some final thoughts on blanks from Jeff Harborough

[skategeezer]

Jeff is a consultant to the skate industry who writes for Transworld Biz...
this is from his website jeffharborough.com
cheers
Michael

Can We All Please Just Calm Down?
A Business Perspective on Blanks
BY Jeff Harbaugh
I can’t believe I’m doing this. Oh lord, how many people am I going to piss off
this time? I mean, I could just lay low and let the slings and arrows fly back and
forth but no, I just don’t have the intestinal fortitude to keep my mouth shut.
Instead, there’s this almost pathological need to try and reduce a highly
controversial and frankly emotional issue to a series of business bullet points. I
guess I’ll console myself by remembering that I’m not going to say anything here
I didn’t say some years ago in Market Watch.
I might as well get it over with. Maybe it will help me sleep at night.
For those of you who live at the United States Air Force weather station three
miles from the South Pole (and don’t have an internet connection), IASC and the
leading skate hard goods companies created and wrote the 32 page insert called
"Under Fire" that you all received in the recent issue of Transworld Business.
My hats off to them for achieving a level of efficiency and cooperation that,
honestly, I wasn’t sure they could pull off. And they succeeded in highlighting
what I think most of us would agree are the major issues confronting the
skateboard hard goods industry today and identifying some action items. What
I’m going to do is review those issues and then go a little deeper into the
business implications of what they are saying and advocating.
Remember that "Under Fire" is a consensus document. That is, not everybody
who was represented in it would agree with everything everybody else said. Still,
I thought there was remarkable consistency across a number of key points.
And the Key Points Are……
The bedrock of the whole argument is that pros are the foundation on which
skateboarding is built and that their influence is key to getting kids excited about
and continually committed to skating. Okay, I agree that pros have big influence
on the core of skating. How much? As much as they use to? Don’t know.
The next point is that the brands’ marketing activities, including their support of
pros, is critical to the health of skateboarding. If skaters are buying blanks and
shop decks (I consider those separate categories, and will discuss why later)
rather than the more expensive branded decks, the brands can’t afford the same
marketing programs. That’s simply a financial equation. Can’t argue with it.
And, the argument continues, if professional skateboarding and the associated
promotional activities aren’t strong and can’t be continued at the same level
skating, as an activity, a lifestyle, an attitude, and as a business is fated to
decline.
Well that would suck if it actually happened. What do the brands want to do
about it?
First, they acknowledge that it’s time to introduce some technology and
innovation into skate hard goods to give skaters a reason to buy the more
expensive branded decks. We’re already seeing some of that start to happen
and you’ll see more. But of course it’s not an instant solution. The industry has
spent a lot of time, effort and marketing dollars to convince skaters that a
skateboard is a seven to nine ply laminated product made of hard rock Canadian
maple. Skaters seem to believe it. Getting some of them to pay more for
something that ain’t quite that, even when the benefits seem obvious, will take
some persuasion and some time.
I guess where we’d like to be in where, for example, golf is. You know- they
come out with "new and improved" models every year and people buy them even
though there’s nothing wrong with their old stuff and the new stuff is expensive
and doesn’t necessarily make a difference in their game. Or like in automobileswhere
the newest technology appears in the top of the line product and works its
way down year by year.
This will require, however, that the pros be in lock step with their sponsors.
Second, they recognize the shop’s need for a better margin on branded hard
goods. What are they going to do about it? Somewhere between lots and
nothing. There are brands already offering better margins and some that just
don’t want to compete at the lower price point. There is, by the way, nothing
wrong with a business decision to not offer a less expensive product if that’s what
your market position and targeted customers require.
"Under Fire" is only "the first step in IASC’s plan to continue educating and
informing the industry about this issue." There will be additional steps in the
program. The supplement ends with a call to action suggesting some tactics that
all the industry’s stakeholders should consider.
So, Where Are We Exactly?
You remember all this from a few years ago. Skating takes off, skate parks start
to sprout like mushrooms, brands can’t keep up with demand. Everybody’s
happy. Then the market gets big enough for the foreign, low cost manufacturers
to notice it. "Hey, we can make this cheap," they say. They’re right. The usual
startup problems. Problems resolved. Eight bucks landed cost for a blank
skateboard if you’re buying in quantity. Maybe less. Consumers get the idea
that the quality of blanks and shop decks are the same as the branded deck. Big
price difference. Product wears out. No fundamental change in the product in 20
years or so. Percentage margins decline. Worse, total margin dollars earned on
a deck decline. Fifty to seventy percent of deck sales world wide (you pick the
number you believe) are blanks and shop decks.
So after a period of rapid growth, the industry matured a bit and started to
consolidate. Product becomes a bit of a commodity, price and margin pressures,
volume matters, etc. Look, I’m not going to go through this for the 14th time. All
the usual things happen that happen to any industry in its life cycle. Big surprise.
It’s so predictable it’s boring.
Anyway, wherever you go, there you’ll be. And here we are. There are some
business issues implicit in Under Fire that it didn’t specifically discuss. Well, you
can’t blame them- if they had, you’d be confusing this thing with the telephone
book. But me, I always wanted to write a phone book.

