By Rachel Brown
This story first appeared in the July 9, 2009 issue of WWD. Subscribe Today.
The recession has a tight grip on the surf and action sports swimwear industry, and retailers and manufacturers are caught in a debate over what approach is most likely to free them from it.
On the one hand, there are risk takers who bemoan a lack of creativity in the niche industry. They argue that surf and action sports swimwear cannot compete on price alone and that compelling swimwear, not solely a retread of past hits, is essential to induce consumers to open their wallets.
On the other hand, a majority of retailers and manufacturers are finding that surf and action sports consumers aren’t in the mood to spend big bucks on swimwear. Adjusting to that frugality, their plan is to stick with swimwear that retails for less than $100, and to rely on proven brands and styles.
This debate over preferred business strategies is an indicator of the gravity of the category’s troubles. Although it is difficult to quantify the size of the industry and its recent declines, reports from across the surf and action sports market suggest there’s been scant sales improvement of late.
When asked how surf and action sports swimwear was performing, Cary Allington, co-owner of Loma Linda, Calif.-based AA Data Co., producer of ActionWatch market updates published in trade title TransWorld Business, simply responded “bad.” He pointed to the latest ActionWatch report showing that same-store sales for apparel — including swimwear — at surf and skate stores tracked by AA Data dropped 10.3 percent in April from the same month a year ago.
“I don’t know of anyone who feels like things are really going up,” said Allington. He added that numerous surf and skate stores have gone out of business, although the amount is “less than 10 percent” of the stores AA Data monitors, and those that remain open are suffering from margin losses in several categories from one to three points.
A recent survey of board sports retailers by Trabuco Canyon, Calif.-based market research firm Board-Trac revealed that about half predicted sales would be down this year, while about 32 percent forecast flat sales and about 18 percent anticipated sales growth.
In this tough environment, some swimwear retailers and manufacturers are calling for action. Tom O’Hara, owner of the San Diego swimsuit shop Gone Bananas and a nearly 35-year retail veteran, sits firmly in this camp. “[Brands] are not taking any chances and what they in essence do by not taking any changes is eliminate their chance of succeeding,” he argued.
Gone Bananas has shed some surf brands that, while good sellers in the past, have tapered and delved heavier into brands that O’Hara believes deliver novel merchandise such as Luli Fama, Guria Beachwear, L’Space, Vitamin A, Beach Bunny and Body Glove. Price isn’t his biggest concern, and the average suit at Gone Bananas has climbed from around $100 to $125.
“We are selling and are coming very close to last year’s figures,” O’Hara said. “The consumer is hungry for quality and freshness, and they will pay for it.”
However, several retailers and manufacturers believe Gone Bananas’ experience is unique, and assert that juniors consumers don’t appear to be straying from their penny-pinching ways. In this camp, the plan is to stick to swimwear retailing for less than $100 and rely on proven brands and styles.
Overall, Pamela Levine, national sales manager for swimwear and accessories at Roxy, approximated that retailers’ swimwear orders for next year will fall 5 to 10 percent. “This year, they have had a slow start, and they are going to plan for next year accordingly,” she said. “People are picking the best juniors, contemporary and misses’ brands, and going with those.”
Carol Nielsen, women’s buyer for six-unit Orange County-based chain Becker Surfboards, is betting on her top brands this season, which include Billabong, Rip Curl and L’Space, for 2010 as well. “Until we can get a little more headway with retail, I will be buying scared,” she said. “Girls just aren’t throwing their money around.…The reorders have been very small and very concentrated on a few brands.”
Regardless of brand, Heather Quintana, women’s buyer at five-unit North Hollywood, Calif.-based chain Val Surf, stressed that price is crucial. “I rarely will sell a suit that is over $100 unless it is unbelievable, and it was seen on a celebrity,” she said. Val Surf’s swim bookings this season were 60 percent off the year before, and Quintana doesn’t expect to add any lines next season, either.
