FRIDAY FREE FOR ALL: Is The Industry Too Dependent On PacSun?

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19 Comments For This Post

• ThePusher Says:
  February 20th, 2009 at 2:07 pm

  Great Idea for a column… Now that we’ve thrown the rock through the window… I look inside and see the economy as it is and question whether anyone can afford to decline a sale in any business sector.

• whatevs Says:
  February 20th, 2009 at 7:37 pm

  ccc

• bhawk Says:
  February 20th, 2009 at 7:38 pm

  I don’t deal with Pac Sun but it is the same with Forzani… Sometimes u feel like a divison instead of a brand.

• markfitzy Says:
  February 20th, 2009 at 11:21 pm

  Mr. Hunter, Firstly, could you handle the “New User Registrations are Currently Disabled” issue so we can get properly signed up and in? Thanks.

  #1. Pro-Pacific Sunwear, I am not, but I hate to think that after years of helping Volcom and Billabong become household names that they would pull the carpet out from such a high volume retailer as things start to go south across the board. It isn’t really Pac Suns fault that more of these two brands aren’t selling. NOTHING IS CURRENTLY SELLING.

  I have a heck of a lot of respect for Wooly and Naude’ but their current earning loses shouldn’t be blamed on The Company. These two brands DO NOT support core surf retail.

  #2. I disagree with your idea the Pac Sun is THEE largest customer to V.CO and Bong. Try Macy’s, Nordstroms and Genesco, even Costco. Pac Sun is a large purchaser but not the end all be all. If you think Pac Sun has difficult Guidelines (walk in the park), try dealing with what used to be Macy’s West. Once a Federated apparel buyer for action sports ask me what “Cut and Sew” meant…wtf?

  3. SKU’s? I think you meant to write SMU’s (or Special Mock Ups). SMU’s are necessary evils to keep stores from all having the same product. They are typically a simple, branded piece. Everybody can bitch and moan or go to work. Do your job or go stand in a bread line…

  4. Bending over backwards? Isn’t that why we call it “Work” and not “Fun”. Too bad we all got so fat and lazy, that we forgot how good it feels to work hard…

  5. ??some of the bigger retailers in the mall sector, we?ve got some quite substantial declines as they all seem to be reducing the amount of inventory on the floor; and some want margin demands or pricing demands that frankly we just don?t want to go there.”

  So what your saying is…. Screw you. You bought it, we aren’t taking it back… Well, Mr. Oneill, Core surf isn’t gonna be taking YOU back any time soon… In fact, since you are so inclined to NOT help Pac Sun, why would you possibly consider helping out a one door, Mom and Pop shop with an R.A. You won’t, you don’t and pretty soon all the Mom and Pops will be gone and it will just be you selling your neon print, African animals and goldfish boardshorts to the market from your own branded store. (But I guess that is what you’d prefer anyway).

  6. Once we all stop blaming others for the mess we ourselves have created, we will all get better much faster. Why do you think A.A. is so popular?

  Start here: ” I am a greedy, idiot apparel manufacture and I produced WAY to many goods and now I am stuck with it all… And it is of no ones fault but my own”. That is step one…

  Thanks for letting me rant…

• markfitzy Says:
  February 20th, 2009 at 11:31 pm

  DISCLAIMER: Please forgive me, as I am not referring to any of the above mentioned individuals as greedy or an idiot. That last paragraph was simply an example… My apologies to anyone taking offense.

• Warren Says:
  February 21st, 2009 at 9:02 am

  Great topic.

  While I am up in Canuck land and we do not have Pac Sun - thanks goodness - we do have West49 which is smaller version of the same.

  Fortunately V.Co has remained out of W49 and now that things are slipping in W49 as well - it looks like it was a good move to stay out. This is the part where I insert the “I told you so” line.

  The others - Quik / Billabong / etc. weren’t so lucky and bought into the W49 ideal hook line and sinker - and in Canada anyways seem to be in line to “pay the price”.

