Chapter 9

The Business of Snowboarding

Group 2Back to the Beginning

Snowboarding Success

“The period between 1990 and 1995 was when the real fun started,” says Scott Sibley. “We were major players. We built a distribution team and produced our own apparel. We had major lines of production. We had distribution networks in Europe and in Japan.”

As our brand grew, so did the requirements on our in-house production (we could never produce snowboard apparel in-house, but we still produced our surf and skate wear). To help with this growth, I put an ad in the paper for a production manager.

One person who responded to the ad was a young guy named Frankie Hon, who had just arrived in Canada from Hong Kong. Frankie’s experience was in distribution, not production management, but from the moment I met him, I could tell how smart and committed he was. I gave Frankie the job.

“My family immigrated to Canada in 1990, and I started looking for a job,” Frankie remembers. “Chip interviewed me and offered me a job with Westbeach. The position had no title, but the intent of it was to coordinate with the existing production team. I was very impressed that he offered a job to a newcomer like me who had no Canadian experience.”

Frankie was with Westbeach for two years. Then, Frankie met and married a woman named Elky, a fellow Chinese immigrant living in Vancouver. The two set up their own Vancouver-based garment factory. Frankie and Elky took much of our production team with them – but that was okay because our relationship was very strong.

“With Chip’s encouragement, I started my own business in Canada,” says Frankie.

A few years later, Frankie and Elky would start a larger manufacturing business, Charter Link Ltd., in Hong Kong. They would be a vital partner for me in the early days of lululemon, and it all started with the personal relationship we’d established at Westbeach.

Growing our in-house production, then eventually taking it externally, were just two aspects of the growth Westbeach was experiencing through the crazy early-’90s. Even though financing was an ongoing challenge, the demand was massive, and the market was forgiving. My partners and I had to put into practice everything we’d developed over the previous five years – including our commitment to integrity and communication.

Advertising to Distributors

There were a few things we did differently or did for the first time to put ourselves at the forefront of the snowboarding movement. One idea I’d had was to put ads in TransWorld skate and snowboard magazine. TransWorld, established in 1983, was the worldwide go-to bible for surf, skate, and snowboard news. But there was an important distinction that should be pointed out – the ad I put in TransWorld was not targeted toward customers; it was targeted to international distributors in order to exponentially grow sales and manufacturing quantities.

Previously, when our focus had been surf and skateboard, we’d never advertised. We hadn’t needed to. I was first in the surf and skate business in Canada, and throughout the early ’80s, I’d received a lot of newspaper attention and editorials because I was the only adult who understood the youth market. This meant I had never had to spend money on advertising.

It had actually helped us not to advertise, as there was an underground authenticity to surfing and skateboarding. Traditional advertising would have only taken away from that.

Building on Letters of Credit

We continued to operate on letters of credit, as we still didn’t have enough money to afford upfront costs. Under this system, a distributor in Japan (or multiple distributors in Europe) would receive a sample line of Westbeach products. The distributors could show the sample line to potential customers.

Once orders were placed, the distributors would give us the orders with an accompanying letter of credit. We would then transfer that letter of credit over to our manufacturers in Asia. The manufacturers would ship the product orders directly to the distributors in Europe or Japan. From that profit, we could make the clothing for Canadian stores to pay 60 days after delivery.

That was how Westbeach, once it rebranded as a snowboard apparel company, was built on virtually no money.

The key to this whole process was reaching the right distributors, and that was to whom the TransWorld ads were targeted - not consumers. I wanted to let the skateboard world know we were the first and most original of companies in the new snowboarding industry.

If prospective distributors in Japan and Europe were looking for an authentic brand to sell in their markets, the TransWorld ad would point them to Westbeach. This advertisement was an investment, a plan to make us look bigger than we were. And it worked.

Big Air Contest

I’d also considered other ways to promote the Westbeach brand, with the specific goal of break-even marketing. I thought a lot about what kind of event would attract people from around the world to snow- boarding, and what occurred to me was a big air contest.

At the same time, Whistler Blackcomb had been trying to figure out how to make their season longer – how to make April as strong as other months. They’d planned a big ski festival (with a small snow- board component) to happen during one of the last weeks in April. I incorporated my idea with Whistler Blackcomb’s festival plan. Westbeach, as always, was short on money, but we had to put $50,000 into the event to make it happen.

The first Westbeach Big Air contest, held in April 1991, was a total extravaganza. Over the next few years, it developed into a nighttime event at the base of Whistler Mountain. There were amazing snowboarders performing tricks and stunts, jumping over huge gaps, and going through hula-hoops of fire. Down at the bottom of the hill, we had cheerleaders under the big air jump and hot tubs if the riders wanted to jump in. The crowd was huge, 10,000 people, and the vibe was crazy.

