The Chain Gang — Here they come¿ready or not.

Chain stores¿to some the mere word sounds like fingernails grating across the chalkboard. To others the word conjures up images of dollar signs. Either way, chain stores play an important role in the changing industry as they slowly gobble up the market share.

But what is the definition of a chain store? Everyone has a slightly different idea, but most agree that chains can be categorized into “big-box” chains and “regional” chains. Big-box chains, also known as category killers, generally carry everything from Ping-Pong balls to snowboards. Regional chains that sell snowboards tend to be smaller and specialize in products relating to outdoor gear and Alpine sports. For this article’s purpose, the definition of a chain store is a carrier of snowboards with five or more retail outlets. The line must be drawn somewhere.

Very little statistically valid data exists in the snowboarding industry that verifies chains are definitely gaining market share, but anecdotal evidence would suggest so. The trend towards larger chains can be seen in almost every retail segment. Wal-Mart (the nation’s number-one retailer), Costco, Eagle, Office Max, or any one of the multitude of big-box discount houses causing mom-and-pop businesses to close across the nation illustrate the trend. At the basic level, the reason chains do so well is they have huge buying power. This enables them to buy for less, sell for less¿and price is king in the U.S. But thus far, the snowboard industry has resisted this trend.

More consumers and manufacturers have shown that they simply want the superior knowledge, service, and selection that specialty shopsprovide. A lot of snowboarders don’t like the principle of chains, and chains just don’t project the image they are looking for. Darell Wess, national sales manager for Nidecker, remarks that a lot chains put the product out cheap, which may be good for some consumers. “But they don’t interact with the sport a lot through ads and sponsorships.”

How does this sound? Attention snowboard shoppers! There’s a blue light special on your favorite snowboard. That’s right, Kmart-owned Sports Authority sells snowboards in most of its 120 locations. Weighing in at about 40,000 square feet, with names like K2, Kemper, Liquid, and Rossignol, and with big-mama Kmart to back them up, is there any stopping a powerhouse like this from stomping all over the little guy?

Don’t worry, little guys. Several of the biggest manufacturers won’t even sell snowboards to a big-box store like this. And those that do limit them to the lowest-end boards. Scott Perkins, ski and snowboard buyer for Sports and Recreation Inc., a chain of 61 stores located in the East, may express the disposition of the big-box chain best: “Our snowboard sales have been very disappointing, but we are going to wait for the companies to cater to our larger market with lower price-point boards and tamer graphics.” Currently, Sports and Recreation carries two lines: F2 and Wild Duck.

Recognizing their inherent weaknesses, other chains take a more innovative approach. Two large regional chains, Gart Sports and Ski Market, highlight chains’ efforts to further tap into snowboarding’s growing market potential. Gart Sports’ approach has been to create Big Daddy’s, a separate snowboard shop within seven of 60 stores.

“Big Daddy’s is run by full-time snowboarders only,” says Derek “Heavy” Mill, Big Daddy’s merchandising manager, who opened his first shop in 1992. Heavy is opening eight more Big Daddy’s for the ’95¿96 season. Similarly, Ski Market, a chain of 23 stores in the East, has six “Underground Snowboards” shops, four of which are located inside Ski Market stores.

Big Daddy’s and Underground Snowboards have been successful in boosting sales of snowboards because they create an exciting image consistent with the snowboard market, and that image has allowed them to offer a broader and deeper selection. For example, Burton will sell its gher price-point boards¿Twins and Pros¿only to Garts with Big Daddy’s. Big Daddy’s also carries nineteen different lines, while plain Garts can only offer five. “Garts is one of our biggest chain outlets, and Big Daddy’s is a great concept. We support them with our full line,” says Clark Gunlach, national sales manager for Burton. Garts without Big Daddy’s, and Ski Markets without Undergrounds are limited to the lower price-point boards. This is the selective and protective distribution strategy that most manufacturers employ with chains.

Other manufacturers won’t offer boards to chains at all. Stacy Hauser of Hauser Snowboards would probably disagree with these manufacturers: “Kids aren’t the biggest market anymore. There are more adult snowboarders, family snowboarders, and crossover snowboarders who find the stereotype at specialty shops intimidating. Besides, chain stores pay their bills on time and don’t bounce checks.” Hauser also brings the viewpoint of a small start-up company. “We’re in a position where we can’t be too selective.” she explains. “The market is very competitive, and we need to get our numbers up, increase our exposure, and generate some advertising dollars.”

The dangers of being too careless were demonstrated by Kemper’s dive under previous ownership. Once considered one of the top-five companies in the industry, Kemper indiscriminately sold identical boards to some large chains such as Costco for a lower cost, and often without regard to their specialty dealers’ proximity. Local shops were furious when customers came in demanding the Costco price and demanding that their Kempers be serviced since Costco wouldn’t do it. Kemper quickly lost a large portion of its customer base and sold out. “They were underfinanced, and had an inconsistent price structure between stores,” explains Drew Gardner, vice president of California Pro, Kemper’s parent company that took over in August ’94. “Something we now concentrate on is consistent price structure.”

On the retail end of things, specialty shops’ reaction to chains is varied. “We don’t carry the same lines as chains. And if one of our lines ends up at the local chain store, we drop them, because it just cheapens the name,” says Jay Moore, co-owner of World Boards in Bozeman, Montana.

