This is the word that got me kicked out of longboarding.
That was the subject of an email I sent to an Australian distributor and the result was losing my account. This distributor represents Loaded, Landyachtz, Orangatang, Paris, Hawgs, Bear Trucks, Powell, Aera, Bones, Seismic, Panethon, Rayne, Caliber, Blood Orange, Venom, Madrid, Valhalla , Carver, Restless, Mini Logo, Omen, Free Wheel Co, Kebbek, Earthwing, Bustin, Harfang, Divine, Rogue and a lot more.
Losing my account effectively got me kicked out of longboarding. I can no longer buy or sell those brands. (Update: Caliber, Blood Orange, Prism, Madrid, Venom has a new distributor so these brands will be available for me to buy)
Hard to believe one company controls so many longboard brands and where they get sold, or in my case, where they do not get sold.
Before we start, I want to make this clear, this is not about hating on a distributor, or the particular person that has an issue with me and wants me kicked out of the longboard business. The reason I have waited a while before telling this story, is I wanted the heat to be taken out of it, and I do not want skaters taking revenge or harassing someone on my behalf. I considered not telling this story, just let it all blow over, but I am sick of telling the same story over and over when people ask, and a few skateshops and people in the industry said I should stand up and say something. Many of them can not, or don't have a voice and they rely on their business to feed their family. It also gives me a chance to talk about my opinion on distribution. A few industry friends said I probably need to tell the story for closure, and I appreciate the advice and council. I will not mention their names, they know who they are and I don't want them dragged into this sh!t show, this distributor has a reputation for brutal revenge. Finally I am not going to mention names. The people who need to know, don't need to be told, they know who I am talking about. I don't want petty online revenge in my name, or anyone being harassed.
First the word: reconciliation. It was the subject of an email because I was emailing about accounts reconciliation. I deal with a lot of big distributors like Billabong and Globe. You pay monthly accounts statements and they need an accounts reconciliation. Basically a list of invoices paid so they can match payment of those invoices on their accounts. Standard practice in the industry, and mandatory for some distributors, they don't like getting random amounts in their bank account that they can not reconcile.
However for the person who owns this distribution company, the word reconciliation was a trigger. He took it as a personal insult, even though the email was not for him, it was for his accounts department.
It did take months to get to this point, this person has been having an imaginary fight with me for over 6 months. Why? It is hard to know but I suspect it is all about money.
The purpose of this podcast is my commentary on the Australian distribution industry. That is, it has to be about more than just money. I don't believe you have to be a skater to own a skate business, but I understand why so many people think that is important. It can't be all about making a dollar. At some point you have to care and love a community. The industry has to grow the sport, not harvest it. Most distributors are just clipping the ticket. Clipping the ticket means making a certain amount of money on every sale. If that one person does not skate or does not believe in growing the community, then the community will die but the upside is that person gets rich.
So what happened in the lead up me getting kicked out of longboarding.
This distributor had been angry with me since last year. In hindsight, it coincided with the start of this podcast and it promoting niche brands. Cuei, Ahymo, Beggars, stuff like that. I'm just guessing because I have not been told anything specific.
Was it that I was supporting small brands? No, it was more to do with how I was spending my money. I was behind in my account and not giving all my money to this distributor was unacceptable. This point is correct. I hate doing accounts, and yes my payments can be late, but I always pay. Christmas is the busiest time of the year, skateshops order the biggest quantities. I usually go away with my family after Christmas, so by the time January rolls around, my accounts are late. Look at it from my perspective, should I do accounts or record a podcast? Should I do my accounts or go skateboarding with my kids? Should I do my accounts or spend the time organising Newtons. Every time I'm choosing the fun stuff. Did I mention I hate doing my accounts? :-)
So I'm late in paying my account, and the distributor believes I'm doing it on purpose, that I am against them. When it just because it is not interesting and I have a lot of other fun things to do.
The tension is simmering.
