Hungover, Jet Lagged, And Sleep Deprived

A view of the industry from 37,000 feet.

By Jeff Harbaugh

Editor’s note–Jeff Harbaugh is currently the COO of Sims. As always, his opinions don’t necessarily reflect those of SNOWboarding Business or Sims Snowboards.

The specialty shop in Vienna was fillwed with snowboards and snowboard products. It was mostly last year’s stuff and all on sale. Word was financial woes were preventing the store from getting new stuff.

Over at a big Intersport store, there was just as much space devoted to snowboard products as in the specialty store, and the deals were just as good. Though still under construction for the upcoming season, the snowboard department appeared to be well laid out. New product was arriving, and the people I spoke with seemed knowledgeable. There were boards priced to meet every budget.

Last year’s product was apparently taking over as the mid-price product, and there were at least a couple of boards from almost any brand you could imagine (Heavy Tools lives!).

So, I’m crammed in this tourist-class sardine can with circulation to my butt cut off, and for reasons explained by the article title, only half my neurons are firing, but I don’t think the retail situation in the United States is much different from what I observed in Vienna.

It’s also consistent with what the textbooks say happens in a maturing industry. Brands either become specialty players with clear market niches or they are larger-volume, lower-cost producers.

If you get stuck in the middle, you’re last year’s board in perpetuity.

The Good, The Bad, And The Ugly

Apologies to Clint Eastwood, but sometimes when an analogy fits, you just have to steal it. In no particular order we have four classes of snowboard companies right now:

By this time, everyone probably understands Burton’s market leadership.

Morrow, Ride, and Sims are three companies that are arguably large enough and have enough brand recognition to survive as specialty brands.

Next are the brands owned by large companies: K2, Mervin, Nitro, Rossignol, and Salomon–among others.

Finally, there are the smaller brands I won’t list. Most of them are looking at the same fate as Lamar or Silence. They have enough brand equity to be milked, but the time when they could hope to grow and prosper independently is past. A couple have always focused on being small niche brands, and may be succeeding at that.

What The Categories Mean

Burton is both large enough and well established enough as a brand that it’s fairly secure as the industry leader. The word "fairly" is thrown in there in recognition of the fact that although Burton is by far the biggest snowboard brand with the most brand equity, it’s still tiny compared to some other companies involved–or trying to be involved–in snowboarding.

Burton did a lot of things right, but two things stand out. First, it was well capitalized when most of its competitors were struggling to find enough dollars to print a decent catalog. Second, it expanded the Burton franchise quickly into softgoods and as a result is shielded from some of the hardgoods pressures even they aren’t immune to.

Morrow, Ride, and Sims have all had well-publicized financial, management, and brand-positioning issues. During the feeding frenzy of a few years ago, they all sought to increase their market shares by rapid expansion of distribution. In the process, either by use of multiple brand names or sales through the wrong channels, they got some volume but reduced their brand strength.

The impact on their brand’s market positions didn’t become apparent until growth slowed and the torture of consolidation set in. They tried to get big and be specialty brands. It turned out to be hard to do both.

All of the small brands seem to fit into one of two groups. The first are those who tried–or are maybe still trying–to become a Morrow, Ride, or Sims. In the current environment, these smaller brands don’t have (and can’t get) the financial resources to market their brands enough to achieve that goal. At the same time, pricing pressures have pushed down their margins–as they have for the entire industry. Profitability requires increased volume, but they don’t have the marketing money to achieve that volume. It’s a terrible Catch-22.

A few smaller brands, however, such as Never Summer and Glissade, have always been focused on being smaller niche players. With a connection to a particular kind of rider or a geographic area, these brands never tried to be big and so they don’t have to be. They’ve always had realistic long-term goals, and consistency in their approach to the market continues to be critical for success.

Finally, being a snowboard brand owned by a larger company offers both opportunities and challenges. You have the "security" of being part of a larger organization. You share overhead. You don’t need your own warehouse or computer system. You can earn lower margins and still be successful. You have access to some distribution channels that may make it easier to increase sales.

On the other hand, you’re not 100-percent a snowboard company and are–to a greater or lesser extent–subject to the ebbs and flows of the overall company’s fortunes.

Snowboard brands owned by ski companies have taken a financial hit by the declining fortunes of the ski business. It’s also likely that there will continue to be some creative tension between the snowboard and ski sides of the business. Some things never change, and it seems skiing and snowboarding still don’t entirely understand each other.

Which gets us, happily, to the point of the article.

We’re Not The Ski Industry

The inevitable snowboard industry evolution is not going to go the way of the ski industry. The industry won’t work its way down to only half-a-dozen brands.

Snowboarding may have become part of the winter-sports business, but it still has some uniqueness to it. Unlike skiing, it’s driven by lifestyle issues such as music, clothing, and attitude.

Don’t believe me? Well, consider the rise of Forum. Theoretically, it shouldn’t have been able to get started against all the large players in the industry. It’s apparently adequately capitalized, is growing at a manageable rate that insures some artificial scarcity, and has a focused market strategy.

Or consider the confusion, chaos, and mistakes by other companies that made a market niche for Ride when it was created a few years ago. Trying to grow too fast–in my judgment to meet the demands of Wall Street–cost the company momentum and legitimacy in the market it had originally succeeded in.

Now the mistakes of other companies have created an opportunity for Forum. It will be fun to watch and see if it has learned anything from history–like not to get too greedy. Brand success in snowboarding seems to require meeting the market’s expectations, but not exceeding them. You have to leave the customer just a little hungry.

The other reason there’s room for more than a handful of companies is demographics. In spite of crossover, in spite of the increasing age of the average snowboarder, this is still a youth-driven business, and the demographics suggest it will stay that way for at least the next five to seven years.

Retailers shouldn’t get too comfortable with the brands they’re carrying. What’s hot and what’s not will keep changing. Snowboard brands have to keep focused on snowboarding no matter who owns them. People who write columns for trade magazines will still have lots to write about.

Over the last couple of years, the term core is perceived to have lost some of the passion, importance, and legitimacy that was once associated with it. But the sport still has its roots there. And it looks like it will for the foreseeable future. Successful companies will have to sell beyond that core, but always focus on it.

That’s our biggest challenge, and also the reason snowboarding won’t become the ski business.

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Jeff Harbaugh works with companies in transition. Reach him at: (206) 232-3138.