“It’s Deja Vu All Over Again!”By Jeff Harbaugh
The Crowded Market
In 1903, 57 companies started to produce cars. Thirty-two left the business the next year. I recently heard this on National Public Radio, so it must be true. Snowboarding, of course, is going to be different.
In your dreams.
They say that when you die, your fingernails and hair keep growing for about three weeks. In Las Vegas, I saw some companies whose personal grooming was clearly not part of a fashion statement they were making (except for Mervin Manufacturing). These company reps sat in their booths waiting for wide-eyed buyers desperate for any kind of snowboard or snowboard product to place orders, regardless of price, quality, or line completeness.
Three years ago, it worked for some. This year jaded buyers, overwhelmed by the number of snowboard brands and companies, scurried back to the familiar brands they could count on for delivery, quality, terms, warranty, service, and, by the way, sell-through.
It’s 1903 all over again.
I asked the same set of questions to perhaps 25 relatively new hard- and softgood companies. The conversations went something like this:
“If you’re successful, what will your company look like in three years?”
Long pause and a smile, followed by some variation on, “We’ll be a lot bigger and making money.”
“So you’re not making any money yet? Are you paying yourselves salaries?”
Longer pause and less of a smile, followed by some variation on, “Well, you know how it is.”
“How much working capital do you need to achieve your sales goals this year?”
“We’re not exactly sure yet.”
“Where are you going to get it?”
“We’re talking to a lot of people.”
“Who are your competitors, and how are you differentiating yourself from them?”
“We’re closer to the market and really know what’s up.”
“Are you prepared to risk losing everything you have?”
At this point they looked around hoping someone else would come into the booth. If there was ever a messenger who needed shooting, it was me. I could see it was time to finish up, so I’d summarize by saying, “Let me see if I understand this: You aren’t really sure what your goals are; you have no source of capital; no clear competitive strategy; you could make more money working at McDonalds, and are risking everything you have. Why are you doing this?”
Finally a question they could answer. Their face lights up. “We love snowboarding!”
Obviously, most companies didn’t fit this extreme profile, but some came close. The most common issue was lack of financing.
Where is the industry going?
The kind of irrational business planning described above is one indication that the snowboard market will consolidate soon. Other indications I saw at the shows include:
1. People trying to create market niches as a way of differentiating their product by: having separate lines for specialty and chain stores, doing graphics specific to a particular region of the country, and trying to make minor design or construction changes seem significant.
2. The product is becoming more important than the booth and its presentation. As what it takes to succeed in this business hits home, price, quality, service and delivery are competing with glitz and hype in the selling equation.
3. The first rumbling of price declines were seen, but not as much as I had expected. I attribute that to a shortage of quality, volume manufacturing, and fiberglass in the U.S.; a weak dollar; the presence of a lot of smaller brands that can’t afford to sell at lower prices; and the fact that a lot of the big players aren’t really selling direct yet. If you want a peek at the future, look at the pricing on Nale’s boards. One new brand having its boards made at Elan bemoaned the fact that Nale was selling boards to stores for less than he was buying them from Elan. How could he compete?
Answer: He can’t, unless he’s very well capitalized and has a well thought-out marketing strategy.
It’s just this ssimple: The snowboarding business is changing in predictable ways. Whether you are a retailer, distributor or manufacturer, the way you do business is going to change as well. Success means being ahead of the curve and using these changes to develop a competitive advantage. Living in the past means being buried there. “More of the same” won’t work any more.
Jeff Harbaugh has fifteen years’ experience working with privately held businesses growing quickly, in financial distress, and in rapidly changing markets. He spent three years as president of a snowboard distributor and has an MBA in finance from The Wharton School. Reach him at (208) 232-3138 or on the Internet at [email protected]