New Online Action Sports Discounter Discusses Business Model
mike lewis
- September 03 2009
- 1,596 views
- 23 comments
TheSurpriseStore.com is a new private online sales site scheduled to go live on September 10 that specializes in “helping branded consumer product companies alleviate their inventory and find new direct-to-consumer channels for marketing and brand elevation. TheSurpriseStore is geared towards youth lifestyle and action-sports brands. We caught up with founder Mark Freeman to find out how the site works and why he thinks this channel benefits everyone in the market place.
Why did you decide to launch The Surprise Store?
The idea really came out of an opportunity, a niche, and almost a bit of a necessity too. I have been around the better contemporary marketplace in the apparel industry for quite some time. My wife and I own a brand (Seaton) and some stores around LA (Jill Roberts). The private online sales business is becoming a popular trend in not only offering amazing products to consumers but in helping branded companies alleviate excess inventories. It’s a win-win.
What happens with consumer products, whatever it is, when you get down to the leftover stuff, it’s really hard to get it liquidated and get anywhere close to what you have invested in it. So the idea is it’s almost a direct to consumer channel. We’re the conduit between the brand and the consumer and allowing them to sell off their last season stuff, or things that they overproduced, returns, or whatever may happen. That always happens, whether the economy is good or bad. We handle all the fulfillment and the sales only last from 48 to 72 hours.
So it’s kind of an ODAT model?
Ours is a little bit different. We’re rolling multiple stores at any time, [but it's] a complete pop-up, pop-down kind of thing. Once it’s over, it’s over. It’s actually an educational process because most people don’t really understand the model. It’s up, it’s down, it’s complete and we then take the merchandise from the manufacturer, we’ll package it, and get it off to the consumer.
So is it in your inventory already when you’re selling it?
What happens is we work with them, not on a consignment basis, but more of a secured basis. So they’ll tell us they have some units of something, and we have them freeze those pieces, we’ll build up a store for them, we’ll make it look and feel like their brand to keep that consistent and then it will go live. Upon completion we’ll go back to the brand and say “of the 1,000 units we had, we sold 940 of them, ship those out to us.”
And then you in turn send them to the customers?
Exactly.
So then as far as the relationships with the brands, how do you develop those and what’s the back and forth about what’s available?
We’ve been working on that part of it for almost a year now and establishing the relationships. We haven’t been in that space, so we have to validate our existence. I can tell you as a brand owner that I don’t care what business you’re in, you’re always going to have stuff left over. We have been working on that and have picked up a lot of traction over the last three or four months. We’re getting ready to go live probably on Thursday the 10th.
As a brand owner, you don’t feel that this would impact the brand equity for your partners?
We think that if it’s done like we’re planning on doing it, that we will be a great marketing vehicle for people to be able to understand who their consumers are and what they did right or wrong. We’re going to give the brand owners the opportunity to actually view their transactions live. We’re going to give them backend information to login and watch the sales. Almost like QVC. At the same time, we have been establishing relationships within the entertainment industry. Even though a brand might be selling off an excess pair of shoes for example, Alice in Chains might have a new album coming out and we’ll look to do a cross promotion. It’s nowhere near a shop meet kind of down and dirty thing at all.
What do you mean they’ll understand what they did wrong or they did right?
Sometimes the trade doesn’t buy into a product, yet the consumer, when they finally see it, gravitates toward it. If it sells there, they know it’s valid and can prove to the trade that it will sell through.
All the retailers I’ve talked with about this type of business model are really worried it undercuts their sales. As a retailer yourself, what’s your take on that?
It seems to be a common thread and I’ve felt it also. We’re not even asking the brands to consider putting new products through our channel. From a retail standpoint I don’t want to be competing with this. I can tell you specific instances where as a retailer I saw product show up on one of the ODAT kind of sites and we called the manufacturer and said “dude, what is this?” and they immeditately took the product back from us. We’re focusing our efforts primarily on older inventories that the traditional retailer doesn’t even want any longer. The shopper coming into my store or any store is looking for the newest and greatest thing.
How do you set prices?
