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Toby Bost on acquisitions, supporting core retailers, social media marketing and more

By Andrew Horan
June 11, 2009 6:12 AM

The La Jolla Group is moving to add brands to fill out its portfolio, O'Neill Clothing and La Jolla Group CEO Toby Bost said last night.

He was speaking to a more than 100 action sports folks gathered at The Camp in Costa Mesa for an Innovator Series discussion hosted by GroupY and moderated by Shop-eat-Surf.com founder and editor Tiffany Montgomery.

Toby was engaging and forthright as he answered questions from Tiffany and the crowd and dispensed advice and insight into his company and the state of the action sports industry. La Jolla is the privately held licensee for O'Neill Clothing, Lost Clothing, Rusty and Metal Mulisha.

Here are some highlights, in Toby's words. I've consolidated some answers from different questions under the headings. For more photos, see GroupY and ZexSports later today.

Adding brands to the portfolio

We get presented with opportunities all the time, and there are some great opportunities out there.

We are building diversity within our portfolio. We'd love to be able to cover every level of distribution, and every level of action sports. We want to be in every sport in action sports.

Tiffany Montgomery, Toby BostSo you can definitely read between the lines. We'll be doing something soon.

The La Jolla Group business

We have a formula, and it's super important: you have to know who you're getting in bed with, who you're going to be working with.

So we can pick great brands to partner with, and not spend a lot on an acquisition fee. Great brands that might need help with financial backing, operations, merchandise design and production. ... Our model doesn't have any cash out of pocket.

The owners of La Jolla don't work in the business. They're five guys who went to college together. ... One of the owners is Kurt Rambis of the Lakers, and you know, he doesn't have a lot of time to worry about whether we're shipping T-shirts.

State of LJG and the industry

GroupY crowdWe're a private company, so we don't report sales, but it's safe to say they are north of $200 (million).

The biggest challenge we have is managing inventory. There just has been no way to forecast it. For the fall, we took it down 10 percent - and the industry was down 30 percent. Holiday will probably be off 20 percent, and that's where we are (on inventory).

The major retailers have figured out how to tune down their buying, and we can rely on their pre-booking. The core stores, there's been mass confusion, and people taking the approach of not putting in any orders. There's a lot of educating going on. We're telling people, "even if you're down 20 - 30 percent, don't leave yourself exposed because you didn't buy, because your customers are still coming in and they expect new product."

A lot of us (wholesalers) have stepped in to see that the core retailers make it. We have all identified that we want to keep the core retailers alive.

We have some pretty tough times still ahead of us, so you'll definitely see more manufacturers stepping up to aid the core retailers.

The Rusty-JC Penney deal

Tiffany Montgomery, Toby BostWe took on the Rusty license as the whole macro economic shift was happening. We weren't being given the opportunity in the core market to build the brand back to its glory days. And we were victims of this "Sea of Sameness" in the industry, with the Top 5 - including O'Neill - and even second- and third-tier brands, this market saturation.

And at the same time buying dollars were shifting.

We're a growth company, so we had to think, how do we put Rusty back in the spot where it was in the 90s?

You've seen product segmentation work with Nike and Vans. So we're going after it through product and brand segmentation. Penney's caters to the mid-level of retail, and we'll also cater to the core market.

I know a lot of people were offended by it, but Penney's has 1,100 doors, and that allows us to do some special things for the core market. We can get creative with the product, so it doesn't look like this "Sea of Sameness," and we can give them margin support.

For the core market, we're definitely going to take risks with the Rusty product. In the past, we fell into the trap, "you have to have the price-point board short, the price-point walk short."

GroupY crowdI'm happy to say we're moving forward at a fast pace. It feeds a need for action sports on a national scale. (But) we've lost a few key customers, and we get it. We have to perform, and we've asked our key customers to hold us to performance.

Supporting the core market

We definitely believe in the core market, especially those retailers who carry hard goods. Definitely, special things happen for that core market.

There are a lot of term incentives going on, like net 180 days or net 100 days. The net 30-60 days model is dead.

And we're helping with margins. We need to help them make up for their revenue loss with profitability.

Marketing in down times

Toby bost after GroupYWe have a tight formula, marketing is always a certain percentage of sales. But as a company, we're never afraid to spend on marketing. You can never spend enough in marketing. You can't be afraid to take the risk and invest.

Social media and marketing

We're having a lot of fun with it. The whole social element is so new and exciting, and the impressions are vast. For print, it's been pretty tough lately.

I blog (internally) once a week, and a lot of the executives and director level have the opportunity to write on it. (He also has personal Twitter and Facebook accounts, along with brand accounts).

The web is pushing us to evolve, fast. The key to it is the content. We're all pressed to put out great content. That's what sets apart anybody, in any industry.

Young people today, they want to know what's going with your athletes, your company. They want to feel like they're part of your brand. They want to come back and see something new and fresh, every day.

Liz Randall, Mark Sperling of GroupYLiz Randall and Mark Sperling, co-founders of GroupY

For the young bucks out there, there's a lot of opportunity in social media. We have a department now called social media marketing.

You need people out and about, and we're building an army to be at every event.

Our summer intern program this year is going to be in the social media group. They're going to be blogging, about the company, products.

Advice for young people in the industry

My advice for young people just starting out in this industry: hard work and perseverance get you through the ranks. We have a ton of success stories of people coming up through the ranks. You've got to be able to break down a garment to be a CEO in this industry.

Don't be afraid to compromise what (salary) you think you should be making for the opportunity to rise up.

Shifting trade show spending

In the last cycle, we took the approach, you go to a trade show to do what you do: show product to retailers, not show off your booth to the industry.

There was a lot of internal marketing going on in the industry. We were spending upwards of $250,000 to construct big, giant booths.

We found that we could take that money and it could be better spent supporting our retailers. So, we're taking down the curb appeal on the booths, but inside, we're still doing the job in there, doing what we're there to do: sell product to retailers, not market ourselves to each other.

That big booth, that's out the window. That's the old model. Those old booths are sitting in the warehouse, in crates, gathering dust.

His background

Early in high school, I told my friends, "I want to run a company like Quiksilver some day."

I majored in business at the University of San Diego, but I was supposed to be a third generation orthopedic surgeon, so I've really brought it down.

I don't tell many people this - I'm not proud of it - but my first job was at Boomdoggers. It was cheesy surf. I started as something like the office manager, got to wear a lot of hats, saw how production and finance and the business operated.

Then I went to No Fear, and that was a great opportunity to run the pre-production and understand how to put garments together. I was production manager, VP of manufacturing. The Simo brothers were great mentors and that's where I learned how to market and sell.

I had a short stay at Rip Curl, it was really a stepping stone to O'Neill, where I came on as vice president of manufacturing, and was COO, side-by-side with Kelly Gibson, who ironically left to go to Rip Curl.

Being a young CEO (at 38)

It's definitely the dream job. I pinch myself for an opportunity like this.

I thought when I took this job, that with these hands and a computer, I could run the company. It took me about a year to get out from behind that computer and go out and build relationships.

It was something I didn't realize as COO. I left all that to the sales department. But my job is to get out and meet and greet the customers and find out what the specialty core retailers need.


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