How Sierra Snowboards Changed the Industry
Over the past two years, there has been a
huge change in the way the snowboard industry works. This is largely in part
due to the closing of Sierra Snowboards and limiting the amount of snowboard
product that is available. For those of you who don’t know, Sierra Snowboards
(now sold and renamed trusnow.com) was a massive online snowboard shop that was
able to discount product way earlier and cheaper than any other local retail
shop or website.
Sierra, Dogfunk, The House, Eternal and all
major online retail snowboard shops have all become successful because of one
reason. There was a huge overproduction in products by most of the major
snowboard companies. To understand this you need to understand how the
snowboard industry works.
Shops order product from a company about 8
months in advance. Burton for example takes these orders and calculates how
much product they need to make for the upcoming season. They calculate this by
the number of actual orders placed by shops + rider requirements + extras in
case there is a good economic season and they need to sell more to the shops.
Usually this excess product is discounted 20% to 40% below cost (which is
already 40%-60% below MSRP) so they will not be left with excess product at the
end of the season. Having spoken to employees at sierra after they closed I was
told that Sierra’s business plan was to buy limited amount of full priced
product at the beginning of the season just to have the basic requirements of
Burton Customs, and Lib Skate Bananas and then right before Christmas they buy huge
amounts of close-out product on discount. As soon as they get this product they
put it on sale for 30% off MSRP. Sierra will still be making full margin on
this product while brick and mortar shops would be breaking even at the price.
Because Sierra was putting things on sale so early everyone started buying from
them based purely on price not on experience or any other value. All the major
manufacturing companies have put deadlines on when product was allowed to go on
sale so there was more of an even playing field from local shops to websites.
Because the local brick and mortar shops followed the rules and Sierra took
advantage of the system these shops ended up being stuck with the majority of
their product at the end of the season and having to sell it below cost just to
get rid of it. These core shops started closing and the manufactures
repossessed the product and then sold it back to companies like Sierra at a
discounted rate once again fuelling the cycle.
In 2009 the industry had gotten so bad that
consumers honestly believed that companies were ripping them off by charging
anything more than 30% off. No industry can survive like that.
I remember reading in forums after Burton
stopped selling to Sierra how pissed customers were that Burton was ‘price
gauging’ when in fact they were finally correcting their mistakes.
I don’t want to make this article sound
like burton is the hero because in all honesty they were the worst of the
companies when it came to over producing.
Companies were encouraging websites to buy
huge amounts of product with rules that said if you wanted to sell Burton
online you had to buy at least 1-2 million dollars in product. Then as local
shop sales of Burton gear declined the shops were harassed and not given any
discounts. Most of this Burton problem happened during the years Laurent Potdevin
(originally made his money with Luis Vuitton not snowboarding) was CEO. After
he was let go and Jake came back on, Burton turned things around, but it would
be stupid to believe Jake and the rest of the Burton organization didn’t
approve of this system.
On March 10th 2010, Burton told
Sierra that it would no longer be selling to them. Without Burton, (making up
around 50% of their inventory) Sierra was forced to file for bankruptcy and
later sell the company. This was one of the best things that could have
happened to the industry. As soon as Burton pulled out many other companies
followed (including K2, Ride, 32). On top of pulling out of sierra, Burton
along with a majority of other companies cut their supply way down for the next
year eliminating the problem of excess supply that had started this mess. The
following year small shops once again had successful years and customers found
that if they waited for high demand product to go on sale the product disappeared.
This enthusiasm pushed into the next season where customers who had missed the
opportunity to buy Travis Rice’s and Sherlock’s were coming into shops and
buying them full price to make sure they didn’t miss out a second year.
Now that sierra is consumers are no longer
able to find such good deals but on the bright side your local snowboard shops
can finally survive.
This experience has been well documented by Angry Snowboarder and I invite you to check out his blog’s for further reading.