Bob McKnight Believes In Surfing

Is Bob McKnight the most powerful man in surfing? The claim is at least arguable as his already vast Quiksilver empire continues to grow at an incredible rate. TransWorld SURF Business caught up with McKnight mid March 1999 at the SIA Show in Las Vegas. Here’s what he had to say about the growing surfwear company and its future.

TransWorld SURF Business: In the latest quarterly financial reports, Quiksilver’s sales were up again — up almost 60 percent in the U.S., 50 percent in Europe. What’s contributing to the companies success?

Bob McKnight: I think it is a case of where the Generation Y — the fourteen- to eighteen-year-old male or female — worldwide is such a huge demographic that our market place has doubled.

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We’re an authentic label, along with Burton, Airwalk, Billabong, O’Neill, and other companies like that, that have been in this thing for a long time and have come up through the ranks, paid our dues, and paid respect back to the sports via team, events, and reps out on the field. We’ve also taken really good care of our core accounts, and have earned our real estate in the stores. And the customer has exponentially grown.

We’re just getting our fair share of that extra business. In our case, the youth business has been moving along quite nicely for years now. It’s growing about twenty to 30 percent a year, but what we’ve gotten the big kick to get us that number you were just talking about, was the Roxy area — where all of sudden we’re now doing a line for girls who share the same enthusiasm for sports and the outdoors as young men do.

This demographic is vastly different than the one right before it, in that it the previous generation didn’t care about life, and used to hang out in Starbucks, and drink coffee and talk about how shitty things are.

TransWorld SURF Business: And wear flannels.

Yeah, and they say that there’re no jobs, we won’t get into college, my parents are divorced, there’s no money, there’s just all these bad things. Plus they had all these social issues to deal with like AIDS, and political unrest in the world, disease, and nuclear war. It’s just wild what they had to think about.

This new group is very positive about life, where they’re going to school, and about getting jobs. They’re happy.

By the way, they spend about 35 to 40 percent of their money on apparel and another 30 percent on entertainment. But their entertainment is snowboarding, surfing, and all that stuff.

So you start talking about 60 percent of what they spend their money on are things we have something to do with. The demographic is growing and the kids who are in that demographic are happy, they spend money on apparel, and they’re into the outdoors and music.

TransWorld SURF Business: How do you see the overall youth market?

There are really three looks going on, in at least in men’s. You’ve got the Tommy Hilfiger, Nautica, Calvin Klein look. It’s a little more fashion, a little more preppy, non-coastal kind of city deal.

And then there’s the whole Fubu, JNCO type thing — the inner city thing.

And then there’s the outdoor, sports, coastal-influenced, surf/skate/snow-influenced kind of companies. And we’re the leader of that pack, at least in apparel.

The big stores, as well as specialty stores, are looking for a vendor that can come in behind Tommy Hilfiger, and take care of the young men’s and the young women’s customer. We’ve done a really good job, so we’re it!

So because of all those things, we’re just growing, growing, growing, and growing. And I know our bookings for Summer are way up over that figure.

Our Fall lines were released a couple of weeks ago, and I think everybody is just claiming we have a good denim line, because Levi went from seven-billion dollars of sales to six-billion dollars, and plus that whole JNCO, Fubu thing is slowing down, so there’s denim business out there, and why not us? So we think that the surf/skate/snow vendors should do a good b with denim and bring it to the market place.

The reason why I’m telling you all this is because I think that this momentum is going to continue for quite some time. The demographic behind generation Y is equally as huge. So we have about a fifteen-year window, which I think holds well for everything all of us do — surfing, skating, snowboarding, all that stuff. That’s why it’s an exciting time in our industry.

TransWorld SURF Business: How much time does your company spend looking at the demographics, and doing research?

We look at it at least every quarter. We have a lot of research done for us by outside analysts.

They’re trying to keep track of public companies and how those companies are fairing in this big world at large. So the analysts look at demographics to make sure they see the same kind of window we do. Most of the research is done by them, which we get, and they basically all say the same thing: it’s a huge demographic. These kids are all into sports, apparel, and music and the demographic will be here for a long time to come.