[skategeezer]

part 2


Why People Buy
As far as I know, there are three things that motivate people to purchase a
product. They are advertising and promotion, product features, and price. It
appears, right at the moment, that advertising and promotion isn’t working too
well for branded skate decks. If it was, there would be no Under Fire and I
wouldn’t be writing this. Which, frankly, would be fine with me. There must be a
better use for a Saturday morning. I mean, I could be doing yard work. Never
mind. I’ll write and send the two teenagers out. Same to you kids. No, you can’t
play with the chain saw.
New product features? Well, uhh, there really haven’t been any that have caught
on, though hopefully that’s starting to change.
That, I am afraid, leaves us where we really, really didn’t want to be. At price.
Let us then discuss the elasticity of demand with regards to price. If the
blank/shop deck is, say $20.00 and the branded deck is $50.00 and you’re a
fourteen year old without a lot of money or the a parent of a fourteen year old
who knows you’re going to be back in this shop in a month, that’s a big
difference. Apparently, too big a difference for a lot of people.
How big a difference wouldn’t be too much? Judging from the discussion of the
demand for the $35 branded deck in the sacred supplement, the retailers seem
to think that’s a price point at which they can sell branded product. But would
$40 also work? Or does it need to be $30? What kind of and how much
advertising and promotion and product innovation can change that?
We don’t really know. Or at least I don’t know. Actually, I guess I do know the
answer. The answer is, "It depends." Isn’t that helpful? It depends on the brand.
It depends on the shop. It depends on buyer motivation. Has anybody out there
rigorously asked 500 skaters, or even 100, why they bought the skate board they
bought?
Right at the moment, if we asked a bunch of skaters, we know quite a few of
them (fifty to seventy percent I suppose) would say that price was a big factor, as
is their belief in a lack of meaningful product differentiation. More troubling, I
suspect that if we asked our questions just right, we’d find that many are indeed
influenced by the pros- but that doesn’t translate into buying a branded deck.
Finally I’d expect to hear, "I support my local skate scene." And that brings us to
our next topic.
Blanks and Shop Decks
Let’s define a blank as a skate board either with no graphics at all or with
graphics with absolutely no legitimate connection to skateboarding. There will
always be a market for both. Some percentage of the market, especially lacking
any real or perceived product differentiation, will always want to buy the cheapest
thing they can. It’s true in any market. And somebody will always supply it.
I’d like to say that again- If the customer wants it, somebody will always supply it.
Lacking a change in skater perception and motivation, every store and shop that
stops selling blanks creates an opportunity for somebody who does sell them.
The non branded board with graphics has been the province of the larger chains
and sporting goods stores, often as completes. There’s no possible reason for a
"real" skate retailer to carry them, if only because they’d make more money on
their shop decks as well as promoting their shop. They are going to be around,
and I imagine the quality has improved.
Shop decks, though, are a different story. What I hear, and what I suspect is
often true, is that a shop deck, in a good shop’s neighborhood, is essentially a
lower priced substitute for the traditional branded product. It offers a certain
customer the same sense of legitimacy, belonging, and connection to skating
and the skate culture that they use to get from the branded pro deck. And it’s
cheaper. And shops make good money on them. I wonder how many shops put
out their own pro models. Shop decks are not going to disappear. In fact, they
may get stronger. And as I said, I don’t think the success of shop decks is just a
price issue.
Maybe, with the right technology and promotion by the brands, shop decks can
become the entry level boards.
It would be interesting to collect some good information on sales of shop versus
blank decks as I’ve defined them. They really are separate categories, but
they’ve been lumped together.