The traditional way small shops have competed with chain stores is by offering better selection, service, and expertise. They have also been more flexible in inventory selection, enabling them to quickly respond to local demands for new products and individual needs. But as chains become more specialized, gaining the advantages of both chains and specialty shops, the small shops’ competitive niche diminishes. Gregg Dileo, vice president of Division 23, has some encouraging thoughts for small shops facing this dilemma: “Small shops can still keep a devout clientele through promotional activity and community involvement. But I think the big thing they can still go on is image. I mean, the kids are smart. They know who is just trying to look cool, and who really is cool.”

Barry Russell is a MBA student at the Southern Oregon State University in Ashland.

Inside a Chain’s Mind: Pedersen’s Ski and Sports

TransWorld SNOWboarding Business recently paid a visit to the charismatic and entertaining Jim Shaw, franchise owner of Pedersen’s Ski and Sports in Medford, Oregon. Pedersen’s is a sporting-goods chain with 22 stores across the West located exclusively in malls. They primarily carry bikes, skis, in-line skates, and snowboards. Medford is a town more commonly associated with loggers and industrial waste than snowboarding. But this Pedersen’s also gets a healthy supply of snowboarders from nearby Mt. Ashland. The snowboard display reflects this by being very noticeable among the other merchandise. They have a respectable lineup: Burton, Morrow, Santa Cruz, Rossignol, K2, Evol, and WFO.

Shaw’s desk is in the corner of a huge concrete backstock room. Snowboard boots are solidly stacked on twelve-foot shelves all around him. Aside from the dirty jokes, the interview went like this:

TWS Biz: What are all the boots for?Shaw: Oh, those are for the package special we’re going to run in the fall. We’ll sell a board, boot, and binding package at several price-points. We buy them now because we get a better discount this time of year.

What are the pros and cons of being located in the mall?Well, the pros are that we get a lot of walk-by traffic and good security. The malls love us because we bring in a whole new type of customer, so they give us cheap rent. But the bad side is we get the mall-shop attitude. I mean, people don’t take us seriously because we’re in a mall. But we have a very knowledgeable staff and a full-service shop. Pedersen’s top-two stores for sales have separate outside doors from the mall, so we’re working on locations with an outside door from now on, because that must give us a different image.

What about the pros and cons of being a chain store?We buy for 22 stores at once, which can give us a substantial volume discount. Also, we have a very fluid inventory network where we can quickly exchange poor-selling items for good ones with other Pedersen’s. I guess the bad part is that sometimes conflict arises because we are a discount house and companies out there are trying to keep prices artificially high. But if you ask me, this is a form of socialism. You should let supply and demand rule, because the consumer benefits in this way. For example, the rep for a popular brand of sunglasses came in one day, looked in our display case, and said, “You can’t sell those for that price!” I said, “Oh yes I can. Those are my sunglasses.” The rep came back later that afternoon and bought every one of those sunglasses. Needless to say, we don’t carry that brand anymore.

Have you had any trouble getting the brands of snowboards or price-points you want?No, we have all the brands we want and aren’t limited to lower price-points. I think because we started selling snowboards eleven years ago when nobody else was really doing it, we have built up a loyalty with companies like Burton. And companies realize that we provide good service and knowledge.

I know Pedersen’s carries its own private-label brands for bikes, in-line skates, and clothing. Are you considering doing this with snowboards?No, the reason we started our own brands in those other products is because the lower price-points didn’t exist with the features we were looking for. So far, the snowboard industry has provided for us pretty well in that regard. There are so many companies out there that it makes for a very competitive environment, driving prices down. But I think that there is going to be a big shake-out. Who knows what will happen after that.

¿Barry Russellm. Snowboard boots are solidly stacked on twelve-foot shelves all around him. Aside from the dirty jokes, the interview went like this:

TWS Biz: What are all the boots for?Shaw: Oh, those are for the package special we’re going to run in the fall. We’ll sell a board, boot, and binding package at several price-points. We buy them now because we get a better discount this time of year.

What are the pros and cons of being located in the mall?Well, the pros are that we get a lot of walk-by traffic and good security. The malls love us because we bring in a whole new type of customer, so they give us cheap rent. But the bad side is we get the mall-shop attitude. I mean, people don’t take us seriously because we’re in a mall. But we have a very knowledgeable staff and a full-service shop. Pedersen’s top-two stores for sales have separate outside doors from the mall, so we’re working on locations with an outside door from now on, because that must give us a different image.

What about the pros and cons of being a chain store?We buy for 22 stores at once, which can give us a substantial volume discount. Also, we have a very fluid inventory network where we can quickly exchange poor-selling items for good ones with other Pedersen’s. I guess the bad part is that sometimes conflict arises because we are a discount house and companies out there are trying to keep prices artificially high. But if you ask me, this is a form of socialism. You should let supply and demand rule, because the consumer benefits in this way. For example, the rep for a popular brand of sunglasses came in one day, looked in our display case, and said, “You can’t sell those for that price!” I said, “Oh yes I can. Those are my sunglasses.” The rep came back later that afternoon and bought every one of those sunglasses. Needless to say, we don’t carry that brand anymore.

Have you had any trouble getting the brands of snowboards or price-points you want?No, we have all the brands we want and aren’t limited to lower price-points. I think because we started selling snowboards eleven years ago when nobody else was really doing it, we have built up a loyalty with companies like Burton. And companies realize that we provide good service and knowledge.

I know Pedersen’s carries its own private-label brands for bikes, in-line skates, and clothing. Are you considering doing this with snowboards?No, the reason we started our own brands in those other products is because the lower price-points didn’t exist with the features we were looking for. So far, the snowboard industry has provided for us pretty well in that regard. There are so many companies out there that it makes for a very competitive environment, driving prices down. But I think that there is going to be a big shake-out. Who knows what will happen after that.

¿Barry Russell