Just A Technical Glitch…or A Vicious Circle? by Michael Brooke

Transworld Business Magazine originally covered the story on blanks in 2006. In the fall of that year, a decision was made to develop a booklet to counterbalance the impact of blanks and shop decks. At the beginning of 2007 there was a tremendous uproar as a result of the booklet entitled “Industry Under Fire,” the argument set forth was that if shops and consumers continued to purchase blank decks and don’t support pro decks, then skateboarding would die. (there would be no more pros, no more magazines, no more dvd’s). The backlash was severe from both shops and skaters. People were incensed by the hypocrisy and sheer arrogance of the industry’s position. Among the highlights of the backlash: skaters were incensed at the World Industries ad chastising skaters for buying blanks and the world without pros website got parodied into a world without ceos. As predicted, the issue burned red-hot for a brief period and slowly petered out. Then it was back to business as usual. Well, maybe not so usual. Skate retailers realized that skaters would speak up for their right to do business however they saw fit. Blanks or pro models – what was important was the choice to sell both, if necessary.

So now we come to another piece in Transworld that in many ways is even more contentious than the “war on blanks.” Recently Transworld reported that Quiksilver’s Roxy division had set up on-line to go direct to consumers. This is not something new. What is new was their decision to remove any affiliates from their site. At the Quiksilver, Burton and Billabong sites, if you want to buy something, you are automatically linked to a number of shops (ie K-Five, Val Surf, Swell) who will sell to you direct. It is worth noting that at the Burton site, you have the choice whether you want to order from direct from Burton. Again, the crucial word here is choice. If you want to order direct, you can. If you prefer to deal with an online shop you already have bought from before, then it’s your prerogative.

When Marty Samuels, President of Quiksilver, Americas Region was asked about the absence of the affiliates, his response was telling:
How have your online affiliates responded so far?
“Unfortunately we had a little technical glitch when we came online and the affiliate links were not accessible, but that was never our intent and when we went to talk to our guys we told them that and we’re fixing that. Certainly we will not go live with the Quiksilver piece until we have that nailed. We still want to have the affiliate programs. I’ve looked at company’s like Burton and Patagonia that have been at it longer and I think they have some interesting things they’re doing to make it beneficial to retailers as well. We’re looking at those things, and not just those things. We’re looking into some other ways to do things that are positive.”

Well, it’s been over 8 weeks since the technical glitch appeared and the affiliates are still nowhere to be seen on the site. From my experience, a technical glitch is a page not loading fast enough or flash not working correctly. Removing your entire affiliate program seems like a pretty big “technical glitch.” What it seems like to me is that this an effort to cut out those folks who have helped build your brand.

Of course, what’s really driving this is money, pure and simple. Roxy is not a difficult brand to find and they spend millions on marketing. If you live anywhere in the Greater Los Angeles Area, there are over 35 places to buy Roxy. As Quik is a public company with revenues of a billion plus dollars, it’s all about getting the most stuff out there, the most profitable way possible. Again, I am not naïve to think that companies should not go direct. If you can’t get the stuff you want from a local retailer, then you sometimes have no choice. But if someone is already on-line, why cut out the affiliates? This seems like a slap in the face to the very people who got you to where you are now. I consider this the thin edge of the wedge and it is a very worrisome trend indeed.

I originally wanted to call this piece “Phoenix’s Still Get Burned” because I am amazed at the resilience of the independent skate and surf retailers. They have been bullied for carrying products like blanks and shop decks. They have seen a huge amount of their business go to big box shops and chains like Zumiez and Pac Sun and yet they remain committed to servicing their customers and keeping the magic alive. Yes, distribution plays a key part in how these brands are marketed. I am not pleased to see the action sports industry become just another commodity driven business run by beancounters, devoid of soul. Independent shops are the lifeblood of the industry because they take chances on new brands. They are hothouses of new ideas. But don’t take my words for it, look what Marty said in the same interview; “without the core shops we’ve got nothing.”

So, why screw again with a formula that works? Why mess up your relationships with the very people who have helped you succeed? Well, it’s like that old chestnut: “it’s nothing personal, it’s just business. I sense however, Quiksilver might regret this move and that a backlash is brewing. Tom Martin of Val Surf (the world’s first skate shop) was somewhat surprised by their actions. In his interview with Transworld he says: …one day we noticed that our affiliate traffic took a nose dive. So we went to and found that customers could just buy straight from their site… many mouths dropped as we realized that our strongest affiliate traffic driver had cut us out of the loop without warning. They had told us that they had a new site in works a few months before, but there was no mention of selling direct.” Ouch and double ouch!

Like many retailers, Val Surf is pissed, but they are also realistic. As Tom notes: “they cut out the retailer. Plain and simple. Everyone knows that the future of retail is going to involve ecommerce more and more (in all industries, not just our own) … it’s just inevitable. And now we have a major vendor putting in motion a trend that will undoubtedly have vendors directly controlling a large fraction of retail down the road. And with the margins they’ll be making by selling direct, they’re just going to have more and more money to throw at it, making it even that much more difficult for a retailer to survive.”

He continues: “it’s about the biggest kick in the teeth they could give us. I think a lot of shop owners are still blind as to how much this is going to affect them in the years to come. The more digital the world goes, the more even the brick and mortar stores are going to be hurt by vendors selling direct. If someone can go straight to a vendor’s site and get everything they want shipped right to their door with no shipping and no tax (in some cases, depending on the state the vendor’s located), why come to us? After all, if a customer is looking to buy Roxy, and they type that into any search engine, who do you think is going to get that traffic? And thus the sale? Any vendor that goes this route is looking the corner the future market, plain and simple. From their perspective, it’s easy to see why they’re doing it. They’ll obviously make serious bank. But from a broad economic view, this trend (and I’m talking beyond the scope of our industry) will only squeeze out retailers… vendors will get bigger… more and more shops will close their doors… make the rich richer, and the poor poorer. Back to Ramen noodles from Costco.”

I think a number of skaters can identify with the plight of independent shops. Tom provides a detailed scenario of what is happening out there. To paraphrase it: as big vendors move towards selling direct and opening up their own shops, it squeezes out the sales that the core shops rely on to keep the lights on. The truth is that the smaller up and coming brands don’t bring in the sales the way the big brands do.

So, what is basically described as a technical glitch, is in fact something far greater. It’s a monumental shift in the way business is conducted. It was not surprising to read how annoyed Val Surf is with having a Burton/CI superstore located near his main shop. He senses something that many folks are starting to realize: Vendors will make serious bank online with their extremely high profit margins and low overhead. In turn that money will also fuel more vendor brick and mortar stores. It will become a vicious circle.”