At one point, I had $5,000 cash which I rolled in toilet paper and fired out of a slingshot into the crowd. The wind hit at just that moment and blew all the money back at me. That didn’t stop a mob of people from overwhelming my position to get at it. On-site security didn’t stand a chance. That Westbeach Classic Big Air was a gigantic success and strongly contributed to Westbeach’s unique brand identity.

After we ran Big Air for two years, Kokanee Brewing paid us to rename the event. From then on, Kokanee ran the event and covered all the expenses and paid us $50,000, and the event was called the Kokanee Westbeach Big Air. I’ve always loved developing marketing ideas that generated revenue.

Sponsoring Snowboarders

The majority of other snowboarding companies were only marketing by sponsoring athletes. Many of these athletes were kids, really, between 14 and 18 years old, at the top of their game in a sport that hadn’t existed before. Big board manufacturers would pay a top snowboarder up to $1 million a year to use their branded boards at high-publicity events.

The board manufacturers of the world, such as Morrow, Sims, Burton, and Ride, could pay that kind of sponsorship through the sheer volume they made, mostly selling in Japan. Westbeach couldn’t afford that, so we had to think of other innovative ways to market.

Rather than having two or three top snowboarders at $1 million dollars each, I went to the individual mountains and found the half-dozen talented snowboarders just under the sponsorship level. These snowboarders were typically a little bit younger and friendlier than their more famous counterparts. They were also heroes of their community. They hadn’t developed big attitudes or egos.

Our first team consisted of Kevin Young, Devun Walsh, Emanuel Krebs, Paul Culling, and Randy Friesen, all snowboarders who would become household names in the sport. Another one of our first team riders was a guy named Ross Rebagliati, who would win the first ever gold medal in snowboarding at the 1998 Olympics in Nagano. Famously – or infamously – Rebagliati tested positive for THC, had his win disqualified, then had that decision overturned by the IOC and his medal reinstated after they deemed marijuana not to be a banned substance.

As the relationship with our team evolved into a less formal, more economical kind of sponsorship, we gave our riders free clothes and arranged their travel. We would also arrange photography of our snowboarders at various events and locations, then put the pictures in TransWorld to promote our riders’ images for their big-paying board sponsors.

This community branding system worked out to be cheaper by millions of dollars – plus far more effective – than the marketing hoops our competitors were jumping through with sponsorship.

I didn’t want to “buy” the snowboarders on the Westbeach team. A strictly financial relationship felt inauthentic. Whenever I saw a sponsored athlete from Nike, my mind screamed “fraud” as I thought they were bought to promote the Nike brand without an authentic belief in the product.

For amateur athletes, the money was a godsend. I wanted to make technical clothing for the sport and have these young guys test it. This gave me an early taste of focus groups composed of my ideal customers, an important methodology I would use with lululemon.

The First Focus Group

The first design group I put together consisted of our snowboard team, who were all 14- to 16-year-old boys. In all honesty, back then, my ego was looking for their stamp of approval. I knew that at 32 I probably looked like a grandpa to them – they might automatically reject whatever I showed them just because it was designed by an old man. I wanted them to test the products, tell me the clothing was awesome, then talk it up amongst their friends. I imagined these young guys acting as ambassadors and helping sell the line they’d tested. I was an inauthentic manipulator.

But, as the first focus group went forward, something happened that I didn’t anticipate.

When I presented our riders with the clothes, they were not excited. They took one look at the line and, instead of telling me how impressed they were, their eyes told me they had different ideas. It was a hard thing to hear, but I knew it was crucial for me to understand this demographic, so I set about listening to what they genuinely wanted.

The snowboarders told me to make the apparel “fat,” or oversized. Hip-hop-inspired, gun-hiding clothing was developing as an underground trend. These riders knew what they wanted, and they were clear in their advice. I was skeptical, but I took them at their word. I was astute enough to know I wasn’t listening to teen music and I wanted to see the world through their eyes. I made the changes and redesigned everything to be “super fat.”

Westbeach recreated snowboard clothing; the designs were the polar opposite to our competitors and definitely as different from tight ski gear as possible. I learned my lesson about the power of listening to my target market, even if their initial feedback wasn’t what I’d wanted to hear.

By the following year, however, I seemed to have forgotten that lesson.

Next season, I brought out a similar oversized look and again presented it to the snowboarder focus group. Once again, I went into this expecting their thumbs up. Wrong again. What they were looking for this time around had changed completely. They told me to make the clothes slimmer again, and they asked for solid colours instead of colour blocks.

I thought I knew better. We’d had such success with the oversized look I didn’t want to change it up so quickly. I was also convinced that solid colours were a mistake since it looked too plain. I ignored the kids and went with my own designs, unmodified. Once again, they knew best. If we had slimmed the size and offered solid colours, our line would have sold like crazy. I’d ignored our target audience at my own peril.