National swimwear figures underscore the significance of price. Sales of swimwear to adults aged 13 and over declined 10.7 percent to nearly $2.9 billion in the year ending April 2009 compared with the prior year, according to research firm The NPD Group. Among all brick-and-mortar swimwear channels, off-price retailers notched the smallest decline, at 3.9 percent, while specialty stores tallied the steepest decline, at 15.2 percent.
Lisa Keen, sales manager at Cypress, Calif.-based Manhattan Beachwear, producer of the Split and Hobie swim lines, said large retail chains diving into inexpensive swimwear have “changed the dynamic of the swimwear business.” She said there has been price compression as surf and action sports brands “figure out how to get the right formula” to attract consumer dollars.
For instance, Kari Johnson, vice president of design for O’Neill, which has opted to take swimwear in-house instead of licensing it out, noted the brand is lowering its swimsuit prices $2 to $4 at retail. “We felt it was really important to be in line with the other junior surf brands,” she said of the price change.
Danette Drake, director of merchandising for girls at Fox Head Inc., said the brand’s new 16-style swimwear line, priced at $79 to $84 at retail, also aims to be squarely in the pricing mix of surf and action sports brands that dominate the retail floor. “Our research tells us that for lined and reversible suits, those are very good price points,” she said.
Phyllis Posner, account executive for Vitamin A, observed stores are gravitating toward Vitamin A’s silver line, which was introduced last year at $21 to $29 wholesale, in contrast to its original gold line, priced from $32 to $42 at wholesale. A plentiful helping of reversible suits in the silver line helps, too. “People right now want the most mileage for their money,” she said.
The importance of swimwear’s value proposition has driven consumers to pick up reversible and solid styles, Quintana and Nielsen have found. “It comes from the consumer wanting to be able to have more versatility with their swimwear,” said Quintana. “A solid is a good choice because they are able to use it in many ways.”
Aside from swimwear’s price and its perceived value, retailers and manufacturers are still trying to identify what exactly will get swim shoppers to buy during the downturn. As a result, many brands are moving forward with fashion trends that have shown promise of late, including animal prints, metallic accents in foil and hardware, tie-dye, acid wash and vivid colors such as purple, fuchsia and blue meant to be the next generation of neons. In cover-ups, dresses are the go-to style.
“I feel that retailers are wanting to play it safe,” said Mary Miller, vice president of design and merchandising at Rip Curl, which she added is piggybacking on the strength of animal prints with a “snakeskin look. They are going to want to buy into the products and ideas that are working for them now. I definitely think they are going to be wanting neon, animal and maxidresses.”
One formerly ubiquitous design element that hasn’t been working everywhere is heavy branding, and there has been extensive dialogue about whether brand logos should be front-and-center or muted. Becker’s Nielsen is leaning toward the latter. “You could see so much branding before — it was selling huge amounts. Now, the customers don’t want that at all,” she said. Rip Curl’s Miller acknowledges that logos aren’t the volume drivers they once were, but said “the logo will always be part of the business.”
The lessening of logos is evidence that the surf and action sports swimwear landscape is shifting. Such shifts have been a boon to Luli Fama, a brand with a sexier take on swimwear that might not have gotten a hearing from surf swimwear buyers in years past. This year, Augusto Hanimian, co-owner of Earth and Sea Wear Inc., the Miami-based company behind Luli Fama, said business is “very good,” and he credits the brand’s penchant for fashion-forward designs.
“We are not afraid to take risks,” said Hanimian, echoing Gone Bananas’ O’Hara. “What has happened through the years is that people have accepted us as a brand, and people are looking for that innovation from us.” The risk-taking of Hanimian and O’Hara’s, while successful for them, may be too dicey to garner many followers in the surf and action sports swimwear market.
For the most part, brands and retailers are hunkering down. “We are in survival mode,” concluded Miller. “We are trying to tighten our belts. We are not wanting to overextend ourselves. We are being very conservative with our spending and expenses.…We are just hopeful that things will pick up, and it will turn around soon.”