In 1992 former Surf Hardware execs Mark Kelly and Lachlan Kekwick decided the surf industry was in need of a fundamental make over in how hardgoods were distributed. The duo teamed up with Cobra’s Thailand factory to launch Global Surf Industries
(GSI), offering retailers a margin of up to 40% on entry-to-intermediate level surf hardgoods, making the available around the globe.
Launching with just three brands, GSI, which is celebrating its ten-year anniversary, now boasts 13 labels in its quiver, has global distribution on a massive scale, employs 18 people worldwide and plans to add three more in the next few months, and even offers surf travel insurance.
GSI has managed to grow its business despite the turbulent global economy and surf world, and has arguably helped shape the industry with its model and values, both of which remain firmly embedded in the company’s culture.
GSI came onto the scene on the front end of the debate between the validity of mass-produced boards in a landscape dominated by custom shapes, and helped carve out a niche for both and better marry the two—allowing many shapers, brands, and retailers to make a viable living in a rapidly changing global economy—and created a product pathway for beginners to evolve in the sport.
“Our goal is to support retailers and help make the hardgoods section of their store profitable and easy to manage,” Kelly told TransWorld Business in July of 2003. “These boards are priced at the lower end of the market to allow the stores to profitably compete with the backyarder and to sit under well-known brands that people are already willing to pay more for. No one who walks into a store intending to buy a top-name brand of surfboard is even going to look at one of our brands, as their mind is already made up,” continues Kelly, “but the person who’s just getting into surfing or doesn’t care about the brand of board they ride is potentially a consumer of our products.”
While its product range has grown over the years, its dedication to providing the right product to all surfers and getting more people on board hasn’t.
We caught up with Kelly to learn how GSI’s model has grown and evolved over the years as well as get his insight on the current state of the surf industry and how retailers can increase profits from the increasingly difficult surf hardgoods category.
Congratulations on hitting the ten-year mark! You launched in the summer of 2002 with the goal of being a “catalyst for positive change” within the surfboard manufacturing community. Looking back how do you think you've done on achieving that?
I think we have been the catalyst for positive change for sure. We have around 400 active accounts in the USA and distribute boards in 74 countries. I think our four main focal areas of service, support, quality, and value are the key drivers for the business now as much as they were on day one.
GSI Co-founder Mark Kelly enjoying the fruits of his labor in the Maldives.
What have been a few of the biggest highlights for you over the last decade?
The best highlights for me are all about introducing new product and having it taken up by the market place. Our 7S Super Fish has sold over 40,000 units globally. For a single model of surfboard with no team rider that is huge and a show of the strength of a great design. GSI being early into the SUP world via our NSP brand is another highlight for sure. Probably the biggest one is the quality of our staff and how they handle themselves on a daily basis. In 10 years we have only lost five staff. This is fantastic really.
Wow, that’s incredible. You started with three board lines and have grown your brand portfolio to 13 in the last decade. That's an impressive average of one per year. Is that something that was calculated or developed on a case-by-case basis?
We have developed a few brands ourselves but we have also licensed a few with world-renowned surfboard designers. It seems that they have joined at the right time. The bravest of them all was Steve Walden for sure, who was the first to step up and ask us to partner with him.
Explain the relationship between the various brands in your portfolio. How do they work together to compliment each other and help your retailers?
I try to take on brands that don’t really compete with each other. I don’t approach brands, I wait for them to approach us. There is a real difference in me going out there to sell GSI to people and brands coming to us, asking for us to help them take their business global. The difference is that they are ready, they have thought about it, and they want it to happen for all the right reasons in their mind. It would be easy to sell lots of brands the idea, but that is not what it is about. I have knocked back literally hundreds of brands over the past 10 years as I didn’t think the brand was right for us, or that the person running that brand would be too hard for us to work with.
GSI offers boards and brands for all surf types and abilities.
Which of your brands did you guys develop in house?
Modern Longboards, 7S, Gnaraloo Soft Surfboards, and Trident Paddles. The Seaglass Project is a joint collaboration between Tom Wegener and GSI, NSP is developed in conjunction with Cobra.
You guys launched on the front end of the foreign-made board debate. Since that time Clark Foam has gone under and surfing has undergone several highs and lows. How has this helped/hurt your business model during that time?
