A Few Minutes With Airwalk President--Lee Smith Exclusive
SNOWboarding Business Interview.

SNOWboarding Business caught up with Airwalk President Lee Smith and Action Sports Category Manager Cec Annett on day two of the ASR show in Long Beach, California. Here's what they had to say in this exclusive interview.

SNOWboarding Business: What's your impression of the snowboarding marketplace right now?

Lee Smith: I think it's in a state of flux. There's a lot of brands. There are 272 board manufacturers right now. There's a good amount of oversupply. I think there was 50-percent oversupply last year. That makes it difficult for both the manufacturer and the retailer. Sure, there's going to be a lot of cheap prices, but overall I don't thinks it's healthy for the industry.

SB: If you could have looked into the future and known what the market was going to be like now, would Airwalk still have launched its board line?

Lee Smith: Probably. We're looking at it as a long-term plan. We actually launched the board line for two reasons, and both of those reasons are still valid no matter what the market is doing that year. First, we looked ten years into the future, and thought, "We're the number one boot manufacturer, what is that going to mean ten years into the future?" Where is snowboarding going to go? If we do that, it points us in the direction we need to go. Ten years from now, we're probably going to need things like outerwear and boards. In the ski market, for example, 50 percent of the market is rentals. As snowboarding matures, it will probably be something like that, and rental shops need a lot of packages. We want to be able to participate in that 50 percent of the market. The other thing is that we're working on our Quad binding system and we found that boards that are made for highbacks aren't really going to maximize what the Quad system can do. So, at some point we'll need our own shapes to maximize our step-in system. We might as well start marketing them now, with highbacks on them, but start shaping and tuning them for the step-in system.

(L to R) Lee Smith and Cec Annett of Airwalk.

SB: Isn't that a danger, though? It would seem to be a real marketing challenge to tell consumers that to get the most out of your step-in bindings, you have to be on an Airwalk board?

LS: Yea, it may be. It really may be. Hopefully we'll be able to show the advantages through competition. It really is a different feeling [with the Quad step-in]. You really don't have to lean over, you just push with your heels and your toes. Looking ten years into the future, we really want to be a complete snowboarding company. We want to integrate boots, boards, and bindings into one unit rather than becoming an obsolete boot supplier.

SB: So, did the oversupply affect your manufacturing?

LS: Compared to our market share in boots, yeah, absolutely. We're new at it and we're taking it slow. We have a good relationship with our factories. Generally, we make ten to twenty percent over what we've pre-booked in order to allow fill-ins. However, with boards we may only produce five to ten percent over.

SB: Some retailers have told us that Airwalk's focus lately has not really been on snowboarding, and that it's been in other places instead. What's your feelings about that?

LS: We're a schizophrenic company. We have been for a while. In fact our mission statement is be the "casual brand of choice while maintaining our dominance in action sports." To a degree, that's schizophrenic. It's two completely different mission statements rolled into one. Up until six months ago, we we're fighting against ourselves. That's why we split the company into two divisions. Now, the action sports division is completely separate from the footwear division and they both have their own goals, reps, and strategies. So, I'm sure a lot of those retailer perceptions were true. That was probably one of the most horrific things we had to do was split the company in two, and we did it in a matter of months. But it's already paying off. We have people focused on snowboarding 100 percent. And people focused on footwear 100 percent. So, I would say our focus on snowboarding is pretty max attentive right now. We aren't fully staffed, however. We're looking for a general manager. I'm doing it right now, and I'm not doing it very well. We're also looking for a board designer, a clothing designer, a director of marketing for action sports--there're quite a few key slots that we have to fill.

SB: What percentage of your business is international?

LS: I would say in general it's 70 percent domestic and 30 percent international. But last year because of Japan -- we had a custody battle over our trademark in Japan last year, and the general market in Japan was so poor last year -- it was probably more like 90 percent domestic and ten percent international. We're now focusing on Europe. It has the biggest growth potential right now. Cec Annett: It's amazing. There's so much potential there right now and we've barely begun to tap it. According to some of the studies we've seen, we have 40 percent of the boot market over here. We have like eight-percent marketshare in Europe.

SB: So, what's the holdup? Is there resistance to U.S. brands in Europe, or is it more a red-tape problem?

LS: No, I don't think there's resistance. Burton is doing well over there. They've done the right thing. They paid the price. They've opened up offices, they work very closely with their people -- so it's mostly our problem. Part of it is the ski influence -- we don't have a hard boot --and there's incidental things that may affect us to a small degree, but the major problem is us not focusing on that marketplace.

SB: But that's going to change?

LS: Yeah, we've opened up four offices, and we're working much more closely with our distributors, as well as doing some direct sales in a few key markets. So, it will be a big push for us in the future. Plus, they're in love with the Quad over there.

SB: Think you'll produce a hardboot for that market?

LS: It's something we're definitely considering.

SB: Lee, how has Airwalk changed since you first started?

LS: When I started, we had about 60 employees -- this was about nine years ago -- and the company was doing about 30 million a year in sales. I was doing international sales at the time -- selling to Japan actually. When I became president we had eight employee and were doing eleven million. Now, we have 215 employees and we had 225 million in sales last year. The company has changed in just about every way possible -- it's been a great learning curve. I never thought this was going to happen, or planned for it to happen. I didn't have training on how to do it. It was just trial and error for the most part -- with a lot of error.

Airwalk's booth

SB: How did your boots get into Costco, and what did you do about it?

LS: Ooooohhh! I don't know if I want to name names. They were diverted from a person who was supposed to be exporting them, and didn't.

SB: Sims went into Costco and bought all of its product back. Did you do anything like that?

LS: I don't think so.

SB: Is that a fairly common problem?

LS: As far as diverting and parallel imports, yes. Doing it through a domestic retailer isn't that common. You have to choose your distributors well, choose your retailers well, monitor orders when they come in. We spent seven digits [more than 1,000,000 dollars] last year trying to prevent parallel shipments, nighttime production, and unauthorized factories making our product. We had people who were making more pairs than we were at one time! The knock-off shoes were being shipped to Japan, Korea, and even back here into the States. So we spent seven figures shutting down factories in Asia, leasing our trademark, and we had to take action against a few companies here in the states as well. I would just say, make sure your trademarks are in order. It is really expensive to hire these people. We had a full-on security firm -- private investigators -- the whole thing. It was quite expensive, but absolutely necessary. I guess every popular company faces these problems.

--Sean O'Brien, reporting live from the ASR show in Long Beach, California.