The New Geography Are emerging countries viable snowboard marketplaces?

Conversations about snowboarding as a sport seem to often degenerate into pep rallies, with the participants rhapsodizing about the soul, the passion, even the enlightenment of riding.

But when the topic shifts to snowboarding as a business, those dewy eyes turn steely, money starts doing the talking, and anything warm and fuzzy generally gets excised from the discussion.

As a result, while the image of snowboarding has become a nearly international icon for youth culture, the business reality has limited worldwide expansion to those areas where the geographic and economic interface is most favorable: the United States, Europe, and Japan.

Of course, with the growth in those existing markets slowing, companies are eyeing new areas on the map. Eastern Europe, Russia, Korea, Australia, New Zealand, and Chile-areas usually marked snowboarding terra incognito-all have a nascent mountain culture and relatively strong economies.

Even the hinterlands, those impossibly exotic locales never mentioned in most snowboard business plans, are no longer entirely ignored. China, for instance, given the vastness of both its rideable terrain and population, has been recently eyed by forward-thinking sales managers.

“Korea, Russia, and China are all capable of doing ten- or twenty-times the business they’re doing now,” says Burton’s Vice President and Director of Global Sales Dave Schmidt. “But of course,” he adds, “ten- or twenty-times nothing isn’t that big.”

Schmidt points out that the obvious obstacles found in any foreign country-language and trade barriers, the cost of shipping-are compounded in many of the emerging countries by poor resort access, questionable political and economic stability, and the lack of business information.

Of course, other problems also exist-namely the gray market and trademark issues. “When you get a 1,000-board order from someplace where Hitler and Stalin fought tank battles, you can assume those boards aren’t staying in the country,” jokes Sims COO Jeff Harbaugh. “There are legitimate dealers in some of these countries, but you can’t expect a high volume of orders from them,” he continues. “You have to ask yourself, ‘Even if I get 100-percent of the legitimate marketshare in that country, would it really affect my financial results?'”

Harbaugh says that before a brand spends a lot of time developing one of these markets, it should first see if someone has already registered its trademark in that country. “If you can’t use your own trademark, the value of your brand equity is worthless,” he says. “In order to do business in that country, you’ll have to reach an agreement with the holder of the trademark-and that can be expensive.”

On the other hand, some of these countries might not have any enforceable trademark laws at all. “What will you do then? Hire a Russian mob hit squad?” asks Harbaugh.

Using a reputable distributor can help overcome some of these problems. “You have to work with a local distributor who knows the ins and outs of the market, because it’s pretty primeval,” Schmidt explains. “We can’t stay up on how all the local markets work.”

Worth The Hassle?

However, these formidable downsides haven’t kept companies away. “Because of the great population density, the large percentage of highly educated people, and, at least prior to the economic Asian flu, a good economy, Korea is one country we definitely talk about,” says Marc Bujold, Rossignol Snowboard’s U.S. division manager. “We talk about Korea almost in the same breath as Japan. And we’re doing business in Russia. In the Caucasus, some European companies have gone in and set up real resorts. Of course, I use that word loosely. It’s not like Vail-it has a hotel and a lift that works.”

K2 has expanded its sales into Eastern Europe and Korea, according to General Manager Brent Turner. Both Burton and Rossignol’s roster of minor players include Argentina, Chile, Brazil, Israel, Lebanon, Turkey,nd many of the eastern European and Baltic countries.

Convert has similar distribution through its mother company Columbia, and all of the brands have a presence in Australia, New Zealand, and Korea.

“The fact that we have a distributor in Lebanon is pretty cool,” says Bujold. “Most people see Lebanon as a decimated war zone. And we have Iran, too.”

None of these peripheral markets are likely to become significant players, at the very least because none has a workable blend of economy, geography, and money. “Czechoslovakia, Romania, Croatia, and what was Yugoslavia would be great,” says Schmidt. “But it’s kind of a mess right now.”

Brazil has a large population, but no mountains. Argentina has mountains, but not near the population centers. “In Chile, there are ski areas right next to a major city,” says Schmidt, “but the population base for snowboarding and skiing is small. There’s potential in South America, but nobody is running down there to spend a bunch of money to develop those markets.”

