Joe Luzzi, owner of Identity Board Shop, shares his insight on the changing surf/skate market.
By Stephen Sotnick
Skate/surf has driven the action sports business for years, but its dominance is waning. Here, we talk to Joe Luzzi, owner of Identity Board Shop and a 30-year veteran of the surf/skate market, about this new era in young men’s.
Describe your challenges and opportunities.
With 7,500 sq. ft. to fill, there can be no specializing. We need balance. So, we branched out from primarily skate into several lifestyles (skate, surf, streetwear, casual/dressy, etc.). There’s no one look driving the market today. It’s all about coordinates, so the market has shifted. Skate is no longer the driving force.
That said, the sneakerhead has influenced our store: he’s a collector; the guy who’s waiting in line outside the store for the latest, limited-edition style. The popularity of brands like Nike SB and Supra have allowed other looks and brands to surface. Casual comfort is pushing the market. The main look is casual, yet dressy, light and clean. In addition to apparel and footwear, we sell hard goods like skate decks, snowboards, boots and longboards ($150 to $400 retail).
How has the surf/skate business changed?
The action sport industry was fueled by skate shoes, but in the last five years the skateboarding business has declined radically. And because of that, the culture and lifestyle that influenced shoes and clothing have changed. Up until the early ’90s, the surf culture was the driver of activewear. Everybody wanted to be associated with surfers, so it was easy to target that market (12 to 25 year olds) because they were the influencers. Then, skate culture showed up and started influencing that demographic, so kids were identifying themselves more with skate than with surf. Skate eventually burnt out and we started seeing more from brands like Affliction, Fox, Alpinestars and Ed Hardy. Now there’s this street/urbanwear mixed with skate culture creating this new hybrid/retro style.
The trends used to be more defined, so it was easier for a kid to identify with certain brands. Now they identify with five or six styles. I have to decide who I want to align the store with. If you have a boutique you can target one segment, but we’re a bigger store. Our heart is in skate, snow and surf, but we’ve had to blend streetwear in order to appeal to a broader audience. We added brands like Obey, Freshjive, Diamonds and Crooks & Castles.
What’s your advantage over a smaller hybrid store?
Actually, the smaller hybrid shops have an edge over us: they focus on one look, fill their store and pull it off. Whereas a store like ours has to fill all that space with the right ingredients and still be a specialty store.
The business has become so segmented. We used to be a destination, now we’re not because you can buy a lot of our product through other outlets. The skate and surf culture has lost its value as far as its influence on clothing and shoes. California has become a dumping ground for most companies and it’s a highly competitive environment. You have all the state and city regulations and taxes to comply with. Profit margins are extremely tough to maintain: we sell brand names, so we’re probably averaging about 43 percent.
And then there’s competition from stores with buying power like Pac Sun and Zumiez. They can buy a large volume of pants for $8 a pair and sell them for $39.99. Then they put them on sale for $19.99 and they’re still getting keystone-plus. So who gets hurt? Companies like Quiksilver, Billabong, RVCA and Hurley have annual factory clearance sales. They’re all selling direct, online vendors have quarterly warehouse sales, vendor stores, and now we’re even competing with unauthorized dealers (i.e. Craigslist and eBay). These dealers have created this gray market with the potential to sell a lot of items. They sell the same items we do for 10 to 30 percent less because they don’t have the overhead. They don’t have the fixed costs that we have. You know it hurts.
What kind of margins are you able to pull off with brand names?
We have to sell their products at the suggested retail prices or they’ll pull the line. We are an authorized dealer so we have to maintain price, but they do give us a break on some items that they aren’t doing well with. They also help us with markdowns on slow moving items and they give us a chance to buy off-price products as margin builders.
Why are vendors selling to unauthorized dealers?
They’re not. These people are aligning themselves with retailers who work with them to liquidate old merchandise. So they’re willing to work off a much smaller margin to get rid of it. They’re also buying closeouts. Nobody wants to get stuck with anything and something’s better than nothing. Business has been very difficult since 2007.
What’s hot these days?
T-shirts are still a major part of our business. However wovens and sweaters are gaining momentum. Denim is still strong, but I see a resurgence in twills. Brands like Dickies are impacting our pants business. But it’s not that grungy skateboarder look anymore, it’s much cleaner.
How’s your footwear business?
Shoes used to be 60 percent of our business and now they’re 35 to 40 percent. So in some respects it’s better because there’s more balance. And as a result of the downturn in the skateboard market, skate shoes like DC, Emerica, Etnies, Lakai and Orisue have expanded their distribution to make up for the loss of sales. Those brands were once 60 percent of sales and now they’re 10 to 15 percent. It’s amazing. The skate shoe brand that has evolved or triumphed is Nike SB. Vans do well because they’re authentic and that classic look will never go away. Supra and PF Flyers are hot, and I can’t keep Toms shoes in stock. We’re seeing the emergence of some brands that haven’t been associated primarily with the skate culture. Bulky shoes with a thick tongue don’t sell anymore. It’s all about a much thinner streamlined shoe. Low tops are now about 70 percent of business and high tops about 30 percent.
Describe your advertising strategy.
Most effective is our direct mailer. We also advertise in the L.A. Times and the O.C. Register twice a year at Christmas and back-to-school. We send an email blast once a week and do high school and college papers, but we’re selective. We use social media like Facebook and Instagram. These guys come in with their iPhones and show you their coupon on the screen. Kids come in, look at some clothes and then Google it to see if they can find it cheaper somewhere else. It’s not a bad thing. You just have to be a part of it to compete. Social media is such an important part of our customer’s generation. So I’m on a constant quest to stay relevant.