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That’s why the analysts are putting out “Buy” recommendations on Quiksilver, Vans, Oakley, and Pacific Sunwear — the companies that deal with the same demographic.

TransWorld SURF Business: Unfortunately, the snowboarding market isn’t getting a lot of “Buy” recommendations right now.

I think the companies that have only snowboarding business, like Ride and Morrow, have a tough time because they’re stuck in this industry which is going through the same thing that ski went through, and there’s a lot of equipment out there, and a lot of players all vying for the same dollars.

And then you top that off with the bad snow season we just had, it’s tough. I’m glad we have more than just our snow division, because it’s kind of growing a little, but we’re getting our big growth from the sportswear on the other side, and with everything Europe is doing.

TransWorld SURF Business: With your growth and expansion in young men’s and juniors, do you think lot of your customers aren’t core surfers any more?

I think that’s always been the case, and that’s the case for everybody like Billabong, Rusty, and O’Neill. When you look at the stuff that goes out there, probably five to ten percent of it is worn by people who actually surf, skate, or do any of the core sports.

But the deal is that this generation Y customer, whether the kid is in Newport Beach, Virginia Beach, Tokyo, Sydney, Munich, or Des Moines, he still might go to the coast for a weak during the year. Whether he bodyboards or hangs out at the beach, he wants to look like a surfer while he’s there. It’s all in his mind. And so he goes back to Des Moines and to him he’s a surfer, and you’re not going to tell him any different.

And he might skate around, might go snowboarding in the mountains for a weak with his family, but all year long he’s a surfer.

I’m the same. I don’t surf a lot in town now, but when I go on my trips, I’ll go to Sumatra, I’ll go to Fiji, but I figure I’m a surfer year round, but I don’t surf year round. It’s the same when I go on my snowboard trips. I’m still a snowboarder year round, even though I don’t snowboard every day.

So this kid is the same everywhere in the world. And they’re instantaneously connected now by MTV, the Internet, advertising, magazines, television, and all the things everybody does in the media.

The trends and ideas no longer start on the West Coast, move inland, and slowly move to the East Coast. Everybody knows what’s going on immediately now.

Dennis Rodman’s haircut is seen as fast in Chicago as it is in Los Angeles. Just like what these kids are doing, what they’re wearing, their styling, their sports, what they think, and who they’re into and all that. It’s the same kid. So whether he actually goes into the halfpipe or doesn’t, he is still core in his mind. So therefore the core market is really, really sound, by virtue of just the single happening kid in high school who influences ten more, who then influence ten more, and so on. Core begets mass.

TransWorld SURF Business: You started Quiksilver in 1976 in the U.S. — almost 25 years ago. You, your managers, your reps, and basically everyone in the company is older now. How do you stay connected to those young kids?

In our case, you have to get whatever you call your senior management, I guess I’m one of them, to keep young. By staying young, I mean by hanging out with as many of these kids as we can, with our riders. Staying connected. We all want to be on the same level. I go riding with them and just hang out.

I try to be as involved with the designers and go on trips with them. I go to the clubs where they go, read all the magazines they read, look at all the stuff. I feel like I’m fairly well connected. And then I demand that of my other senior people too.

Then right below that we have to keep rejuvenating the company all the time in the design and rep areas. We bring in sub reps underneath the veterans. But the veterans are still really important.

A lot of the core accounts, then again, core accounts what does that mean? Becker has a 3,000-square-foot men’s department, women’s department, surfboard department, shoe department, so the day of the small surf shop are over. These guys have now gotten more sophisticated, but

The core shops would rather work with a Willy Morris, than have some young, punk kid come in with died hair, tattoos, and earrings all over him and maybe that’s what they’re seeing. They know Willy, they know how he thinks, and that he’s going to be honest, take care of his reorder business, make that phone call that’s really important, and maybe hand-deliver the goods if they need them for the weekend. Willy’s been in it long enough, he’s sophisticated, he’s responsible, and he’s the man.

So, the way you rejuvenate that is you bring a sub rep under Willy, in this case it’s Jay, and Jay starts learning the ropes. Willy educates him, and in some time Willy ends up in management and Jay will be the rep. You just can’t slam these young kids in, just to have the young kids. I mean, 60-70 percent of the time it won’t work.

