Australia's iconic surf brands on the wave to recovery
Australia’s top three surf companies – Billabong, Rip Curl and Quicksilver - have had a tough time of late; battling financial uncertainty and a crash in demand for their products.
Billabong, one of the country’s most iconic brands announced in early October that it has reached a $386 million refinancing agreement with US consortium Centerbridge-Oaktree Capital Management, who acquired a 40 percent stake in the business. Billabong posted a $859 million loss last financial year and hopes are that the acquisition will - for now at least - secure the short-term life of the brand while it finds its footing again.
The public surf company Quicksilver has also been suffering financially, reporting declining sales. Its third quarter earnings make for miserable reading having declined by 84 percent. And privately owned Rip Curl is not faring much better, with analysts describing the brand in a state of ‘profit free fall’.
During the 1990s and the 2000s all three brands were ‘off the hook’ in terms of market presence, popularity, and profitability. Each was aggressively pursuing international expansion and you couldn’t attend a surf event anywhere in the world without seeing their logos on every banner, surfboard, or item of clothing. So what went so catastrophically wrong for the brands who, less than 10 years ago were leading the pack when it came to symbolizing surfing’s laid-back lifestyle.
Each brand seems to have lost touch with its target audience owing to a pursuit of global commercialization. Its like with any subcultural trend, once it becomes mainstream the subculture will find something else to support or wear. Writing for theconversation.com, Andrew Warren noted that “as the big three surf brands grew so did a disconnect between global commercial ambitions on one hand, and maintaining local subcultural credibility on the other hand.
“Ironically commercial success has been the source of their troubles,” he says.
So how are the big three going to increase their market presence, while regaining their subcultural credibility?
Reconnecting with the ‘core’
The only option for Billabong, Quicksilver and Rip Curl now is to reconnect with the markets that became their springboard to success - the Australian and Californian locals. In the 1970s the popularity of the beach and surf culture soared – the founders of the brands were part of the surfing movement and because of that the brands’ achieved strong credibility within the community.
However, acquisitions of brands such as DC Shoes, Element and Nixon Watches made the brands more accessible to a wider audience; Billabong alone bought some 600 retail spaces around the globe, and suddenly everyone was sporting surf inspired fashion. The exclusivity was lost and the locals opted for something more low-key.
Finally the big three have recognised this and have realigned their marketing strategies to reconnect with the ‘core’. For example you can now order custom designed clothing from Quicksilver and Rip Curl has been promoting the ‘authentic’ nature of its surf products by highlighting its roots in custom surfboard manufacturing. By focusing on designs relevant to the core subculture, the brands are hoping to regain their ‘cool’.
Building on strong foundations
It’s unlikely that these brands are going to vanish from the face of the earth; they have strong foundations and a loyal following of fans that respect the fact they grew out of a close-knit culture. They may have turned their backs on the brands for now, but as soon as they begin to give back to the community support will come flooding back.
This should come as a warning though to other clothing brands, particularly the likes of Hollister in the US and Jack Wills in the UK who have built their brands around a culture and a lifestyle. By pursuing global success you can forget your roots and ultimately your popularity will become your downfall.
There are a number of brands now that have recognised this trend and who are consequently avoiding wide spread advertising or product placement in large chain stores. They are instead opting to advertise in specialist, local publications and will only sell their products in independent retail outlets or online. Brands like Asenne and Swami’s have done this to great effect.
Finding the balance is difficult and many brands have fallen down at this hurdle. This example also serves as a reminder that doing business in retail can be volatile and risky and you need a strong marketing strategy in place to overcome challenges. For Billabong, Quicksilver and Rip Curl the challenge is to remain profitable while maintaining subcultural credibility.
Q&A: Professor Loredana Padurean, Asia School of Business
As someone who is creating Asia Pacific’s business leaders of the future, what do you believe are the essential skills leaders require?
In many ways, we need leaders who are Renaissance women/men or polymaths, as opposed to specialists of an industry or a field. A polymath is a person with profound knowledge, proficiency and expertise in multiple fields and today’s leaders have to be able to combine various ideas, look at problems in novel and useful ways, and develop a broad and yet still deep set of skills, talents, and knowledge.
You’ve coined ‘smart’ and ‘sharp’ as skills of the future. What are these?
They are replacements for ‘soft’ and ‘hard’ skills, a concept coined by a US Army doctor in 1972 who observed that his pupils had different skills: dealing with machinery required ‘hard’ skills, while dealing with people and paper were ‘soft’ skills. This concept has served us well since, but I find it too binary, not to mention the semantic implications of the words themselves.
Soft implies gentle, delicate, mild, quiet, tender, weak. However, there is nothing soft in navigating competing perspectives and cultures, handling and delivering critical feedback or dealing with office politics. Instead, I prefer to call these skills ‘smart’. Hard implies rigid, difficult, heavy, static. But how can we think of engineering or software development as static or rigid? I believe ‘sharp’ is more apt as such skills need constant updating or sharpening.
I think it’s time to reflect on these classifications, because we can drastically change someone’s perspective by how we choose to talk about and frame something.
How important are smart skills in leadership today?
Smart skills are more important than ever because we live in a world of extreme diversity: generational, ethical, value-based, gender, etc. Gone are the days when giving an order was an effective act of leadership. I personally work with people from five different continents and across five different generations, therefore as leaders, we need to know how to adapt, motivate, inspire and connect. We need to increase our investment in learning about them in action, especially as smart skills are more difficult to develop.
I believe that a successful leader today has to be both smart and sharp. Take cognitive readiness, one of my top 10 smart skills. In order to be cognitive ready, one has to master system dynamics, one of my top 10 sharp skills. Also, did you know that one of the primary reasons why digital transformation fails is not the absence of digital literacy, a sharp skill, but the need for more validation and adaptability, both smart skills. So, instead of thinking of these skills as binary, I prefer to think of them as the yin and yang; co-existing and complementing each other.
So, you can teach leaders smart skills then?
Yes, you can, via a combination of the classroom experience, plus an action component supported by deeply embedded reflection. At ASB we call this Action Learning, and we teach it both in the MBA and in the executive programs. For example, in teaching a leader emotional maturity as a smart skill, first they need to learn what it is, and then act on it, before reflecting on what we did and how we did it. And then to repeat it, but this time with more expertise and awareness. It’s not easy, but that’s why my favourite mantra is ‘the job is easy, the people are not’.
Discover Professor Padurean's successful skills for a digital transformation here