships I have. These guys arecompeting with me a lot, but they’re still helping me in such waysthat I know to be thankful. These are my competitors, not myenemies; I just want to beat them on a level playing field by workingharder.”

Eastern has done such a job that they’re even distributingproduct from California-based companies to West Coast shops. “Iknow of some shops that we tried to open up here in the West, andthey still buy from Reggie,” says Reilly at RAX. “That’s becausesometimes it’s about a relationship more than it is about who hasthe best product.”

But it’s Giant’s Douglas who sums it up best when hesuggests there is some good camaraderie going on in skateboardingright now among both manufacturers and distributors:”Skateboarding is in good hands at the moment.”