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Industry Insight

New business info and advice from QCS GRAPHICS, PROCOPIO, SHACC and FSG LAWYERS.

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Tiffany Montgomery
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Dick Baker on the recession

By Tiffany Montgomery
July 07, 2008 6:25 AM

I wanted to get some thoughts on the recession from Dick Baker so I called him the other day to tap his expertise.


Dick is an apparel industry veteran having run Op for years, served as president of Esprit and launched Tommy Hilfiger women.


He offered some opinions on why this recession is different from the past. He also talked about distribution trends he sees coming.


I should preface the piece by saying Dick believes the surf industry is performing better in the downturn than most sectors. And, even though the big box stores (Target, Kohl's, Wal-Mart, Kmart) are making another run at creating or buying surf or action sports brands, "Kids still want the authentic, cool brands," he said.


Here are Dick's thoughts about the current climate and other issues.


"This economic slowdown is different from previous recessions because the scale of the surf business is so much larger, so the issues that go along with surviving in a recession are magnified. You now have large, publicly-traded companies operating on global platforms. It's not 10 years ago when you had a few $30-to-$40 million companies trying to figure things out.


"I don't see any clarity about the economic climate emerging until 2009.


"The three biggest issues facing core stores and brands this time around are:


"1. Credit. The dynamics have changed. In the past when companies were smaller and private, they could carry core store operators who were having trouble paying. Now, some of the large, publicly-traded companies have shareholders to answer to and smaller companies need to get paid as well. Plus, some companies such as CIT are having problems of their own, so are looking to collect every dollar they can. This has led to a credit crunch for those retail accounts that are slow to pay, and I don't think it has run its full course yet.


"2. The development of the brands and scale of the brands have grown so large, but there has not been a major increase in the number of core surf shops. Brands need to grow, and doing significantly more business with core shops will be difficult sheerly because there are a limited number of core stores. So where is the growth going to come from? The smart brands will protect and ensure they are successful at the core level while seeking other distribution. Also, the internet has the single biggest upside as both a wholesale customer and a direct brand vehicle. But it also has the biggest investment required.


"3. There will be an influx of brands opening stores or acquiring stores. There are three models for this. A single-brand store where a company opens a store and only carries its own brand. But it's challenging to be successful selling one brand that reflects one lifestyle and getting the product right all the time. Or, brands will acquire multiple location core surf shops where they keep selling other brands in addition their own. A third option is to acquire multiple brands to include in their retail strategy."


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