February 29, 2000

By Karen Price

It has drawn comparisons to the Industrial Revolution in terms of scope and impact on the future of business.

In United States households, more than a half-billion hours are spent on the Internet per week. In 1999, consumers in the U.S. are projected to spend more than twenty-billion online, and there are those who argue it’s changing the face of business forever. Others aren’t so sure.

One thing everyone knew when the Internet established itself as more than a fad was that it had the potential to generate thousands upon thousands of dollars in revenue. The questions were for who and how?

Those questions are far from answered in many industries that continue to struggle with the problem of how their businesses fit into the online generation. Many have scrambled to get .coms after their names just trying to keep up with the Joneses. And many industries, like snowboarding, are sticking with their wait-and-see policy, still unsure of if, when, and how their customers will stop entering brick-and-mortar retail shops in favor of accessing cyber shops.

Still Growing There is no question of whether there is money to be made on the Internet. According to GartnerGroup’s Dataquest, the worldwide business-to-consumer e-commerce market will reach 31.2-billion dollars in 1999, up from 11.2-billion dollars in 1998. It projects that by 2003, revenue will surpass 380-billion dollars. In the U.S. alone, the 1999 total is projected to reach around 20.5-billion dollars and 147-billion by 2003.

According to an industry report by Hambrecht & Quist, online sporting-good sales will exceed four-billion dollars by 2004, and account for seven percent of total e-commerce retail sales.

Recent demographic studies from @plan, Inc., show that more than 2.2-million online users say they have an interest in snowboarding. Not surprisingly, most of those users fall into the eighteen- to 34-year-old demographic–with more than 42 percent of eighteen- to 24-year-old Internet users saying they have an interest in snowboarding and more than 34 percent of 25- to 34-year-olds.

But is the Internet the future of snowboard sales? Nirve, an e-brand that made its debut in the world of online sales in time for the holiday shopping season, is banking on it.

Nirve was founded by Bill Duehring, formerly the COO and VP of product development for GT Bicycles, and Jonathan Mork, the former strategy vice president for China Internet.

In March, 1999 the pair decided to launch a product line that would include bikes, snowboards, wakeboards, skateboards, and outerwear. The difference between Nirve and other brands is that with the exception of outerwear, they will sell their products direct to consumers, strictly online.

"The environment right now is really ripe for e-commerce," says Elyas Khawarzad, corporate relations director for Nirve. "There are more people willing to buy online now. The concept would have been possible two years ago, but a lot of people wouldn’t have understood it. It seems more and more people are warming to the idea of buying online, so the environment is ripe for something like Nirve."

Nirve’s strategy is to sell high-quality merchandise at a lower price than consumers could find in retail stores simply because they are selling direct with no middle man. Their competition will include everyone–other online retailers, traditional retailers, and manufacturers.

Others, like Fusion.com, are simply taking the brick-and-mortar retail plan and moving it online. Fusion started out as snowboardshop.com two years ago and has since expanded its offerings to include skateboarding and wakeboarding.

"It’s grown tremendously," says COO Mark Horton, who currently employs 25 people and expects that number to double in the next four months. "We’ve watched it go from two years ago, when we couldn’t get any of the name brands except for buying closeout product to having the manufacturers calling us saying, ‘You guys are doing a great job, how can we get our product on your Web site?’"

Selling product online forces e-tailers to tackle traditional issues–advertising, marketing, and warranties/returns–in a whole new way. Often that means combining the old with the new. Fusion.com relies heavily on banner ads on other Web sites and search engines. However, it also takes the more traditional routes, including running print ads in snowboarding magazines, employing team riders, and relying on old-fashioned word-of-mouth.

Most online retailers are also very lenient with return policies simply because they have to be. Most allow consumers to return a product at no expense within 30 days through return authorizations, no questions asked.

Horton says they also adjust their Web site if they notice a trend, such as a number of consumers returning a boot in exchange for the next size up. In that case, they publish ordering information advising consumers that sizing tends to run small, and advises they order a size bigger than usual.

But where do manufacturers fit in? The biggest problem e-tailes face is their struggle to get the major manufacturers to sell to them. While some have warmed to the idea of allowing closeout product to be sold over the Web, a great many brands still have not resolved how to sell product online without angering their brick-and-mortar retailers. The simple solution thus far has been to just not allow their product to be sold online, period.