They’re worked out jointly with the brands. We ask the brand to jointly take 40-80 percent off the retail price. It’s in their best interest to go as low as possible. At the end of the day this is stuff that they want to move so we’re asking them to consider that. We won’t work with anything less than 40 percent. We’re also talking with magazines and publishers about doing this with subscriptions.
From you standpoint is there any risk associated if you don’t sell a certain number of units?
There’s always a risk because we have to commit dollars to build out the stores. There’s a lot of time and labor from photographing, getting models in, building the site and it’s only up for 72 hours so if it doesn’t sell, yeah it’s a loss for us.
Who else is holding things down over there?
Bobby Benveniste is the COO and Leland Drummond has been handling the branding and PR.
How have you been marketing TheSurpriseStore.com?
A lot of viral marketing. We have teams of bloggers out there pounding the pavement. The demographic that we’re talking to, anyone from 14 to 39, is so in tune with the Web. It’s interesting, somebody asked how much we’re spending advertising in traditional publications and it’s very difficult because it’s such a diluted market. The amount of traffic we’re getting to our Farcebook and our site now through our blogging teams is very successful. It’s clearly going to be much more successful when it’s live.
We’re also offering from the consumer standpoint a very viral marketing aspect. Every time someone refers a friend and they make a purchase they’ll get a 10 dollar gift.
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September 3rd, 2009 at 1:29 pm
its been nice knowing you brick and mortor. don't hide too far behind that screen.
September 3rd, 2009 at 3:48 pm
good luck, prepare to lose some mulah. Inventories are going to tighten I think you are 2 years to late.
Just another guy trying to cut margins for the whole industry. It never is good to have 1000 items in the same place at 40 to 80 percent off. I think its better to disburse it among 500 stores.
September 3rd, 2009 at 4:26 pm
Sounds like there will be quite the lag time from when consumer purchases product, to when they recieve product, correct me if I am wrong, but if true, I don't think that will really fly!
September 3rd, 2009 at 8:03 pm
The shipping lag will suck to a certain extent…but I think the 40-80% off or retail price will motivate people in to waiting a few extra days to get their items. Seems like a small price to pay for a greater customer value.
September 3rd, 2009 at 8:13 pm
It will be longer then a couple days I would think. 1. How long is the product for sale before they turn it off 2. how long will it take for the manufacturer to pack and ship, 3. how long will it take for the Surprise store to recieve, and turn around. That dude or dudette who purchases something the 1st day it goes live, could be waitin a while! They should Drop ship, maybe they are, then this creates a headache for the manufacturer. I don't know, I don't think this model is going to fly.
September 4th, 2009 at 2:21 am
IF THIS GOES LIVE AND YOUR PRODUCT IS LISTED……….BUH-BYE FREESTYLE.
September 4th, 2009 at 5:53 pm
Let the hatters hate! WOW!! Tell us how you really feel! Let the dude do his thang in this struggling environment. I think the store is going to be a hit and if retailers were smart, they should jump on board and try to find a way to cut a deal, on how they can move product that has been sitting on the floor for a while….. Maybe you should make some changes in your own business homie!
September 4th, 2009 at 6:52 pm
Its Funny..the people who are against this model seem to be the brick and mortar store owners. This a new economy..and its about brand survival. As an owner of a brand I have had to deal with absurd store cancellations, factor holds and bankruptcies left and right. Are you seriously worried about "brand integrity" when you have people like Oscar del renta, Cartier, Carolina Herrera etal liquidating their overstock? People–TJmaxx and loemanns have been the usual "last stops" as far as liquidation goes. These sites are thriving for a reason. And as far as 100 units noy being sold at regular price –if its discounted THATS the incentive. Suddenly it becomes something within the realm of psosibility. This is the new economy people. Survive or die.
September 5th, 2009 at 2:26 am
After receiving complaints from several of the manufacturers previously listed in this story we have removed all allusions to the brands. Apparently several of the brands listed, including Freestyle, which was mentioned as being one of the first stores that will go live with Surprisestore.com, are not planning on working with this retailer.
September 5th, 2009 at 5:39 pm
nice survive or die, sounds like your brand is dying. Brick and mortars seem to be the only ones who care about the brands they sell. Call me old school, but I care about margins, not just volume
September 6th, 2009 at 1:30 am
Get real folks. Have you been to the Ross and TJ Maxx stores down the street from your stores? There are miles of hideous racks full of AS brands. And the product just sits there til it's gone. I'd much rather it went someplace like this. It's clean and quick and over in a couple of days.
