Skateboarding’s growth fails to register at ASR.
Everyone’s talking about it. Itis upon us, and ithas everyone worried that itwill do to them what it has done to others. Itis the buzz of the industry, but as much as you hear about it, no one seems to know what itreally is.
With 9.4 million participants* in the U.S. alone and an estimated 23 percent growth in sales over the last yearÝ, skateboarding seems to be doing just fine, and someone must be making money. But slowed traffic through the aisles and booths at the fall Action Sports Retailer Trade Expo this September had exhibitors poking their heads out to see who that might be. The crowds just weren’t there, at least not the crowd everyone expected.
With skateboardingdoing so well, it’s a wonder that the industry’s in such disarray. For most hardgoods companies, sales are slowing or flattening, and the mood at ASR was muted by the many absent brands that helped fill the aisles with color last year. Plan B, 23, Silverstar, and others have folded, bringing the number of booth spaces occupied by skateboard companies from 161 in 1997 to 118 in ’98. “It’s not that these particular brands that we’re seeing leaving didn’t have good products – they did,” says Reggie Barnes of Eastern Skate Supply. “They had good products and good teams. But the amount of growth in the industry – which is still there – is just not enough to support as many brands as there are. Especially with the price war that’s going on with blanks and things. It was innevitable, not necessarily that those brands had to go, but that some brands had to go. The ones that had the shallowest pockets are the ones that went first.”
Absent from the show, but open for business at the Hyatt next door, ABC Board Supply opted out of ASR and to instead meet with buyers in its suite. As part of an overall plan to restructure his business, Owner Jim Gray has consolidated his office and woodshop space, and cut back on expenses like trade shows. “We had more appointments booked with all our distributors at the Hyatt than we did at the last ASR,” he says. “I think the industry’s definitely sensing the whole realignment. We’re definitely going a little more guerilla style and trying to work out deals directly with our distributors and stuff like that, but not necessarily sticking our chests out at the tradeshow in front of our competitors. I think that’s what it’s come down to right now – everybody standing in a room, kind of sticking their chests out and seeing who looks cooler.”
Gray began reorganizing earlier this year when he realized from conversations with competitors that sales failed to meet expectations: “The common thing was, ‘Hey, what happened to spring? I can sell a fingerboard, but I can’t give away a skateboard.’ I’d start hearing common issues coming out, and then it wasn’t until probably 60 days ago that it seemed like the plague – you heard it from everyone.”
What he heard were the woes of a grossly oversaturated market buckling under its own weight. New brands, blank boards, shop boards, and everything else are named as culprits, but the fact remains that many companies have to adapt to survive.
ASR demonstrated which companies are actively changing with the new market, and which are relying on the historical inertia that may have carried them in the past. Alien Workshop arrived in San Diego with new products, a new team, and a new approach that President Chris Carter believes will help them weather the climate: “I don’t have a crystal ball, but I think the companies that are strong and have their place in the market will do well, and people who are not will react and compete on price – they’ll do whatever they have to to survive.”
Carter’s strategy involves maintaining Alien’s premium-company status through aggressive promotion and product differentiation. “We’ll do whatever we can to set ourselves apart in that faceless blank market,” he says. “We’re not selling on price – from day one it’s always been team, image, quality, uniqueness. We want to create a value-based product that people want to have. We want them to actually go out and buy it because it’s our brand.”
Carter identifies the oversupply of product as the biggest problem. He believes the proliferation of not just companies, but of woodshops has caused that. “There used to be a handful of woodshops, now there’s dozens,” he says. “Now we have at least a dozen woodshops – East Coast, Midwest, West Coast. They’re everywhere. The availability of finished product is greater than it’s ever been, which lowers the barrier to entry. It’s very easy to get in the market, and we have a real price war going on right now. We’ve got a lot of low-cost blanks, and the blank market feeds off of ours. By doing what we do, we make skateboarding exciting and create interest.”
NHS has survived both of the previous skateboard-industry recessions, in the early 80s and again the early 90s, and has continued as a full-service distributor throughout. With its traditional lines like Santa Cruz Skateboards and Independent Trucks, NHS has consistently introduced new products, like the recent Roofie’s Graphic Griptape, to help weather times like these. “That’s why you’re seeing guys go out of business, because all they were selling were decks,” says NHS President Bob Denike. “Their whole business was based on decks. They had teams based on decks, and advertising based on decks. It didn’t take long. All it took was for the industry to flatten for a minute, and they’re gone. And why is that? The margins have been sucked out of decks.”
Due to the company’s diversification and experience, Denike says that NHS is ready for whatever the market does: “Our sales are continuing to grow. It’s our gross margins that are being challenged. The problem is that retail prices have stayed the same for about the last fifteen years while the costs of manufacturing have gone up. My biggest concern is that if the blank-board thing continues, or if tight margins continue, there’s not going to be enough money to market, promote, et cetera.”
Gray says that we’re reaping what we’ve sown, that because the industry has been unable to police itself, and partly because shops and distributors are willing to carry a wide array of product, we’ve painted ourselves into this corner. “I definitely saw the price wars coming,” he says. “I stood on my podium seven years ago and said, ‘Hey, it’s a joke, guys. There’s 200 pro models. If the market doesn’t do something about it, there’s gonna be 350 soon.’ Now I laugh because it went farther than that. So what we the industry did, unfortunately, was devalue the pro, and we kept the door open to where everybody and anybody could have a skateboard company with five pros and pretend they’re legit. So we have too many supposedly legit companies, and not a big enough market for them.”
