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Stokehouse’s Derek O’Neill Talks Biz, Moving Supply Chains Closer To Home + Maintaining Brand Equity Through Tough Times

Industry vet Derek O’Neill, European GM at Stokehouse (Vissla, Sisstrevolution and Amuse Society) has now weathered four recessions in the boardsports industry and sits down with SOURCE to discuss how the company fared in Summer 2020. The interview spans many topics from strong sales post lockdown to lessons learnt on supply chains, maintaining brand equity through the downturn and how it’s led to a strong order book for Spring 2021. Derek also tells of the importance of working with the right retailers, ones who are in it for the right reasons and are doing it properly. Read on to find out just what that looks like. Interview by SOURCE Editor Harry Mitchell Thompson.  

Please tell us how the business has been affected by the lockdown – supply, manufacturing, sales, and staffing.
At Stokehouse Europe, the impact of lockdown was very fast for all of our brands. Both Vissla and Sisstrevolution were affected by surf shop closures immediately; the fact that surfing was blocked in most countries didn’t help. And then with Amuse Society, the challenge was that being more city boutique based, the cities became ghost towns quickly. So, it wasn’t a question of delivering products or not, the stores were mostly closed for up to two months so we couldn’t. While you could see it coming a few weeks beforehand, the problem was you couldn’t see where it would end. The French government put plans in place to retain staff, so we were able to keep everyone in a job, which helped a lot. On the product supply side, many countries had yet to be impacted so things took longer and getting a regular supply of products became a big challenge. In some countries the factories closed, or the fabric supplier was affected, or the button supplier was closed, and even when they reopened not everyone could get back to work. We are still seeing many impacts on the supply chain with some products late due to COVID impacting suppliers or freight channels. Previously air freight was an option to speed things up, not at the moment though due to high costs and limited flights. We are looking at a lot more European production on top of what we already do as some of the global production thinking needs to change.

Many retailers immediately cancelled the products that they had on order or reduced their orders. We were flexible on this because the stores were closed for a while, so they needed less products. We understood. Some also asked for very heavy discounts, however we were not always as open on this. We are independent, we are not a public company with unlimited funds nor do we have some big hedge fund/bank owner telling us what to do, therefore in order to stay healthy and for us to best serve our clients selling products at a loss was not an option. We approached it as a partnership, to work with the retailers that wanted to work with us, but it needed to be a two-way arrangement, we just couldn’t take all the pain. We bought a lot of products based on the clients’ orders, and we expected to deliver them at some point. During this period, there were some retailers that understood our issue as well, and in the future, we will support those retailers as much as we possibly can, until the ends of the earth. There were others that we may never give our business to again or at least may not offer credit in the same way in the future.

Were you able to sell successfully over the lockdown via your web channels? 
Web sales at the beginning were slow. People were still trying to work out what lockdowns meant. For one week, we had only one or two staff packing a few orders every few days. But after around one week, it suddenly went pretty crazy. Our web sales went up by more than double, at full price. Even while it seemed others were trying to give their products away on their webstores, particularly on bigger e-comm stores and some of the subscription-club-type bottom price online stores, we kept our pricing at full price, especially all our 2020 products. However, we did run a small sale on older products for a couple of days. I was shocked to see some of the brands just throw their brand equity away like that. It looked like the accountants were running some of those brands. It’s a long way back from that deep hole.

How much do you expect business to be impacted in Q1, Q2 and Q3?
At wholesale our sales were around 30% smaller than we anticipated for the spring/summer season. We lost sales while our accounts were closed. It was their prime full price pre-sale months, and they were not open. We understand that retailers were nervous to take goods, as it was hard to see what was coming, then they got flooded with heavy discounts from some brands, so they took a lot of those cheaper products into their stores. Fair enough. But many of those brands offering those discounts also had the same products on their own branded online stores selling at 50% off or more, so a lot of those products ended up being slow sellers for those retailers. We decided to keep it clean even if it meant we may have lower sales. Our own retail sales exploded when lockdowns finished, up more than double on some months especially on wetsuits, and our e-comm stores helped a lot as well. But in the end, 2020 will be a smaller year than 2019. Some autumn products are delayed or cancelled, and this has had an impact as well. We decided not to chase sales at any cost, we never have, and in the end a lot of our accounts are giving us more business going forward because we held some discipline. Our Spring 21 order book is looking strong.

Which of your brands has performed best over the last 6 months and why?
Vissla easily. There were huge amounts of people surfing in Europe this summer and they wanted technical products. Boardshorts, walk shorts, wetsuits… in the end we had wetsuits in stock all summer because of the order reductions so the retailers that gave us support had a great offer for supply and we were able to back them up all season. Some of those stores that reduced or cancelled in the end probably made a poor decision… and our direct to consumer sales were amazing at Vissla.

How have you been working with retailers, have you altered your dates for season launches and prebook deadlines?
The fact is the calendars and release dates for season collections are mostly set for the bigger brands that want to sell to inter-sport and major department stores. We would rather be seeing surf shops in September or after the summer season and we are slowly pushing our release dates later each year. Pre-selling in May and June to deliver boardshorts in December or January in Europe is not helping anyone so we are moving more and more to our own program, regardless of what others may do, and a lot of stores are happy to order later in the season.

Can you talk us through the ways you’re supporting retailers with regards to leniency, stock buy-backs, inventory levels etc. And also, marketing – social assets etc.
We are trying to be flexible with our retailers. This season no one knew what would happen, and it has been up and down depending on the country and region. Tourism changed in a big way, and it is still evolving, and some retailers got it right, some got it very wrong. We are helping with inventory and payments because we have to, there are no winners if the stores get too heavy in the wrong products, but on the other side, they also need to have something to sell on the floor if they want to make sales…in these times we get to see which retailers understand how to sell something and who’s just going through the motions. We expect that there will probably be some retailers that don’t make it as the government money plans start to have less impact and there is less cash available in the general economy across some European regions. Our marketing has been kept tight and we are now starting to focus on supporting retailers on the floor where possible.

What does the ‘New Normal’ look like for your customers and the market?
The situation is clear. Those retailers that create a compelling reason for someone to come and shop with them through their store atmosphere; the right brands and right products; a rounded pricing offer; great, knowledgeable and helpful staff to make people feel welcome all have an amazing chance to be a clear leader in the future, because the stores around them that have no real reason for people to shop there will not survive.

Surfing, in fact riding any type of board, is not going away at all. Surfing’s growing and boardsport brands have a good future as the customers are ready. While the situation is different this time because it is a health driven economic shock, it’s my 4th recession in this industry so we have had some practice for this. We started Vissla out the other side of the last recession in 2013 and for sure some new brands will start up soon which will be a great way to refresh everything and keep it interesting.

Any positive thoughts for surfing’s way forward?
Today, team sports are still heavily restricted whereas individual sports and activities like surfing and skateboarding are big winners in terms of the numbers of people that want to give it a try. We saw many guys that had not surfed for years come back into it this summer, and with people’s mental health suffering from lockdowns and restrictions, our sports can be a way forward for many people just to help them feel good. For the next few years at least, freedom to do what you want will be majorly restricted. An ordinary day at the beach still beats any day in the office. While business will have its challenges with more curve balls to come for sure, the basic fact is if we provide great products to excite the user wherever they are, we should have a solid future ahead while navigating the turbulence in the economy that is surely coming.