In our design area we bring in youth underneath our experienced guys and sooner or later they end up somewhere else or they go away or whatever, but you constantly have to be reinventing yourself, rejuvenating yourself, and staying in tune with the marketplace.

And it’s sort of a little bit of secret sauce and I’d tell you but I’d have to kill you. That’s kind of how it works, and fortunately for us we’re pretty good at it.

The other secret we have is that we have designs coming from all over the world. We have Quiksilver in Japan, we have Australia, we have New Zealand, we have Brazil, and we have France. If we feel like we’re running out of gas, a box arrives with a whole line of camouflage shorts, or something just brilliant. So the designers can slam it in the line.

We have youth everywhere giving us all these looks. That, I think, except for Billabong with their Australia deal, is why there’s no company like us. We’re really unique and we have a really strong infrastructure everywhere in the world to bring us design and marketing ideas.

Ninety-nine percent of the people who walk through the door every morning at Quiksilver, whether it’s Brazil, Australia, or whatever, they’re passionate and want to kick ass, and everybody has ideas so the ideas are coming from everywhere. It’s kind of unique.

TransWorld SURF Business: Can you explain the corporate structure of the company?

Quiksilver was founded in Australia by a couple of guys, Alan Green and John Law, who made Ugg boots, which was they’re first product. We’re the originators of Ugg boots believe it or not. Their company is still called Ugg Manufacturing.

So they made Ugg boots in the winter, because it’s zero degrees in Torquay in the winter, it’s a horrible cold. In the summertime it kid in high school who influences ten more, who then influence ten more, and so on. Core begets mass.

TransWorld SURF Business: You started Quiksilver in 1976 in the U.S. — almost 25 years ago. You, your managers, your reps, and basically everyone in the company is older now. How do you stay connected to those young kids?

In our case, you have to get whatever you call your senior management, I guess I’m one of them, to keep young. By staying young, I mean by hanging out with as many of these kids as we can, with our riders. Staying connected. We all want to be on the same level. I go riding with them and just hang out.

I try to be as involved with the designers and go on trips with them. I go to the clubs where they go, read all the magazines they read, look at all the stuff. I feel like I’m fairly well connected. And then I demand that of my other senior people too.

Then right below that we have to keep rejuvenating the company all the time in the design and rep areas. We bring in sub reps underneath the veterans. But the veterans are still really important.

A lot of the core accounts, then again, core accounts what does that mean? Becker has a 3,000-square-foot men’s department, women’s department, surfboard department, shoe department, so the day of the small surf shop are over. These guys have now gotten more sophisticated, but

The core shops would rather work with a Willy Morris, than have some young, punk kid come in with died hair, tattoos, and earrings all over him and maybe that’s what they’re seeing. They know Willy, they know how he thinks, and that he’s going to be honest, take care of his reorder business, make that phone call that’s really important, and maybe hand-deliver the goods if they need them for the weekend. Willy’s been in it long enough, he’s sophisticated, he’s responsible, and he’s the man.

So, the way you rejuvenate that is you bring a sub rep under Willy, in this case it’s Jay, and Jay starts learning the ropes. Willy educates him, and in some time Willy ends up in management and Jay will be the rep. You just can’t slam these young kids in, just to have the young kids. I mean, 60-70 percent of the time it won’t work.

In our design area we bring in youth underneath our experienced guys and sooner or later they end up somewhere else or they go away or whatever, but you constantly have to be reinventing yourself, rejuvenating yourself, and staying in tune with the marketplace.

And it’s sort of a little bit of secret sauce and I’d tell you but I’d have to kill you. That’s kind of how it works, and fortunately for us we’re pretty good at it.

The other secret we have is that we have designs coming from all over the world. We have Quiksilver in Japan, we have Australia, we have New Zealand, we have Brazil, and we have France. If we feel like we’re running out of gas, a box arrives with a whole line of camouflage shorts, or something just brilliant. So the designers can slam it in the line.