The Role of the Pro
I suspect there are some people who feel no need to collect any data on buyer
motivation. They believe they already know the answer they’ll get back. In
Under Fire, most of the brands say their companies are rider driven, or words to
that affect. Always have been, always will be. That’s a valid statement of
principal, but it may not be an adequate basis for a business, judging from the
decline in the sale of full price branded decks.
I would not try to push a comparison between snowboarding and skateboarding
too far. But I will point out that snowboarding use to have a pile of pros and sell
lots of pro decks. Once the industry matured, that started to decline until today,
the number of pro snowboards sold is vanishingly small.
That doesn’t mean that the pros don’t still influence snowboarders. But what the
snow board brands finally figured out was that the best pros were worth
whatever you had to pay them. The ones that you just flowed product to and
maybe offered contest and photo incentives were influential at their local scene.
All the riders in the middle? Not worth what they cost was the decision, and they
are gone.
By the way, my definition of the best pro is not just the one who’s the best skater.
It’s also the one who’s personable, responsible, professional, and shows up on
time.
The other things that happened, in surf especially, is that the apparel and
footwear companies picked up most of the team/pro sponsorship and other
marketing expenses.
Is this how skateboarding will evolve? I don’t know. Skate hard goods
companies have historically been the bedrock of skate boarding. Certainly shoe
and apparel companies are spending plenty of money supporting skateboarding.
So here’s the marketing matrix. Some skaters are influenced by the pros and
buy pro decks. Some are influenced and buy the pro’s brand. Some are
influenced, but still buy what’s cheap, maybe spending their money on shoes and
clothing again. Some are influenced and would like to buy the pro deck but can’t
afford it. Some don’t give a #### and buy whatever is cheapest as long as they
perceive the quality is equivalent.
Well, we’re back to buyer motivation. Let’s talk to those few hundred skaters and
figure out just where the industry (and individual companies) should be spending
its advertising and promotional dollars.
Distribution
Everybody gets together to discuss distribution, tries to blame the other guy for
the so called mess, and nothing changes. I’ve seen it too often, and I’m not
talking just about skateboarding. Anybody who runs a company in the action
sports business sits at their desk and ponders distribution every day. They know
who they can absolutely sell to. They know who they should definitely not sell to
right now. They try and figure out when and what and how much they can sell to
all the accounts that don’t fit neatly in the "sell" or "don’t sell" categories. They
ask themselves, "What will other accounts think? How will it impact the brand?
How much money can I make? What’s the potential for growth? Is it consistent
with my brand’s market position and brand strategy?"
So distribution evolves as companies grow and brands change. It just does.
There is no mess. There’s just normal industry/brand/retailer evolution. Do
what’s right for your business given this inevitable fact. Don’t look for somebody
to blame, and don’t wait for it to be fixed.
Industry Evolution
Industries change. They just do. Companies adapt or die. The customer always
gets what they want. You can influence them, but not always as much as you’d
like. An industry succeeds when the companies that make it up compete. Part
of that competition is always innovation. Some do well, some don’t. But the
industry itself progresses; sometimes kicking and screaming, but it progresses. I
guarantee that every company will do what it perceives to be in its own best
interest.
I went to the Park and Recreation Convention here in Seattle last October.
Basically this is the convention of people who sell stuff to playgrounds, and I can
only say that I wish I was a kid again. Lots of cool stuff that’s beyond what I
could have imagined when I was of an age to use it.
I saw Per Welinder from Blitz there, manning the IASC booth and promoting
skate parks. I walked around a corner and came face to face with Beau Brown,
formerly of Sole Tech and now COO of Radius 8, a seller of portable skate
ramps. His face was all aglow from the huge number of business opportunities
he thought he had at the show. As we talked, a guy from some municipality
came up and, apparently amazed to learn that portable ramps existed, asked
how quickly he could get some. He guessed at the price, kind of suggesting that
one might cost $3,000 as I recall. Beau, who seems to have a nasty ethical
streak he needs to get over, told him that no, the one he was looking at was only
$300. The guy scurried away to get his boss.
I thought there were a lot of potential opportunities at that show for companies
who wanted to pursue them.
I’m not quite sure there’s anything wrong with skateboarding as a sport, activity,
lifestyle or whatever it is. There seem to be more skaters all the time and they
seem to be enjoying themselves. Yes, hard goods companies have a big
challenge due largely to some inevitable industry evolution. As long as they
follow up on the product, promotional, and pricing/margin initiatives in Under Fire
they can meet the challenge.

[rawls]

strike 1- Jeff wrote:"Let’s define a blank as a skate board either with no graphics at all or with graphics with absolutely no legitimate connection to skateboarding."

I have a better idea, lets define blank boards as the same boards that are being offered by the pro-brands, except before the have their 30.00 paint job.

strike 2- Jeff wrote:"Everybody gets together to discuss distribution, tries to blame the other guy for the so called mess, and nothing changes."

Wrong, they are blaming the consumer.

strike 3- Jeff wrote: "An industry succeeds when the companies that make it up compete. Part of that competition is always innovation.

We have already established that no innovation (worthy of driving sales upward) have occurred in many years. Even the IASC venders agree.

There is no competition in a market with stagnant cookie cutter product, cost will always win. Thats why this whole issue is being discussed.

[shapeshifter]

every shop i walk into i'm hit with a barrage of opinions on that pull-out that shipped with the transworld business mag. everyone's hot about this or that talking about how iasc is shootin' blanks...

articles are being written about the articles that have been written about that article that really doesn't address anything really new at all somehow.

from my point of view the new war on nothing is really about giving the iasc a presence in the minds of anyone involved in the biz. it isn't about the problem, nor is it really about any sort of solution. it's just a way to wag the dog. what the industry has in store is simple, and that is change. riders are changing, board styles are becoming more diverse. now all the companies of the association have no presence in anything but the street because they only produced whatever all the others were making yesterday. they hadn't supported anything else but the street and its riders then but now they're supposed to be telling everybody else that it's their business so get out of the way?

the seven words that matter to me most in all those of those thirty two pages are: "this suppliment is only the first step..."

[MrCokesNSmokes]

I'm assuming that, the next step is shooting themselves in the other foot.

[shapeshifter]

heheheh... after that classic move i doubt they'll have a leg to stand on. the trigger they pulled was on an automatic and now their've got to pull a spin in an attempt to dance through this nightmare.

[cfav]

I think a sense of community that a brand creates its ultimately going to usurp the pro's role in a brands sales.Innovation is key,our simple business credo?"The Best always wins".I have to say,in mainsteam skate manufacturing,it's not the best.cfav