I would get these phone calls from the distributor with a lot of stupid questions, like what do I spend my money on? I said ok, lets get the account up to date. It is important to you, lets fix it. I will stop buying stock, and over the next 6 weeks I will pay my account down. When I'm up to date, we will start fresh with a good account.
The next day, the owner calls me and just explodes over the phone. In 30 years of business, I have never had a phone call like that. At night, in the middle of my family dinner, he rings me shaking and screaming. He says "I'm going to get you, I'm going to sue you, you are finished". Once he has calmed down, he wanted to hang up, but I talk him down, and this experience is making me shake with fear, I ask him the problem. He says I'm closing my business and never going to pay him. I said no, read my email, that is not what I meant to say. I'm going to stop ordering stock, sell what I have, I'll pay down what I owe, it will take 4 to 6 weeks until my account is within terms.
By the end of the call, he is ok. He has calmed down, but he does not believe me. I'm ok with that, I'm going to do it, and we are happily chatting about new products etc we are both happy and he goes on his way.
So I do what I say, I stop ordering, just what I need, give him regular payments, my account is nearly within terms.
Three weeks in to my arrangement and I send the email that ends it all. I list out my latest payments and the email subject says "reconciliation" as in "accounts reconciliation".
Send email at 9am in the morning, and at 4pm the distributor rings my mobile and explodes. Worse than before. I could hear the quivering in his voice, like effin scary. I was on the edge of crying, my hands were shaking, he said you are done, like he was ordering a mob hit. He says you don't have an account, I'm closing your account, I want my money back. He does not let me speak, he just rings yells, threatens me and hangs up.
After the phone call, I write an email to the distributor to their general email account, so both owners can read it, I explain what happened, and request no more phone calls from this particular person. I have had two crazy calls this year, no more. I wrote that my account had been cancelled, can you send a return email in the next 24 hours to confirm I do not have an account, and I don't know why everyone is angry with me, please explain and I want an apology.
And I waited.
No email, no phone calls, no apology.
So then I tell my wife. I'm not going into that conversation, there was a lot of emotion from both of us. This is the first time she has heard about the argument, so she wants to know what I have done. When I explain I have done nothing, she questions who am I in business with? That hits me hard, like a reality check. This guy sounds like a loan shark. We discuss taking legal action to stop the harassment, we both think this person has the potential to physically hurt us. The fact I get a threatening phone and then no communication for days just amplifies the issue.
So I go for a long walk and think it through. Without this distributor I don't have a longboard business. After how he has behaved, can I still trust him? My wife's question of who are you in business with really makes me think. I feel like I have been terrorized, like I'm some peasant he can kick and torture whenever he wants. I'm at a point where I can walk away, I don't need the skate business to feed my family.
Do I need this person in my life? The answer is no.
So I send an email to the distributor, saying I will settle my account in the next two weeks. I actually pay it within 24 hours.
The next Monday I get the first email from the distributor after the "reconcilation" phone call. It says thank you for the payment, you can continue trading as long as your account is within 30 day terms.
I replied no thank you, I am done.
That is it. I'm out of the longboard business.
I could kiss the ring of this longboard distributor and be back in business tomorrow, but that is not going to happen. There are a few reasons. Some personal, some business and some industry. Lets talk about them.
The personal reasons. It is pretty obvious. For my mental health I can't do business with someone who will randomly abuse and threaten me over the phone. I should not have to fear for my safety or the safety of my family. I will never know if a phone call from this person will be a crazy screaming one or a friendly business discussion. Why is that important? This distributor is old school. They don't have a website with stock and pricing, they only communicate in two ways. One is a weekly email and the other is a phone call. To know what is new, what new stock or brands are arriving, you have to talk to this one person on the phone. In 15 years of business with them, I have never received an email from the owner, I don't believe he actually has an email account, one of his employees sends the weekly email.
The business reasons. I have edited these out, if you want to know what I wrote here, you can send me a DM.
The industry reasons. This is the point of the podcast. If there is anything that needs changing, this is it. Anything I discuss beyond this point is not directed to any particular person or business, this is a general discussion about the industry. Any brands or people I mention are just examples, I am not singling them out as the problem.