At the same time, how a brand will be perceived in the new market is wholly unpredictable. What sells as pricepoint product in a developed country may sell as a technical offering in a smaller one. “In Europe, Convert is a young man’s brand,” says Bill Inman, the brand’s outerwear merchandiser. “It’s still branded ‘Convert,’ but it’s more of a sub-category-rather than a sub-brand-of Columbia. It’s attracting a different customer than in the United States.”

Assuming a company can negotiate the maze of external variables, it still has an internal maze to face. “First there’s the money needed to market the product just to get the country to be a blip on the radar screen,” says Schmidt. “And the business in all these countries is piecemeal, so you take what you can get.”

Plus, setting up shop in these countries is no picnic. “It’s potentially easier to establish an office in Europe, and service multiple countries,” explains Inman. “So you could distribute into the Czech Republic, for example, without ever dealing with an independent distributor. In some countries, on the other hand, you want a distributor. Columbia Europe services France, Germany, Italy, Austria, and some of the Benelux countries. But the Netherlands, the United Kingdom, Poland, Switzerland, and some of emerging countries, are handled through distributors. A good distributor makes all the difference.”

Of course, good distributors are hard to find, because they have their own obstacles to clear. “The distributor is buying product from us, and that takes a certain amount of risk out of it for us,” explains Inman. “Then it’s their responsibility to sell to the retailers, and especially in the Southern Hemisphere, they have to pay us before they show the line to retailers, because their season is different.”

According to Schmidt: “In many of these smaller countries, the distributors show up at the warehouse, pay cash, then disappear. Some have to change currency three times a day just so they don’t lose ten-percent of their open to buy.”

In order to compensate for these innate challenges, distributors from developing countries need to charge a premium price and find someone who’ll pay it. “They are mostly targeting the well-off elite, who are, hopefully, immune to the vagaries of the economy,” says Bujold. “A random guy on the street in Iran is not buying snowboards.”

So, is all worth it? Yes and no.

The saying, “it takes money to make money” definitely applies in the emerging markets. “For Columbia, going after smaller markets makes sense because we’re trying to get significantly bigger, and one of our targets is international growth,” says Inman. “But we’re not just Convert. In terms of the company putting market development money in, we’re building more than just a snowboard brand. If I were only selling a snowboard brand, I might think again about the investment.”

The relative returns in such markets are so small that they can only be realized at the global level. Rossignol Snowboards, according to some estimates, is the number-three brand worldwide, even though it comes nowhere near that rank in the United States. “In some emerging market countries, our ski distribution history makes us the number-one brand in snowboards,” says Bujold. “Our market share in some of these countries outdoes our market share in some of the major ones. We had the business infrastructure set up before some of the other companies even arrived.”

Once established, a company has to continue to ride the same rough marketplace seas. “The bottom line,” says Turner, “is that none of the so-called emerging markets are substantial-200 to 400 boots, bindings, and boards are sold per year in each.”

Schmidt agrees that the potential gain from these markets are slim: “It’s going to be a while in all of them before they have any real significance. The greatest growth potential still exists in developed markets.

“We’re not economists,” he adds, “we’re snowboarders. If we see an opportunity, we’ll take it.”

 hat they can only be realized at the global level. Rossignol Snowboards, according to some estimates, is the number-three brand worldwide, even though it comes nowhere near that rank in the United States. “In some emerging market countries, our ski distribution history makes us the number-one brand in snowboards,” says Bujold. “Our market share in some of these countries outdoes our market share in some of the major ones. We had the business infrastructure set up before some of the other companies even arrived.”

Once established, a company has to continue to ride the same rough marketplace seas. “The bottom line,” says Turner, “is that none of the so-called emerging markets are substantial-200 to 400 boots, bindings, and boards are sold per year in each.”

Schmidt agrees that the potential gain from these markets are slim: “It’s going to be a while in all of them before they have any real significance. The greatest growth potential still exists in developed markets.

“We’re not economists,” he adds, “we’re snowboarders. If we see an opportunity, we’ll take it.”