We have youth everywhere giving us all these looks. That, I think, except for Billabong with their Australia deal, is why there’s no company like us. We’re really unique and we have a really strong infrastructure everywhere in the world to bring us design and marketing ideas.

Ninety-nine percent of the people who walk through the door every morning at Quiksilver, whether it’s Brazil, Australia, or whatever, they’re passionate and want to kick ass, and everybody has ideas so the ideas are coming from everywhere. It’s kind of unique.

TransWorld SURF Business: Can you explain the corporate structure of the company?

Quiksilver was founded in Australia by a couple of guys, Alan Green and John Law, who made Ugg boots, which was they’re first product. We’re the originators of Ugg boots believe it or not. Their company is still called Ugg Manufacturing.

So they made Ugg boots in the winter, because it’s zero degrees in Torquay in the winter, it’s a horrible cold. In the summertime it gets to be a hundred degrees, so they started making swimwear. So they went back and forth for a number of years between Ugg boots and board shorts, invented the word boardshort the whole deal, they went back and forth. That’s why the logo is a wave breaking over a snow capped mountain. Because they wanted to make closer both lifestyles. In time they sold of the Ugg business because it’s tied to sheepskins, it’s like a commodity, you can never quite peg the price of skins, therefore your gross margins, its like a nightmare business. In 1976, I got to know Jeff Hakman real well through my surfing in Hawaii and Bali and all that, we were best friends. We decided to approach these guys in Australia to become the licensee of Quiksilver boardshorts in America. So we did that in ’76, we came here, we started making boardshorts, serving em’ up, via my Volkswagen van up and down the coast, from West coast to East coast, living with these guys, breathing with them, surfing with them, hanging out with them, eating dinner, drinking. All the stuff you do when you develop these relationships that are still as strong as ever today. Our three first accounts, are still three of our best accounts. Val Surf, Newport Surf and Sport, and Hobie in Dana Point. So, as far as core we never lost a core account, we got rid of some. But, we’re still number one, two, and three in every surf shop in America and we’re trying to become that in every snow shop. We started Quiksilver boardshorts and then Quiksilver also licensed out Japan and Europe. And we went in 1991 and bought their licensee in Europe, and folded it into our company as a wholly owned subsidiary. So my company, Quiksilver, Inc., the ones you read the numbers on, is the business we do in America, Europe, and Mexico. Plus we also are the licensee of Quiksilver Australia for Canada and parts of South America. We also ship to a lot of their licensee’s around the globe because they like our product. All of us contribute to a fund called Pavilion, that does big events and pays for our big pro’s like Lisa Anderson, our high level snow guys, events like The Crossing, we’re doing now, the extreme movie. It’s really unique kind of company structure. But all of the rest of the licensee’s are wholly owned by them, they pay royalty to Australia, but they run themselves in design and merchandising, sales and all that. The fact of the matter is, our line in Europe is pretty damn good, so they end up getting a lot of stuff from us to fill in the stuff that they do domestically. So I’d have to draw a map because it’s quite complicated, but it works real well. It’s real potent compared to competition.

TransWorld SURF Business: Is the U.S. organization larger than the other ones?Bob McKnight: Yeah, we have about 700 people working for us. We’re by far and away the biggest part of the Quiksilver organization. When you put us and France together, we’re probably three-quarters of the business world-wide. Between us, Mervin, and Napali we probably have about 1200 employees. The idea with Mervin was that the snow-capped mountain was very important to our logo. We have a snow line which does okay, I mean, does very good actually, compared to the small guys, but nowhere as good as a Burton or some of the bigger guys. We wanted to be in the hardgoods business, but we thought it was invalid to do it under Quiksilver.

TransWorld SURF Business: There was a temporary Q-Sticks wasn’t there?

Bob McKnight: Yeah, but that wasn’t Quiksilver, that was Q-sticks, it gained some of the assimilation off of Quiksilver, but not calling it Quiksilver. As far as the boards went, well we got to do something authentic. About the same time we were providing Mervin clothes forever, they came along and said they needed money, one of their partners was leaving. We said, “hey, this is a great get up.” So we got together and the big deal was that we were gonna change everything and make em’ do this and make em’ do that, and make em’ sm

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