By and  on May 28, 2007

SAN JOSE DEL CABO, Mexico — After a decade of yearly gatherings of the Surf Industry Manufacturers Association here, the waves still crash, the sun still shines and tequila is still acceptable currency.

But as the surfing world’s most successful companies congregated last week to vet the issues facing the industry, one couldn’t help but notice the party animals were considerably tamer. Gone are the days when CEOs skipped the seminars for the surf or got ousted from panel discussions for reckless revelry.

Instead, most of the nearly 400 attendees showed up for each conference panel to hear lectures that addressed the buying habits of Harley-Davidson riders, the power of grassroots marketing in the world of organic yogurt, and the ongoing need for environmental initiatives.

Perhaps the evolutionary sentiment was best summed up by surf legend and Gotcha founder Michael Tomson: “We used to be the youth that was against the establishment. Now we are the establishment.”

Dick Baker, who serves as SIMA’s president, compared the maturation of the conference to the industry’s own path of progression. “Watching this thing unfold over the last ten years is almost a direct reflection of the surf industry’s growth and sophistication. It’s a real business now,” he said. And as retail sales of surf goods hit $7.48 billion last year, according to a SIMA study, it’s obvious that “the majority of product is not even sold to people that surf.”

Striking a balance between rapid market growth and brand-cheapening overexposure has become a running motif of sorts for the four-day summit. To that end, SIMA brought in iconoclastic surfing legends to share the stage with marketing gurus from Starbucks, MTV and Nabisco—many of whom were quick to admit they’d never paddled out to sea on a shortboard. The take-home message, however, was uniform: Lose your brand’s soul and you’ve lost your edge.

In fact, much of the conference was spent discussing the divide between some of the industry’s power brands—Quiksilver, Volcom, Billabong, O’Neill and Hurley, for starters—and emerging surf labels, stressing the need for smaller names to make a bigger impact on the industry.

Earning a place on surf retailers’ shelves is no easy task, though. A study of 402 independent surf retailers nationwide conducted by SIMA and the Leisure Trend Group found that while new surf apparel brands continue to elbow their way into the field, independent stores only carried an average of 3.5 men’s brands last year—a staggering 48 percent decline from 2004 figures. “Does that mean there’s going to be less room to try new things in the future? Well, we hope not,” said Doug Palladini, vice-president of marketing for Vans and chair of the SIMA Research Committee. “But when it comes down to it, you’re trying to make money and have good turnover for your store. You have to go for what works.”

Gotcha’s Tomson, whose progressive line is still credited for kick-starting surf fashion in the late ’80s and early ’90s, advised small brands to define themselves and their niches, with a focus on one product category at a time. “It’s impossible to take on the big guys in man-to-man combat.”  And as a caution to labels who seek to bring the surf mentality mainstream, he added, “I wouldn’t sell to PacSun if you’re a young brand.”

Tomson’s Pacific Sunwear opinions were not alone in a room full of protective enthusiasts. Still, most agreed that the mall-based chain earns its keep as a frontline defender of the surf lifestyle in landlocked locales where surfing is merely a far-off aspiration. “Hollister has done the surf lifestyle better than most surf brands,” said SIMA’s Baker of the surf-themed division of Abercrombie & Fitch. “PacSun has become the representation in the mall for surf brands. It put surf on the map nationally.”

But Hollister, which is threatening many surf brands’ market share, has done its job making an impact on young men. According to a study conducted this spring by the retail research team at Piper Jaffray, Hollister—with nearly 400 stores nationally—ranked second on a list of young men’s most-preferred apparel brands, just four percentage points behind a grouping of West Coast brands that included Quiksilver, Volcom and Billabong.

Many industry insiders echoed Baker’s call for both established and emerging surf brands to raise the design tide in an effort to stand out in a sea of vertical retailers. “We’ve done an amazing job up until now to keep outsiders like Hollister from emerging. It’s only recently become an issue,” said Graham Stapelberg, Billabong USA’s vice-president of marketing. “The industry, on the whole, needs to do a better job of promoting ourselves as the authentic surf brands.”

Pacific Sunwear president Tom Kennedy agreed that the validity of the brands truly tied to surfing enable the industry to preserve its upper hand. “One thing our industry has in its favor is its roots in an authentic sport and lifestyle,” he said. And, of course, he subscribes to the old retail adage, “Competition makes you better.”

Underlying the discussions at the Summit was a sense of community among attendees, despite the obvious need to win space in consumers’ closets. There are few other industries that could tout a room full of rival companies sharing business strategies in an open forum, pointed out Volcom CEO Richard Woolcott. “It’s all friendly competition,” he said. “We used to compete in surfing and now we’re competing at retail.”

With growth as a goal—whether companies are already listed on the Nasdaq or just earned their first retail account—the promotion of the surf industry as a whole is necessary to increase shoppers’ interest in a society flooded with options.

“The issue at hand is the young consumer’s dollar. That’s why the industry must continue to reinvent itself each year,” said Baker. “The competition isn’t in this room, it’s outside this room.”

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