What is a distributor? Distribution is one of the oldest businesses in Australia. We are a long way from the rest of the world, and our market is unique. Many countries are the same. The old fashion concept of distribution was representing a brand. Landyachtz does not want to open a business in Australia, they appoint a distributor to represent them. The distributor gets a percentage to hold stock and sell it to shops. In the 70s, skaters had little information about the sport and overseas brands. We got a few overseas magazines, but they were usually expensive and old. A distributor represented a brand, they got a percentage of the business to promote the brand via advertising, sponsorship and events. If they grew the local market, they grew their business.
The internet changed all that.
What the internet has changed is information. Before the internet it was hard for skaters to know the availability of products, new products and the price of products. A distributor could set their price regardless of the cost or what it sold for in other markets.
A recent an example is the release of the Orangatang Knuckles, a new longboard bushing. Images were released on Instagram, skaters discussed them online, and we had skaters ringing and asking about them before the local distributor knew what they were.
In business, we talk about channels. In Australia the current channels are brand -> distributor -> shop -> skater. Three channels before the product gets to the skater. Which means three times the product has been marked up for sale base on cost. Before the internet, these extra margins were easy to hide, and distributors would increase their margins to cover the cost of marketing. The internet exposes inflated margins. I would argue that the internet is now the distributor and there is one too many channels in the market. Brands are already going direct to skaters, the successful relaunch of Comet used the internet to sell direct to skaters. Brands such as Bustin and Original were successful early because their main business model was sell direct to skaters. Original used Youtube to amazing effectiveness to market direct to skaters. I am not criticising these companies, I am admiring their hard work.
In the age of the internet do we need distributors?
December 2018 I did an experiment. Landyachtz were selling their Christmas mystery box, I had the chance to compare international shipping versus local distributor shipping. I placed an order with Landyachtz and one with the Australian Landyachtz distributor. Which box would get to me first? They arrived on the same day, the Landyachtz box that shipped out of the USA was in my office first, and to be fair I placed the Australia distributor order before the USA order, so they had a head start. Maybe it is not a fair comparison, but my point is the internet has not just changed how we research and buy product. It has changed everything in the supply chain. International shipping is faster, cheaper and more reliable. If a brand can ship to me quicker than their distributor...why do we need a distributor?
The common industry answer is insurance. The consumer laws in Australia state that if a shop imports a product they are the manufacturer in the eyes of the law. Basically if there is any legal issue, a recall of defective product, then the shop is responsible. If the product is part of any lawsuit, then the shop gets sued not the manufacturer. The worse case scenario is brutal, but so is business. In the current internet age, a brand would not last if it did not stand behind its product in overseas markets. I have been involved in one product recall, with a wheel company. We had to chase up a few customers to get product returned, and we the shop bore that cost, not the distributor or the brand. We recently had manufacturing defect on a set of Bennett Trucks (cracked baseplate). The Australian distributor (not the one who banned my account) discontinued the product and would not support it. There are laws protecting consumers in Australia but not businesses. If a distributor refused to replace, repair or refund a product there is no system other than suing the company. A consumer can use various government departments to force a company to support a warranty claim. We decided to look after the skater. The easy thing to do is to do a refund but it is a good product, and should be available to skaters in Australia. We chased down a new supply, from the USA, imported some trucks and replaced the skaters faulty truck. At our own cost. If we get shafted by a distributor over one truck, what would happen if it was a high cost legal matter? This is not an isolated case, we have had issues with every distributor in Australia, we put it down to the cost of doing business. Distributors can not claim they provide legal protect for brands and skateshops in Australia. I doubt any of them actually have specific indemnity insurance to mitigate the risk. This is the skateboard industry, most boards are used illegally (skating where they should not), most skate brands discourage the use of helmets, and we are worried about a lawsuit on defective products? Our products are designed to be destroyed by the user!
The internet has changed everything but it seems most of the industry is still in denial. The old fashion structures that protected profit margins (distributors and skateshops) are slowly getting eroded.