"I guess right now we’re trying to protect our brand and its image–that’s very important to us," says Steve Dewar, VP of sales for Sims Snowboards. "I think this early, it [selling online] would damage the brand. One of the big reasons I think it’s not there yet is a lot of consumers are going to shop at the store, get all the info there, then shop the best price on the Internet. That’s not very supportive of our dealers if that happens. We’re in a partnership with retailers."

Yet some online retailers, like bigdeal.com, say they’re not interested in undercutting the shop down the street. Nor do they see themselves in competition with brick-and-mortar shops who are good at what they do. Instead, they see the possibilities the Internet offers for consumers who live in more remote locations to still be able to purchase high-quality product.

"Local shops don’t have anything to worry about," says Joe Dunnigan, founder of bigdeal.com. "Nothing beats the ability to flex a board and twist it, or step into your boots. There are a lot of advantages to going to brick-and-mortar shops. The sales managers have to realize if a person has a choice of going to a local board shop with good supply and fair pricing and service, there’s no reason to buy from us. We’re not a discounter, we hold price. There’s not a big incentive for consumers looking for discounts to shop from us."

K2 Sales Manager Luke Edgar says that for now, existing K2 dealers can sell closeout product online, but nothing else.

"In certain industries it makes a lot of sense, but in snowboarding it doesn’t," he says. "People have been trying to do mail order off and on and the industry has resisted it. We have a great Internet site, we get lots of requests for products, but I’d be nervous to start fulfilling those requests at the risk of our dealers."

Edgar worries about the sport itself when consumers start buying product online versus buying from an established brick-and-mortar dealer. While he sees the potential to sell products such as K2’s backcountry line, which not every dealer needs or can afford to carry, he believes there’s something more to selling snowboards than a consumer can get online.

Dewar agrees: "It’s an emotional buy. When you have a product driven by emotion, I don’t know how you’re going to get on the Internet and touch and feel it."

Dave Schmidt, VP of sales for Burton Snowboards, says they do have an e-commerce site from which they sell Backhill kids’ clothing, but they don’t permit retailers to sell online and don’t plan to in the near future.

"It’s never going to take over the business," says Schmidt, adding that online sales account for just seven percent of Backhill’s total sales. "It’s going to force every retailer to do a better job, and that I see as a good thing. It’s going to push the level of service up because consumers won’t tolerate poor salespeople."

Internet retailers do have the advantage of being able to provide a consistent source of information to customers. Most retail sites offer photos of the products along with lengthy descriptions of features and functions who are easy to understand. The consumer doesn’t have to wait for a salesperson to explain anything, doesn’t run the risk of the salesperson not being knowledgeable, and doesn’t feel pressured to buy.

Some online retailers are using advanced technology to take it a step further. "For every product, we’re going to have Real Time video with a pro in that field that will take the consumer through the product, like a tutorial," says Nirve’s Khawarzad. "So every time a consumer points on that video, we’re going to have a full spiel. We’re never going to run out of sales people. Every shopper is going to get the same amount of attention. You can give every consumer the information you want every single time."

Other sites combine music, video, and photo galleries to make their site more than just a place to enter a credit card number. They review CDs; interview bands and athletes; and list upcoming shows, events and competitions.

"What we’re doing is more or less a revolution. It’s a brand-new thing," Horton says. "There are certain retailers who do an extremely good job of selling product to their customers. Then you have mail-order catalogs. By adding the Web sales you’ve got three different types of companies that appeal to their own customers."

Yet the ire Internet sales raise in most retailers is enough to keep manufacturers from jumping on the online bandwagon–at least for now. Schmidt and Edgar both believe it’s a question that will keep coming up and force manufacturers to keep reevaluating their policies based on the demands of the market.

"I’ve been pitched so many times," Schmidt says. "The Internet thing is a whole new breed in terms of how everybody has the solution to the problem. They have the greatest solution since the Internet was invented, and if we don’t say yes, it’s the downfall of the company. What we’re trying to do is sort through all the chaos and wild exaggerations and figure out what would be best for our customer. It’s simply a question of, where does our customer want to buy our products?If our customer feels the Internet is where they want to buy our product, then we have to be there."