How do North American manufacturers distribute goods all over the world? This is an important topic to the multitude of start-up companies learning how to work with the foreign market, especially now that snowboarding has become like McDonald’s cheeseburgers and rock ‘n’ roll¿the latest American trend to storm the world.
“We still sell more product here than anywhere else,” says Dave Schmidt, Burton’s vice president/director of sales, “but not by much. Europe and Japan are each getting close to North America in terms of unit sales, and they’re growing quickly.”
“Our Japanese sales alone financed a new size of women’s boards we put out on the market this winter,” says Sims’ Marketing Director Gaylene Nagel. Sims is enjoying an export situation similar to that of many U.S. companies. Reaching these increasingly important foreign markets can be profitable, but tricky. There are three major routes used by manufacturers and companies in the industry: distributors, direct distribution, and licensing.
The most common way firms market abroad is through distributors. A foreign firm will buy or agree to buy a large amount of merchandise, and in turn sell it to local outlets where it reaches the customer. Dealing with distributors is probably the easiest route a manufacturer can take when doing business abroad¿a firm doesn’t have to worry about setting up an office or making contacts of its own. There is also the added benefit of dealing with people already established in the winter-sports equipment industry. “If you want good, reliable people to sell your stuff, they probably already have a job,” says Nagel. “We’ve found that our distributors are an effective way of getting our product to retail.”
On the downside, distributors may also deal with a competitor’s products, and it can be difficult to tell if one brand is receiving more attention than another. When using distributors to crack an emerging or unstable market, prudence is important. Jaro, a snowboard apparel company based in Eugene, Oregon, uses distributors to get its clothing to the market in the Czech Republic. Sabina Poole, owner and president, added, “We check our international distributors’ financial base very carefully, and sometimes we require a deposit or advance payment.”
Industry giant Burton, on the other hand, doesn’t have to worry about using distributors to establish a foothold in Europe¿they’re already there. This is called direct distribution. In addition to its American and Canadian facilities, two Austrian factories are under exclusive contracts to manufacture Burton boards. A European office in Innsbruck, Austria handles all production, quality control, distribution, and marketing. “A lot of the product we make in Europe, we sell there,” says Schmidt.
Besides geographical convenience, Schmidt adds that having a foreign office in Europe helps to understand that market. “Some companies tend to treat Europe as if it were one market,” he says. “But it’s not like that at all. Alpine boarding for example, is still pretty strong in Central Europe, but I couldn’t sell an Alpine board in Scandinavia if my life depended on it.”
According to Schmidt, doing like the Romans is a lot easier if you have some of them on your team. “Having Europeans working for us in that office has been a great help. I don’t feel like giving away any of our secrets, but I will say that you can’t do business in the rest of the world the way you do it in the States.”
A much less common method of foreign distribution in the snowboard industry is done by licensing of a company’s name. Quiksilver Incorporated, a manufacturer of snowboard clothing in addition to its better-known surfwear, holds exclusive North American rights to the Quiksilver name. The company bought the name outright from the original Quiksilver International, an Australian company. Quiksilver International licenses the name around the world and coordinates activities between the different licensees. The licensees, while separate companies, cooperate to a larger extent and often act as distributors for one another’s products. This can make little things complicated, at least on paper. For example, Nepali, a French company that holds the European Quiksilver license, is owned by Quiksilver Incorporated. Since Quiksilver Incorporated can only license the use of the name in North America, Nepali must pay Quiksilver International an annual royalty for the use of the name.
Robbin Forsyth, merchandiser for the company’s snow division, says that despite the apparent complexities involved with this setup, there are important benefits. “It’s like a global team, you don’t have to worry about who’s going to sell your stuff in what country, or about drawing up letters of credit and things like that,” he explains.
Forsyth says Quiksilver’s unusual situation is an outgrowth of their chief product line. “Quiksilver, you have to remember, is a surfing company. Most distributors tend to be more skate or snow oriented. Snow is a big part of what we do, but it’s not our lifeblood.” The company, he says, has eschewed direct distributorship arrangements like Burton’s because the original founders weren’t interested in running a worldwide operation.
Most snowboard-goods manufacturers do and will continue to distribute worldwide, which means if you are starting a company or breaking into the foreign market, it’s important to determine the most effective channels of distribution early on.