• Duke Says:
  February 21st, 2009 at 9:54 am

  Pac Sun, 10 years ago, was necessary. The vendor’s needed to reach consumers in area’s of the country that weren’t on either coast of the U.S.. It helped stem the tide of more “Hollister’s” and was healthy for the Surf Industry. As Pac Sun evolved, and more recently, when our economy took a dive, Pac Sun has turned into what some people think is the “Evil Empire”. I think that Pac Sun, and all of the Surf Companies that are publicly traded, do indeed have to answer to their shareholders to a certain extent. We’ve all seen the up’s and down of our industry throughout the years, and we are in a trend now of over-saturation, company owned store’s, and vendor web sites selling direct to the consumer. Coupled with this difficult economy, what does everyone expect. Now, with this “new” economy we’re in, Pac Sun is bad for Speciality retail, Company owned stores, and e-commerce are bad, and we’re all in for a time of uncertainty in our industry. If, infact, Wolly and Naude pull completly out of Pac Sun, can they grow, remain flat, or even survive? Can any of the Publicly traded companies out there woo investor’s into buying share’s of their stock without growth? Quite Frankly, I haven’t a clue, But, Volcom and Billabong are still a force to be reconed with in our retail. They are some of our top sellers.. Pac Sun’s constant demands on Surf Companies to create SMU’s per Pac Sun’s spec’s has alway’s been ridiculous, in my opinion, and even in a good economy could be a recipe for disaster. What about the companies image? What if they “speced” out something that was totally lame? Is the Pac Sun consumer as removed from what’s really going on as the Hollister consumer, or, because the companies like Volcom and Billabong are so well known in the Surf wanna-be comunities that they’re able to pull it off? Now, Pac Sun is coming out with “Value” Store’s? How much more can a company cheapen it’s brand by participating in something as outragous as this.. Maybe I just don’t understand the concept, but, if any companies are making special SMU’s to participate is this craziness, it’s just flat wrong. I’ve had meetings with several of Vendor’s including Naude and Wooly, emphissizing the importance of holding price, and margin by not being on sale in our store. Some retailers think that the only way to get the consumer in the store is to have a sale. Sales are a drug. A drug that makes everyone feel really good temporaraly, then, when you realize you are making very little money, for more work, you come back down to earth and realize that it’s a bad, not a good thing. But, the most important bad thing that having sales all the time does, is that it trains our customer’s into never paying full price for anything! That being said, what the hell does this Pac Sun “Value” Store concept do differently?

• amopitt Says:
  February 21st, 2009 at 6:33 pm

  Its quite interesting to see the business disected in this way. I appreciate this article. As a pac employee soon to be ex, its good to truly understand what is going wrong and why they have decided to lay me off as well as hundreds of my coworkers around the country.

• Lance Moore Says:
  February 22nd, 2009 at 11:16 am

  great work , things are going to change , if u are a same store this is your time to work hard and change , we can all learn allot from big and small company’s:
  -big wont’s to be small
  -small wont’s to be big

  lets all get better at our business

• josh hunter Says:
  February 22nd, 2009 at 4:03 pm

  Mark,

  Thanks for your input. I thought the New User Registration thing had been handled, but will get that taken care of asap.

  In regards to SKU vs SMU. Sorry for any confusion there. I generally use the acronym for Stock Keeping Unit(SKU) to refer to a particular item, garment style, etc. In my experience at retail, we used the term (usually pronounced it, “skew” rather than as an initialism “S-K-U”) for inventory managment. I think some retailers use SKU, others use UPC (universal product code), and I’m sure there are others.

  I understand that Special Make Up is often referred to as “S-M-U” … By writing “For years I?ve heard merchandisers, designers, and production teams complain about handling special make up SKU?s for PacSun” I was basically using SKU’s in place of items, garments,etc. Hope that clarifies.

  Interesting point you raise about whether PacSun is in fact the largest single retail account for action sports apparel manufacturers. I know for Q4, PSUN was Volcom’s largest account according to the conference call last week, and from conversations with sales managers I know they are an A++ account for pretty much all the brands that do all-store orders with PSUN.

  That being said, who knows how long it will stay that way? I know the department stores have been getting hit hard too. So I guess only time will tell what store(s) will be buying the most branded actionsports products. Let’s hope Costco doesn’t become the answer for brands looking to make up for lost ground though.