Barnes at Eastern Skateboard Supply says that he’s constantly considering new brands, and that his policy is to never say never. When he started his company ten years ago, he said yes to one young brand, and today World Industries does pretty well for him. “In all honesty, it would make my life easier if there were less brands,” he says. “I would rather go deeper with fewer companies, have less companies represented in my catalog, but stock more of the ones that are. It definitely would make it easier for us, but nobody ever said it’s gonna be easy.”
Itwas made even more difficult when low-end woodshops began pumping no-name blank boards into shops, offering them incredible prices for products that look – and in many cases are – decent. The enormous gap between blank product and branded premium boards has earned blanks about 26 percent of the board marketÝ. Gray says that for a while, the industry just sat and watched it happen – skateboard sales going to non-companies that did nothing to promote the sport. “George Powell fired the first bullet almost three years ago with the Mini Logo program,” says Gray. “I knew it wa
s just a matter of time before we were gonna start feeling that. I’m surprised it took this long. So that was looked at as, ‘Hey, they’re just trying to save their ass,’ when the reality was that strategically, from where the market was, someone needed to do it to clean up. The only way to fix this market is to screw it up first. To some extent, that’s what’s happening – it’s getting fixed by getting screwed up. And people are gonna blame the person Powell, saying he screwed it by doing the low-price thing. But it was actually screwed up by the oversaturation of product available.”
An ASR veteran, Powell has occupied its end of the aisle since the trade show was launched in the mid 80s. Like NHS, Powell has weathered the previous dips, and has been successful in the interim. The Mini Logo program, a series of pricepoint branded-blank decks with a small brand logo on the bottom, has dominated the blank category in the past two years, and many competitors blame Powell for the proliferation of blank and pricepoint product. “If you look at this strategically, the last thing I want to happen is for unmarked blank boards made by anonymous woodshops to be the standard of the industry,” says George Powell. “What that’ll result in is a lot of little teeny woodshops – or maybe a few big anonymous ones – supplying dealers, and no one will advertise in the magazine, no one will support contests, no one will pay for pro skaters. No one will put the pizzazz in skateboarding – the videos and all the things that we’ve done all these years to make our industry grow and be special. I truly believe that we need strong companies that are branded, that do a good job in order to keep the industry strong.”
Jim Ruonala manages San Diego’s Pacific Drive skateboard shop, which has sponsored local pros for years. Ruonala says that he would love to sell more pro decks, but that the market demands a certain quantity of pricepoint product. “We try to keep the premium and pro-model boards’ prices down to compete against that,” he says. “And we get our own runs of boards that we screen ourselves, just so it isn’t a blank board – at least it’s a shop board. Sure enough, those boards sell very well. We would rather not, but we have to do it. There is a customer who wants to pay less for a skateboard deck. Unfortunately it cuts out companies.”
Powell says the Mini Logo program gives shops an alternative to unbranded blanks, and that pricepoint product serves a role in the market: “Historically we haven’t been the rich kids’ sport, really. So if you want kids to enjoy skateboarding, you’ve gotta make the product affordable.”
Tod Swank of Tum Yeto is determined to draw pricepoint customers back to premium products. So he’s taking a cue from the few accessory brands that seem to be doing well. “Nixon watches are 100 bucks a pop, and kids are buying them at the skate shop,” says Swank. “It’s like the kids who are buying graphic griptape at twelve dollars a sheet – they’re buying it because it’s hot. It’s got something they want. And that’s what I’d like to see skateboarding go back to at the board level, where kids wantthis brand, and they want this board.”
While pricepoint product squeezes margins for most companies, Barnes says that the premium brands are still doing well. This supports the theory that the current market pressure is primarily affecting middle-tier hardgoods companies – those whose products fill the gap between the pricepoint boards and the premium brands like World Industries, Tum Yeto, and Birdhouse. “I’m doing more business with the bigger guys now than I was,” says Barnes. “Then there’s still new guys coming, and that’s what’s hard on me, because I’m still facing the same dilemma that I ever was – saying yea or nay to a new brand. On one hand it seems like a terrible time to be entering the market. On the other hand, though, some just left – there might be room for somebody with less overhead to stick around.”
The early 90s saw the rise of the “skater-owned” company, a term that Gray feels has been grossly misunderstood: “What we are are pro-skateboarder-owned companies, for the most part. There’s only a certain point when you get automatic legitimacy for being that. That window was open from eight years ago until about four years ago. And now people are questioning it a littlebit more. We don’t want everybody to come into it. Think of how many pros we’re inundated with this time. What if every single one of those thinks they should start their own company, and the market allows them?”
Powell cautions against too much entrepreneurship, for now. Small brands have always come and gone, but he says that the current situation is unique: “This is the first time that a number of well-known companies seem to be exiting at one point, and it’s a signal to people thinking of starting companies – it may not be such an auspicious time, and it may not be as easy as it looks. There’re too many people in the industry – it’s overcrowded – too many pros, too many companies. It just needs to thin out. That’s all. And nobody leaves voluntarily, so it’s gonna be tough. It’s gonna be ugly for awhile.”
By the time the Action Sports Retailer Trade Expo opens again in February, a new, more robust skateboard industry will have begun to emerge. If this is the beginning of another period of consolidation, and if skateboarding continues to grow, then the companies who make the transition will find themselves in a much improved position. They will project a much stronger industry, and the aisles at ASR will fill to capacity once again.
* According to the International Association Of Skateboard Companies.
Ý Based on results from the TransWorld SKATEboarding BusinessSummer 1998 Retailer Survey.