CFA, WELLS FARGO: Invitation to next "Crystal Ball" breakfast session, "Private Label vs Branded Manufacturing."
STOKES ME: SIMA Humanitarian Fund campaign kicks off this week with "Add-A-Buck" promotions in 76 core-store doors.
Details on Industry Insight.
Dick is an apparel industry veteran who led a wide range of companies over his career including Esprit, Lacoste, Tommy Hilfiger women and Op. He currently leads the Surf Industry Manufacturers Association. Dick prefaced his speech by saying he was speaking as Dick Baker the man, not Dick Baker the head of SIMA.
Dick said he can envision the current slowdown moving into 2009 pretty easily.
Dick compared how surf has thrived while the other big lifestyle movement of the last decade, urban, crashed. He believes it's because urban abandoned its speciality retail base in favor of department stores. "It killed the business from the bottom up," he said.
Surf is much more respectful of its core market compared to the rest of the apparel industry, he said.
He said the surf industry on the brand side has evolved into a two-tier landscape: the big brands on one side and small brands on the other. "All the middle size brands are gone," he said.
Dick believes this year and next there will be quiet, underground financing going on to get the small brands off the ground versus outright acquisitions. He sees some of the smaller brands starting to get legs in the next 12 to 18 months. At the same time, he said retailers can't live without the big brands that spend big money on marketing. But he said retailers need a balance between big and small so their floors have vibrancy.
He said the outside competition has changed as well. Previously, stores such as Kohl's, Costco and JC Penney tried to knock off the surf lifestyle and failed. Now, several retailers have figured it out and are doing a good job, such as Hollister, which "does vertical surf better than most surf companies," he said. Hollister is not just a retailer, but a brand. On the way are Shaun White goods at Target and Wal-Mart being the exclusive retailer for Op - all of which will add pressure, he said.
To compete, core retailers need to learn from the Hollister example and turn their own stores into a brand, Dick said. "It can be done on the scale you operate on. ... You can't let the bus run you over."
Dick said the brands aren't being greedy opening stores, they have to open the stores to grow their business. He also said all successful global brands have their own stores. Usually, the strategy for brands such as Armani and Hugo Boss is two fold: Limited distribution and a small number of company-owned retail stores.
In the surf industry, Dick believes there are going to be more brand stores, but most brands want flagship stores in global tourist locations.
Dick believes core retailers have to be in the internet game, especially since the younger generation is so connected to the internet.
"Brands will go direct. No question. How they go direct is the interesting piece," Dick said. He thinks there is a huge opportunity for brands to partner with core shops online. He recommended BRA get everybody on "the church of ecommerce" as fast as it can.
As brands begin launching their own ecommerce initiatives Dick believes the random online selling that happens now will clean itself up.
If a core shop doesn't have store branded private label it is "stupid," he said. "That is your brand," he said."...It's a requirement. You have to do it."
However, he said, doing private label on a large scale won't work because stores can't meet the minimums required and are better off working with supportive brands.
Dick believes this movement will dramatically change business in the next four to five years as kids become champions of environmental issues.
Core stores have to integrate music into their stores which will give stores a way to reach kids.
Dick said if he could wish anything for the retailers in the room, it would be that they reinvent their stores. Watching how kids live their lives today and integrating those things into stores can make a difference, he believes.
He said there are going to be some casualties in brands and retailers as the tough economy continues.
"It's easy to get angry, but now is a time when great new ideas can happen," Dick said.