  I’d be suprised if anyone on this forum thinks going that route is the answer. But, I could be wrong.

  Thanks again for chiming in.

• josh hunter Says:
  February 22nd, 2009 at 4:09 pm

  PS … I’ve heard the horror stories about dealing with Federated as well. From what I hear, JC Penney takes top honors when it comes to red tape, paper work, RA’s, charge backs, etc.

• josh hunter Says:
  February 22nd, 2009 at 5:03 pm

  Duke,

  Thanks for your comments. I always love reading your posts. You have some great points here as usual. I love the drug analogy!

  I went shopping with my girlfriend at Fashion Island last weekend (I know, I know … I surfed pretty much all day first though! Spides can vouche for me, though..I saw him in the water.) But anyway, back to the point here. I checked out the PacSun store there and honestly could not find a single piece of branded denim in the store. In all honesty I cut my visit short because of bad music playing loudly, but the produt mix in that particular store has changed dramatically since the last time I cruised through. The Sale merch and discounting was pretty much across the board as well. I’d say from what I saw at least 60% of the inventory was marked down in some way or another.

  Directly across the sidewalk, I walked into The Closet and saw solid brand representation from Volcom, Insight, RVCA and others mixed in with brands like WESC, Howe, Modern Amusement, Ben Sherman, etc. Although there was an element of discounting going on, the majority of the sale items were marked down considerably less than at PSUN across the street, which had items in the back of the store for $9.99.

  A couple of doors down at American Rag, there were limited edition Hurley tee’s retailing for 40 bucks, sitting next to brands like Apolis, WESC, Helmut Lang, etc. Wovens from Apolis were selling for $165, denim selling for $250 and up. Minimal discounting going on.

  My point is that it’s pretty interesting to see the different retail strategies out there in such close proximity, and to see the different ways some of the same brands are represented in different stores.

  What’s interesting to me is this: Why can brands like Apolis charge $165 for a woven longsleeve shirt, ot Helmut Lang can charge $300 for a pair of jeans?

  Do these brands make garments of higer quality than action sports brands? Is it because they market themselves differently? Or is it because they control their distribution more?

  Maybe it’s a combination of some or all of those factors?

  Then you have Hollister refusing to discount during a recession, and that didn’t exctly seem to pan out for them!

  So who knows, but what I took away from my little shopping trip is that brands with limited availability were far less susuceptable to discounting even among the current economic situation.

  Kind of common sense I suppose, but interesting and topical.

• Mike Reilly Says:
  February 22nd, 2009 at 5:56 pm

  Scarcity is the most important compliance gaining tactic in business which is why some retailers are fairing better then others.

  Buffalo Exchange, American Apparel, Urban Outfitters or in Europe H and M and Zara. Look at these companies supply chains and you will see why they are still growing share and resonating with consumers. They have quick lead times and new product on the floor shelf in limited runs every week.

  Have you been into a AA store of Buffalo Exchange ( I know they are seconds but good for my analogy) lately or ever? They are bringing in consumers because consumers know they will find something different everytime they go. In fact some people will visit two different stores as they might find something different. The staggering of ship dates in our industry does not match their strategies.

  Yet not only does this bring consumer traffic it also leads to buying behavior because what they see might not be there the next day. (Nike actually does this with SB, limited runs with limited distribution which creates a compelling value proposition, which leads to consumer surplus which leads to purchasing behavior)Deckers does the same thing with UGG, limited runs with limited increase in distribution to create scarcity and drive compliance.

  Our brands need to re-engineer their supply chains and be innovative in every aspect of their business. There has been enough copy-catting which has hurt the competitive advantages of all the manufacturers.

  American Apparel has been innovative and has created a sustainable competitive advantage. I would buy some of their stock—great buy!!

  therookery.ning.com

  Great topic,

  Out

  MR

• Mark Fitzgerald Says:
  February 22nd, 2009 at 9:46 pm

  Mr. Hunter, You are a scholar and a gentleman. Thank you for your insight, understanding and professionalism. Keep up the good work.