I am sort of infamous for my stoushes with US skateshops. It actually a big beat up, I'm friends with most of them. My position is US shops should be allowed to sell where ever they like. An Australian skater buying from a US shop is good for the market. However I am against US shops advertising in Australia either via traditional media or on online. The reason is they have a huge advantage over overseas shops. The main advantage is supply. US shops have immediate access to stock that overseas shops do not. This is because they can buy direct from the brand. They dont need to purchase 6 months stock, or wait for a distributor to bring in stock. They can order what they need, get it shipped immediately. This is their number one advantage.
In Australia, my customers (Australian skaters) can buy where ever they want, in Australia or overseas. As an Australian skateshop I am restricted from where I can buy. I am shackled by the old fashion industry structures. My customers are not shackled, they can shop for the best deal.
Part of a distribution deal, a brand restricts where local shops can buy. They try to restrict skaters, but really, this is the internet, the genie is out of the bottle, shut down one supplier and another pops up. I always smile when brands promote that they support local skateshops, while they tie skateshops to the deck of the distribution titanic, ensuring we all go down with the ship.
My last discussion about this topic was with Overseas Sales Manager for Landyachtz. I had a friend in Hong Kong that wanted to buy an Evo. There were no Evo's in Australia, could I buy one from Landyachtz and get it shipped to my customer? There was no stock at Landyachtz, but it was made clear I could only buy direct from Landyachtz if I had PERMISSION from the local distributor. This is the distributor who has just banned my account, that does not want me in the longboard business. You can guess what the answer would be? As the skater James Hopkin, I can buy from Landyachtz. As the owner of Hopkin Skate, that James Hopkin is not allowed to buy.
Landyachtz has granted one person all this authority over their brand in one market. As the local distributor, they represent Landyachtz. What does Landyachtz get? They get a big order. Every Landyachtz sale in Australia goes through person, and all they have to do is buy a bunch of stock a few times a year. No other requirements. It is all about the money. As long as the money flows in, the distributor can do what they want. No requirement to grow the market, provide sponsorships, or promote the brand. In fact, Landyachtz has given all this power to one company, and THEY are required to do all the marketing.
I'm picking on Landyachtz because they are the biggest longboard brand, but it applies to every other distribution deal.
Brands transfer enormous rights and power to distributors for no enforceable concessions. To have the distribution deal for Bones or Landyachtz or Loaded is a license to print money. They are clipping the ticket, collecting their percentage of every sale, and there is no requirement for them to sponsor one skate event. It was not always like this. Remember this is an archaic business structure, the huge margins for a distributor in the pre-internet era was essential. The distributor had to promote their product or there would be no sales. That all changed with the internet. Brands do all the marketing, and distributors just have to collect their money. There is that word again. Money. It is all about the money.
It is not about what is best for skaters. Or the community. Or the sport. It is all about money.
To ensure a distributor gets their money, skateshops are shackled to this old type of business. Like a feudal system. The brand (the king) grants title to a favoured person (distributor). They have absolute power over all their subjects in this region (skateshops). Unfortunately for the skateshop, the peasants (skaters) can by pass this system and buy whatever they want.
If this podcast could change one thing, it would be brands letting overseas skateshops buy from ever they want. My personal opinion is brands such as Landyachtz and Loaded should deal direct to skateshops in Australia. If it is really all about money, then selling direct will make you more money. If it is about caring and growing a community, then who better than the brand to decide where the distribution profits should be spent.
Should the brand's distribution profit get used to grow and promote the sport?
Or should it be used to buy someone another Ferrari or Tesla?
My final words on the subject.
America prides itself on creating a fair market, and that they do not tolerate monopolies. However in Australia, American brands set up distribution agreements that are monopolies. Australian skateshops do not have a choice, and that lack of choice is the problem. Who tells the brands that there should be only one distributor in Australia? That would be the ones that benefit, the distributors. "Monopoly is a terrible thing, until you have it" Rupert Murdoch.
No Australian skateshop will complain about having more than one place to buy. There are a lot of benefits to a competitive marketplace, the main one is growth.