The Clark thing on paper should have been good for us but there was a lot of panic buying in the marketplace and that was followed by a poor summer. It took some stores years to clear the crappy inventory they bought during that period. I would say that surfboard sales are only just now getting back on track. It has been a long road.
You guys launched with Cobra, whose Thai factory was capable of turning out 300 boards per day in '02. Where are you doing the bulk of your manufacturing these days?
We use Cobra for a lot of our production for sure but we also use five other factories now for different products. We source the best partners we can find and build a relationship and develop products with them. We have production in Taiwan, Korea, China and potentially New Zealand this year. 2012 is looking to be a record year in sales for GSI globally.
How many boards are you turning out on a monthly or annual basis these days?
We don’t give that information out, sorry. I will say that 2012 has been the best gross revenue year for GSI as well as the best Nett Profit year as well.
Where are the majority of your boards being sold these days around the world? What areas do you see strong opportunities in?
The US, due to the size of the population, is the strongest market for us for sure. Outside of that Australia. Europe is close to a basket case but I have some ideas to grow that market over the next two-to-five years.
GSI is extremely dedicated to the surf industry, its community, and your company's values. One of them is "profitability for all parties." Explain what that looks like for GSI, the brands you work with, your retailers, and the surfers that ride them?
In the product mix, you have the following parts—Consumer, retailer, Shipping company, GSI, Shipping company, Manufacturer, raw material supplier. All of these people need to get good value for what they are providing or buying. If any one part of the chain is not nourished then the chain breaks and we have a problem.
When GSI started there was no MSRP on surfboards, we worked hard to introduce this to ensure profitability for the retailer whilst at the same time giving each of the different boards a price point targeted at the end consumer for that board. Still today this is the case for many brands. Some high profile brands produce low teen’s GP for stores. This must be pretty tough when the average store has a break even point above 20%.
Retailers are continuing to struggle to make money on surf hardgoods. What advice do you have for them?
Go surfing, fall in love with boards, ride as many boards as you can, or have staff that do. You are selling the experience and if you aren’t into it then forget about it. People want to buy more waves and helping them get the right board is the key to being a successful hardgoods retailer.
One big comment is that retail needs to step up. If you think of all the changes in the world in the past ten years, and then think what the corner surf shop was like then and is like now, you see that one has stayed pretty still through lack of reinvestment. Retailing needs to step up and start getting into the year 2012 or they will go the way of the dodo I reckon.
What broader changes do you think would benefit the surf hardgoods industry?
In the US there needs to be some regulation about the quality of surf schools. It is terrible at present—there is a lack of quality instruction available. Getting this level right will help people stick with surfing and bolster the whole industry. It is all about participation in my mind. Look at the job Surfing Australia does in Oz or Surfing NZ does there, they are light years ahead of the US. It is such a shame.
With BASE closing last year and Billabong and Rip Curl on the market, what is your view on the health of the Australian surf industry?
Australia is in a bit of a funk right now for sure. This has been compounded by two terrible summers in a row. Having a bad economy is one thing, but a rainy summer is the nail in the coffin. Signs are that this coming summer will be a great one, the early signs are there. I am sure everyone in the industry in OZ has their fingers crossed on this one, that is for sure.
How has the role of the custom shaper changed over the last decade and throughout your time in the industry?
This is an interesting one. In one of Gordon Clark’s last manifestos he called for all of the shapers to go direct to the public, bypass the retailers, and go Guerrilla. There has been more and more of this happening as raw materials get more expensive and the margin for stores shrinks. I think that there are lots of custom shapers who are super busy and there are a lot that just have bad businesses and have continued to struggle for years. One interesting fact for me is that there is a lot of guys in this side of the industry that are now aging and the influx of youth is slow to non existent. It will be interesting to see what happens in the next 10 years that is for sure.
What do you think the surf industry will look like ten years from now?
A few things are certain, the internet will get stronger. So more online sales and better marketing online for sure. Surf Travel will change as surfboards are pretty much being outlawed on plane,s so destination quality rental fleets will be available, no different to renting a good car from AVIS. Quik and Billaong’s retail presence will continue to shrink I think and more hardware-oriented stores will come online. The saturation of places you can buy the same product will make this happen.
Anything else you'd like to share on the last decade?
It has been a great ride for me personally. I have met some great people over the past ten years.