Podium Distribution Lifts The Specialty Market

Timing and luck are no replacement for business acumen, but they certainly don’t hurt. And when all three come together, the results can be startling.

In 1994 Kevin Dunlap was the owner of 118 Boardshop, a two-year-old, 7,000-square-foot skate-centric retail store in the San Fernando Valley. Business was going gangbusters, but Dunlap was having a hard time getting enough shoe inventory into his store.

From that problem sprung Podium Distribution, one of the fastest-growing companies in the action-sports world, with a range of shoe and apparel brands that include DVS, Lakai, Matix, and Clae.

Dunlap has built his empire with a strict distribution philosophy and emphasis on the partnership between manufacturer and specialty retailer. It didn’t hurt that he was a retailer and understood the challenges that brings, but ask anyone who deals with Dunlap and they’ll tell you he’s both humble and a genuinely nice guy.

So how did Podium get started, and what’s next for Dunlap’s stable of brands? TransWold SURF Business caught up with him and Surf Team Manager Brandy Faber at Podium’s super-swank offices in Torrance, California to find out.

How did the idea of DVS come about?

Kevin Dunlop:

With the supply-and-demand problem with Duffs, Etnies, and Airwalks, we could never get enough shoes in our store. We’d order 50 pairs and get six. It was obvious that there needed to be more companies in the market.

Our shop was doing well, and a lot of the guys from Girl and World Industries would come by and skate. I became pretty good friends with Tim Gavin {who is now Podium’s marketing director}, and one day I said that if he could get the team together, I could get the shoe company together. That’s how it started, but I really didn’t know anything about manufacturing. I had no clue what I was doing. But back then you could make mistakes and get away with it. We certainly made a bunch.

How were you financed?

Through credit cards. My father helped, and fortunately, I have some rich uncles in Texas in the oil business. That helped. But it was a lot of debt. We just kind of scraped and did what we could to get by, and year after year it got better and better.

What kinds of insights did owning a store give you when you launched DVS?

Just how hard it is to be a retailer and how hard it is to survive. There’s more paperwork involved with running a store than there is with DVS. It’s endless. I understood what a retailer needs from a company. It helped me show retailers that when times get tough they can count on me to help them out. A lot of companies don’t understand what it takes to run a shop. They think it’s easy, but it is really difficult.

Were you surprised by the success of DVS?

Yeah. It was pretty explosive growth, actually. It was hard to keep up with cash flow. When I started, I thought it would be fun, but eventually I’d end up back at the shop. It was always something to fall back on. But then it just got a little more serious and really started to grow.

At what point did you pull completely away from the store?

Not too long after DVS launched. I was probably only in the shop ten percent of what I was before. I was too busy running around trying to find reps, international distributors, sourcing factories, designing ads — everything.

Did you pick up the whole manufacturing process pretty quickly?

I went out twice to Asia, sent out hundreds of faxes to potential agents and factories, and finally I got really, really lucky. I found an agent who we’re still working with today who had worked with Vans and understood the skateboard market. He’s like my second father. We’ve been working really closely and have a great relationship to this day. I’ve been really lucky, but it was also a lot of research at the L.A. library and a lot of work. I had to weed through hundreds of faxes. You could tell from their response if they were worth interviewing.

What’s the state of the shoe market?

Like I said, when we launched DVS, it was possible to make a lot of mistakes and get away with it. Everyone expected late deliveries. But now there’s no room for error, and you have to go full throttle — double-page spreads in every magazine and everything else. You can lose a lot of money really quickly these days. It’s just really difficult now. Retailers have so many shoes to chose from and their walls are only so big, so you need to give them a reason to buy your product.

When did you decide to expand to the surf market?

Four years ago we started to really get into it. I’ve surfed since I was a little kid, and I always envisioned being in that market, but it was just a matter of establishing ourselves in the skateboard market at a core level and then branching out.

Are the markets different at the retail level?

Not really. Everyone knows about the whole surf/skate/snow crossover store. If there’s anything different, it’s the BMX market, where your retail base is bike stores.

What’s your distribution philosophy?

We’re trying to promote our product to the mass market but keep our distribution in the core shops. We’re not about going to the next level. The PacSuns and the Journeys of the world are at the end of that next step, but we certainly don’t want to go there.

It’s expensive for us to market and do well in each of the sports we’re involved with without getting those 600-store orders, but it seems to be paying off. We want to become number one in our specialty accounts before we even think about going anywhere else. That’s been our philosophy, and we’re happy with where we’re at.

Is Clae a little bit different?

Clae is totally different. We could open stores like Fred Siegal, Urban Outfitters, and Barneys — as well as stores like Active and Huntington Surf & Sport. With Clae we’re trying to focus on the high-end boutique stores and let it dribble down from there. In the future we’ll have to go to shoe-specific stores — it will definitely be marketed to a much larger audience then just DVS and Lakai.

What do you think of the Hurley/Nike deal?

It seems logical for Hurley to set it up like that. They didn’t have any international exposure, and with the strength of the Hurley name you can see why it makes sense to partner with a shoe company.

Are they competition?

Not at all. That’s a totally different deal. Hurley’s just more mass market than what we’re doing.

Are there any companies within our market that you admire?

The way I view competition comes from my retail background. It seems a lot of people concentrate on the competition down the street, rather than their own business. My whole philosophy is to keep my head down and focus on what I need to do to gain business with my customers.