September 6th, 2009 at 1:33 pm
I agree, TJ and Ross already liquidate tons of inventory from many ASR brands. But it doesn’t effect the brands percieved value (in the mind of the consumer). On top of that you’ve got other ODAT sites and normal retailers discounting things all the time. As a retailer I don’t see the harm in it. I even spoke with a couple of people from prominent retail outlets who were considering the creation of a whiskeymilitia.com type solution. The real problem is that those retails are not clever enough to innovate on their own, so they just hate on others (and it looks like suprisestore.com is dead from all the hateraid). I can’t believe FreeStyle pussed out haha.
Anyway I don’t think the model would have lasted anyway, the fulfillment issue does look difficult to overcome. Also I don’t like that users have to sign up (register) to take part in the deal. Good Luck Mark!
September 7th, 2009 at 9:50 pm
Your right, haters is pretty cliche (sorry listening to too much blue print 3). What I meant to say was in my opinion (and everyone had their own opinion) the ODAT model does not negatively effect the brand or retail enviornment in any way. Let’s break down the issue: negative externalities ate usually generalized in two ways loss or brand equity (percieved value) and/or loss of direct sales from retailers.
In terms of the brand, excess inventory has been dumped for a long time (be it via Ross, warehouse sale, deep discounts, etc.) with little harmful effects to the brand. The only way these new models will be bad for brand value is if the brand let’s it (buy allowing too much stuff to be moved through this channel).
In terms of losses sales by retailers they may lose a couple (keep in mind the users for surprisestore.com will be spread out all over the world). But local shops won’t loose much especially if they are prominent in the community. Also other Internet retailers (traditional) can compete by offering variety (and the product doesn’t disapear after 24 hours or whatever).
In general the loss to retailers will be small as long as the brands who wanna push excess inventory through these new models keep it in check (and it’s in there best interest to do so). A bigger problem for retailers is the entry of direct retailing by brands (via opening their own online of physical store). This is an issue to be afraid of. Am I wrong???
September 8th, 2009 at 12:49 am
Please, with the hatters crap. Come up with something new and stop using that dumb saying. There is a multitude of issues and since talking your opinion is hatting we should all be quite and be told what is good and bad. And Homie that show your really in the industry PLEASE HOMIE!!!!
September 8th, 2009 at 12:52 am
Yes I agree but those stores buy a ton of merch and demand the discounts all the while having the ability to move the crap that we all don't like. This is not new and it will discredit brands that get too involved. Wait and see. Or I am wrong
September 8th, 2009 at 2:58 pm
This amuses me. How is this compelling for anyone - the manufacturer gets to blow out stuff below cost, irritate the premium retail channel, and finances the inventory? Can I have some of that? 1,000 units of a style that couldn’t sell through normal channels is still 1,000 units of a style that isn’t selling. That is a lot of units no matter what the channel. What about returns? I love this because both the customer and the manufacturer get ripped. At least with the deal of the day, the retailer ends up taking some risk.
Maybe someone should talk to Naude about distribution and the integrity of our brands before they consider opening this channel. What’s next, TJMaxx.com?
September 8th, 2009 at 4:45 pm
With all due respect, I disagree JR.
TJ Maxx and stores like Ross do not attract our type of customer. When is the last time you have seen surf or skate groms hanging out in Ross? Ross isn't cool, and TJ Max isn't core like HSS, Surfside, Jacks, Froghouse, Becker, etc. They are simply clearing house's for old merchandise that is thought to be " the bottom of the barell" scraps, that no true surf, skate, snow loving kid would be caught dead in! They're mom's have to venture in alone and look for the deals, and then, most of the time, not mention to the kid's exactly where they got it from. The kids do care. We have a Ross in the same center as Surfside. Some retailer's worst nightmare, but, it was there before we moved in, and we knew it, but were not concerned about it. With a discounting online website, you can fool a lot of the kids into thinking you're the real deal by creating a website that say's you are cool and core, even though you're just the online version of Ross or TJ Max. This has the potential to degrade brand image, and more importantly the industry's in general. At the Specialty retail level, we feel it big time, especially in this economy. We simply look like "price gouger's" insensitive to the economic hardships of our customers.