Another critical thing I learned at the time was a concept I’ve come to think of as: “If you have to say it, you ain’t it.” In branding and marketing terms, this concept refers to the inauthenticity that occurs when a company includes what they do or produce in their brand name. For example, Westbeach Snowboard, which was the formal name of our company, rings false. A brand identity should be strong enough, and so in tune with its core customers that it speaks for itself.

Our design team didn’t want our apparel to say Westbeach Snowboard. They wanted the word “snowboard” out.

The Japanese Take on Snowboarding

Snowboarding was our entry point to becoming a truly global company. The Berlin Wall had fallen, and we saw our goods being sold in East Berlin. At the same time, orders were coming in from state- owned stores in the mountains north of Beijing.

But, it’s impossible to talk about the rise of snowboard culture without mentioning Japan, as indicated in the prologue of this book. The Japanese snowboard market was fascinating. Japanese customers seemed to have no problem buying a snowboard, mounting it on top of their car, and never using it. Many customers in Japan simply wanted to look like they were snowboarders. It should be noted there actually is fantastic snowboarding in the mountains of Japan, but the riders’ appearance was as important as the actual sport.

Soon, Japan became 30 percent of our business, as it was with all other snowboard companies. By the early ’90s, the Japanese Yen had become a powerful currency because of the Japanese economy’s incredible growth from the end of the Second World War to the end of the Cold War. Everywhere I looked, Japanese people seemed to be buying up as much western culture as they could, from the Pebble Beach Golf Course to buildings in New York, to the snowboard scene.

Keeping Japan going was the trick. Part of this was finding the money to match the growth and demand, but another part was meeting the high Japanese quality standards. After Westbeach had been distributing in Japan for a year or two, I sat down with our Japanese partner and said, “How are things going, what do I need to know?”

“Oh, very good,” he told me, “but we’re burning 20 percent of everything that you give us.”

This was obviously shocking for me to hear. “What do you mean you’re burning 20 percent of everything we’re giving you?” I asked.

“We meticulously go through all the inventory you send,” he explained. “If there’s even a little thread out of place, we burn the item. We don’t want to wreck the brand.”

That was when I first understood the Japanese demand for quality and how it was exponentially greater than anything we look for in North America. When a Japanese person goes to buy a car, they’ll spend two hours looking for the tiniest scratch on the body. The importance of the visual effect of the purchase is truly remarkable.

For me, this was really an insight into what quality is and how a particular culture evaluates it. This insight gave context to what it was to be committed to quality. If we could meet Japanese quality standards, we could meet quality standards anywhere.

The Ski Association

In 1991, I was invited to speak at a meeting of the Canadian Ski Association in Banff, an organization that consisted of ski and equipment reps, as well as resort owners and operators. These people were the old guard of skiing. They were still scared of snowboarding and did not understand what to make of it. In their view, skiing, as a sport, was on the verge of dying – and with it, their livelihoods.

While in the car on my way to the Rocky Mountains to give my talk, I heard a story on CBC Radio. It was a profile of the time Sherlock Holmes creator Sir Arthur Conan Doyle moved from London to Switzerland. Doyle made this move because his wife had respiratory disease and needed the cleaner air of the Alps.

While Doyle was in Switzerland, he filed a few articles for The London Times. One article he wrote was about how appalled the Swiss were by the new sport of downhill skiing because they thought their national sport of tobogganing was at risk.

I referred to the Doyle profile when I gave my talk in Canmore. “Look, winter sports are always evolving,” I told them. “We have skiing, but, now, we also have snowboarding.”

Knowing what I knew about the cyclical nature of trends, I also predicted skiing would make a comeback, perhaps in 15 or 20-years’ time. I said my own boys would look at me as old-fashioned, still using my snowboard while they hit the slopes on their skis. Sure enough, starting around 2010, skis began to mimic snowboard designs, and skiing was revitalized. These days, all of my five boys exclusively ski.

Some of this perspective had come from our rebranding as a snowboard company. I thought back to how difficult it had been to enroll my partners – and the company itself – in snowboarding, even though it had turned out to be the right move. Whatever the next trend might be, it was reasonable to assume there would be just as much difficulty enrolling everyone in that new vision. Making bold moves with no provable outcome is a scary plan for security-driven finance people.

The communication between Scott, Richard and myself had improved exponentially, and this improved communication led us to align on the idea of selling Westbeach - sooner rather than later.

The rest, as the saying goes, is history – from the sale of Westbeach that I mentioned in the prologue, to the inception and beginning stages of lululemon. I had put in the 10,000 hours at least, (the amount of time author Malcolm Gladwell posits is needed to master a discipline).

As my new venture got underway, would my lessons with Westbeach in partnership, vertical retail, wholesale, and integrity be enough to prepare me for what was to come?