• Jeff Harbaugh Says:
  February 25th, 2009 at 8:48 am

  Sorry if I’m a little pedantic here, but I’m not sure I know what “too dependent” means. That you go out of business if you dno’t sell to them? That you cheapen your brand to the point where you lose your credibility with consumers?

  I also think you have to ask the question on a brand by brand basis. Asking whether the industry as a whole is too dependent doesn’t help us run our respective businesses.

  Not to oversimplilfy too much, but if you have a brand you ask yourself who your customers are. You ask why they buy from you and how they see your image. You ask if selling to PacSun is consistent with that image and if your sales there help, hurt, or are neutral to your image.

  With that information in hand, you look at your volume of sales to and earnings from PacSun. Can you get along without it? Are other retailers you sell to claiming it has an impact on their sales of your brand? How is your margin at PacSun compared to other retailers? Any unique costs from working with them?

  Okay, I oversimplifed. This is a lot more complex than a two paragraph discussion. But maybe the right questions is, “Is your brand too dependent on PacSun?”

  Sorry to barg in on your blog Josh.

  J.

• josh hunter Says:
  February 25th, 2009 at 10:24 am

  Jeff,

  Thanks for the input!

  The question of whether the industry is “too dependent on PacSun” is meant to be general. Based on two industry leading brands (Billabong and Volcom) announcing within days of each other that they feel the need to reduce their dependence on PSUN, it also seems timely.

  The idea of the column here is merely to provide a broad, deep topic and give TW Business readers a forum to discuss the topic, raise questions, make arguments for and against, etc.

  Think Coffee Talk With Linda Richman (aka Mike Myers on mid-90s SNL)

  …”I’ll give you a topic. Talk amongst yourselves.”

  Only I hope the topics on this forum are more engaging than something like “Rhode Island is neither a road nor is it an island. Discuss.”

  I agree it’s without a doubt not a topic that be covered in two paragraphs, which is exactly the concept behind opening up Friday Free For All with it. I’d love for this forum to become a place where such topics and issues are challenged, argued, etc … ultimately resolved to some degree.

  Thanks again for your input, Jeff.

  You’re like Buttah…… Call me, we’ll talk, no big whoop.

• TWRumorMill Says:
  February 27th, 2009 at 8:47 pm

  I may have to change my name soon. I’m glad to see the changes, more importantly, the progress. Even Jeff is weighing in and Duke! He’s a legend over there!

  You must have seen a fly in the champagne!

• lbs og Says:
  February 28th, 2009 at 9:14 pm

  This is a great topic and it will be interesting how this all plays out over the next few years (granted if we all are still around).

  First, this whole problem comes back to high school economics, remember Supply / Demand? I remember a long time ago when retail stores had territories, meaning competition could not open up down the street with all the same brands / concepts etc.. Well brands let retail competition basically fend for itself, and this is the aftermath. Too much product & too many retailer’s.

  So what happened next once our industry reached the saturation level, stores got addicted to the “sale” drug (sorry Duke Had to steal it, that was too good). So; Do we let this industry turn into walmart where the customer expects to always be on sale? What happened to selling a life style that comes at a price? I know if I had half the competition in my area go away (like it used to be) we could hold price longer and actually afford to give back to the community, customers and industry as a whole because it would look like a bad college project on cash flow.

  Bottom line is that lines are going have to be drawn in the sand, when it comes to these problems the choice is ours or Yours! The Red pill or the Blue pill? Choose wisely!

• Jak Carroll Says:
  March 3rd, 2009 at 4:10 pm

  This is a very interesting topic and I would like to draw a parallel with what has happened in the surfboard manufacturing industry in the last few years following the sudden closure of Clark Foam.

  Certainly when Clark first closed its doors there was a period of doom and gloom but now it seems the world didn’t end and people have actually started being innovative in surfboard manufacturing again. (I would love to see someone be really innovative and build an environmentally friendly performance board!)

  Maybe the economic downturn, like the disappearance of Clark Foam, will force the big clothing companies to rethink their business and branding strategies. Perhaps they all got complacent while the good economic times kept rollin’. Maybe now is the time to go back to their roots and be innovative again.

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