Store's like Ross and TJ Max have worked for the industry. On line internet clearing houses are a quik fix for desperate manufacture's in desperate times, that could have a long term effect on their brand(s). They are like marketing tools, but instead of portraying premium products, image, and lifestyle, they portray a brands, and I'm afraid, an industry's, decrepid, desperate, cheap, and ugly side to our core, target customer.
September 8th, 2009 at 8:45 pm
I think you are right about odat. The issue is a manufacture running to may items thru there. I can say I have had my customers talking about those sites. they can hang out at work and keep a window open. You will see a burton, or quik item pop up every 15 minutes. If it was once a day it wouldn't effect the brand, but in its current state is is a negative
September 8th, 2009 at 10:19 pm
I think many of you are neglecting to recognize a very important point. TJMaxx, Marshalls, Ross and The Winners are pretty savvy in their purchases. Firstly, they make regional buys (What will sell in SoCal may not yet be a trend in Florida). Secondly, most brands prepare SMU's for these companies. Therefore, they are not dumping grounds for dead stock, as many think. That simply is not true. I think many uneducated, non-industry opinions are very detrimental to healing this broken industry.
Their is only one plan to move forward in Action Sports. 1. Support your local shop. 2. Buy American made products. 3. Retailers need to price accordingly/ competitively (IE: stop discounting, DUH!) 4. Place limited buys (when it's gone, it's gone).
Pretty soon all the AS manufactures will have to tighten their belts and stop overproducing garments overseas. Then there will be no market for off-priced goods needed. Time to shape up or ship out, people.
September 9th, 2009 at 3:12 am
Seems to me that everyone in this coversation is in some way or form connected with briks and mortar retail. Good or bad, times do change and with the internet now in most consumers close proximity on a daily basis so does the retail / distribution / marketing model. I think that the Surprise Store business model is a threat to all retailers in some way or form as the reality is consumers want the best price and manurfacturers want the largest audince and the widest reach. Marketing is an issue as the Brick and Mortar store bring brands and image to a core community but that same community is already online on huge selected communities (facebooks etc) with a far greater influence than the local store has so times are just changing so so will distibution models. I say good luck to the people with the ability to think new as the current retail environment is flawed and rapidly becoming out of date. The real threat is when this business model becomes viable for direct sales of the latest products and the manurfacturers do the marketing of their products locally with the massive amount of money saved by cutting out the middle man. It is just a matter of time…
September 9th, 2009 at 9:34 pm
Now you guys should carry some core brands that aren't big and you will fit in the same catagory as you talk about because last time I looked Hurley, Quick and Billabong, Wait almost 80% of your brands are sold at big time department stores. Practice what you preach. Viva the core not the store.
September 10th, 2009 at 3:27 am
well if people don't want a main street, then buy online. I certainly would not like that. I like to walk downtown. I think online will be having a pullback here. It isn't what is is cracked up to be. The bottom line here is that the products sold at a surprise model is stuff nobody wanted. Just like most of the stuff sold at odat. The problem is is that it trains people to expect an unhealthy discount
September 15th, 2009 at 11:20 pm
Markfitzy, Markfitzy, Markfitzy…your 1st paragraph is pretty spot on. It's your 2nd and 3rd where you go off the rails:
"But American made products"? Really? While I support the hard working American out there, look deep inside yourself. Our health insurance, workers comp, cost to manufacture, etc are WAY too costly to make almost anything here in the states today. That's why we produce overseas. How freaked out did you get when gas got almost to $5 a gallon a while back? You know just as well as we all do that the "American Made" logic, albeit sad, is near impossible.
And what you failed to mention to point #4 is that not only should retailers be placing buys, but PREBOOKING. It's a majority that reason today why there is so much inventory to close out to the discounters. Do you really think that wholesalers like to work on lower margins? Just about as much as retailer likes it. No Way!
What used to be a partnership between wholesaler and retailer is rapidly turning into a dog-eat-dog relationship. It's very sad…