All my competition have certain things I admire and certain things they’re doing wrong, but I honestly don’t focus on what they’re doing. I don’t admire one company completely, I just admire certain things that they do.

It was whispered that Billabong was looking to buy Podium. Any truth to those whispers?

No. I’d be an idiot not to consider offers, but at the same time, we’re happy with what we’re doing here. It’s still a very family-run business, and we’re just getting started. We have a lot more up our sleeve and the time isn’t right. There’s a lot more growth down the line, and we’re just starting the Clae program. Plus, I’m running my own show. I don’t have anyone to answer to and that makes it fun.

So you’re comfortable with how business is going?

I’m always nervous. What I’m trying to do with DVS is keep our expenses at a point that I know onc
e we reach a certain sales level, everything over that is just gravy.

I don’t see the market getting any smaller. I can see it hitting a plateau in a year or two, but that’s fine. If we’re at the level we’re at now or even a little bigger, how could I complain? Plus, there are still a few things up our sleeves to get more market share, and there’s still a lot of growth outside of the U.S.

How’s the retail market out there?

It’s not so great. There are certain shops that are making it through okay. In general, though, you can see the receivables getting a little bit higher or a little bit further out. You know people are having a tough time, so you’ve got to be really careful about inventory levels.

In which international markets are you seeing growth?

Right now Australia and New Zealand are strong. Germany and France are really strong. They’re the two top and are neck and neck. Europe in general is pretty good. Japan’s been really slow for everybody in the skate-shoe market, but we think Clae will really appeal to that market.

How’s Clae doing here in the states?

Some people get it and some people don’t. A lot of these stores that are bringing in Ben Sherman, that are doing really well with Stüssy, are the ones bringing in Clae. I don’t want our pure skate account to even bring it in because I don’t want them to have inventory that’s not right for their shop. The last thing I want to do is push inventory on them. So if they take it, great. If they don’t, I’m not worried because its target market is so broad.

In five years, if everything goes like you envision it, will Clae be bigger than DVS?

Yes. It’s just a bigger audience. We’re not going to be selling it in JCPenney. It will still have selective distribution in accounts like Barneys, Urban Outfitters — or maybe even Nordstrom. But that will be the extent of it.

Which regions are your strongest?

The West Coast and East Coast. Right now we’re really trying to focus our efforts on the Midwest. Those are the things we’ve got up our sleeves that’ll be cool.

If you could be king for the day, would you have the industry do anything differently?

With the growth of DVS how can I complain? {Laughs} I’m happy with what my competition’s doing. I’m happy with what we’re doing. I think there’s a lot of support from at least the skate-shoe brands and skate contests and Vans is doing its thing to promote the whole action-sports industry.

Brandy Faber: Personally, I would like to see the surf industry support surfing here in America more. How many people were in Huntington Beach for the U.S. Open, and what did the companies actually do to educate all those spectators about surfing? When I was a kid, contests like the Stubbies and the Op Pro had a huge impact on me. You’d see Tom Carroll and Martin Potter doing promos at every store up and down the coast.

Competition is important. I mean Kelly Slater wouldn’t be Kelly Slater if he didn’t have six world titles, just like Kobe {Bryant} wouldn’t be Kobe if he wasn’t on the Lakers. But getting the big companies to support U.S. contests seems like the hardest thing to do. They support a lot of other countries, but there’s not a lot of support here.

Is there anything you’d tell your retailers if you could get them all together?

Kevin Dunlop: I guess I would say, “Listen, we’re not going out and opening our distribution. We’re going to support you. So don’t support those guys who have taken the next step. Supporting them shows me that if I make that next step, you’ll still support my brand, too. I can make a ton of money, but is that really what you want me to do?”

I don’t understand when someone complains that we’ve opened a certain specialty shop, and then I look at their shoe wall and see all these brands with wide distribution. Support those brands that are supporting your distribution channel, and if we decide to go outside of that then we gotta take our hits. But you can’t complain if you’re still supporting those other companies that have already stepped out.

It must be frustrating for you to be holding the reigns in and see other people who just let them go.

Yeah, because we have some other large accounts that we can open if we want them. It’s hard to say no to retailers that have hundreds of stores. At the same time, we don’t want to take that next step. We want to keep it in our core distribution and build it from within. You know, every year we have to grow a certain amount so we need their support — and it’s a little frustrating.

Are there retailers who are doing a good job of rewarding brands with tighter distribution strategies? For example, Val Surf is offering buildouts to nine brands that have shown loyalty to the specialty store, and Matix was one of the labels mentioned.

That’s exactly right. We’re partnering up with Val Surf and with stores like that, and we’re trying to stay out of stores that sell tennis rackets and Razor scooters and Rollerblades.

What’s high on your agenda right now?

I guess one thing is our sandal program. We’ll be marketing that pretty heavily in all the surf mags. We’re very serious about it. We never dabble in a market. If we get involved with something, we do it right. With sandals it’s not any different. We went from five models our first years of sandals to thirteen this coming year. We’ve done a ton of work on the sandal line, and we want to give some of the sandals companies a run for their money

We’ve taken some of our top-selling shoes and really mimicked the design and style of those shoes in our sandals. So you’ll see a sandal sole that’s identical to the shoe. To my knowledge, that’s never been done before.