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During the second annual media breakfast at SIA in Las Vegas, K2 Inc. Chairman Richard Heckman made it clear that he’s serious about being the best and looking good while getting there.
In 2003, Heckman revealed that K2 Inc. looked at 100 possible acquisitions, signed confidentiality agreements with 75 of them, and eventually acquired seven. The companies that K2 acquired were leaders or strong players in a specific market category, or had technologies K2 needed to develop products and broaden distribution. As a result, K2 is now a leading snowshoe manufacturer, has introduced goggles and eyewear technology, has begun offering ski poles (selling 55,000 the first year), and is also selling helmets.
With the acquisitions, K2 has become a $1 billion company, and Heckman is hungrily looking for more, though he makes it clear that he won’t bite into a company unless the flavor matches the K2 buffet.
Heckman has made no secret of the fact he intends to acquire one company each month in 2004, stating that there are a lot of “smaller manufacturing companies that should be put out of their misery.”
While K2 is on an acquisition tear, Heckman makes it very, very clear he doesn’t like the idea of acquiring a company to simply cut costs to make profits.
“If all you do is acquire a company, then merge them with your own to slash costs, you end up with a lot of pissed off people,” Heckman stated. “I believe that consolidation only works when you go about it from the revenue side, not from the cost-reduction side.
“We take the approach that when you acquire a company, you don’t take costs out, you instead pour money back in to continue to lead and innovate, and in that way, you continue to grow.”
That’s not to say Heckman isn’t cost-conscious, but he keeps costs in line through efficient production, and by owning a cutting-edge factory in China where the company can pour money into new machinery and tooling every year — something few other companies can hope to compete with.
Beyond the acquisition frenzy, Heckman is leading the company in a merchandising direction, as well.
“If you look at a ski store, or sporting goods store on Monday morning, they are a disaster,” said Heckman. “They don’t look the way they should. So we have begun a program that will place merchandisers in our stores, with the goal of having a K2 employee in 11,000 stores at least once a week.”
Having studied similar programs in other industries, Heckman noted that company-owned merchandisers boost sales as much as 19 percent.
By June, K2 Sports, the sporting goods division of K2 Inc., will have hired and placed 55 merchandising staff into key regions, targeting the top tier K2 stores first. The goal, Heckman says, is to have merchandisers working with every type of store selling K2 product, including small specialty shops.
“I would absolutely love to have all of our products in every store to be perfectly merchandised and stocked each week, with fresh POP and support material, and have everyone else’s products look like crap,” said Heckman with a wink.
However, Heckman doesn’t see the merchandisers as mere image-enhancers for the company. In a way, they will also become spies. Each is being outfitted with sophisticated RF equipment so they can report back to headquarters in real time with sales reports, not just of K2 product, but of competitors’ products as well.
SNEWS View: Rumors are already flying about more acquisitions, as is customary during trade show season. No, there is no truth to the rumor that K2 has acquired the entire outdoor industry. But, if you start to look at the holes in the K2 outdoor lineup, you can start to imagine possibilities. K2 covets a clothing line, with technical and sportswear products. K2 needs a footwear line. Would K2 consider getting into the paddlesports business? No doubt it could run Confluence better than ACS has. The move to place merchandisers into stores is a bold one that should garner the company the sales boost it seeks. Every retailer we spoke with said they would love to have a K2 rep in their store sprucing up the K2 product displays, restocking shelves, etc. Who wouldn’t? Of course, it’s possible that K2 will know how well its competitors’ products are selling even before the competitors do — and that has to be a bit unnerving. If K2 can react quickly to the sales information it receives, that will give the company a huge competitive advantage in the ever-changing retail landscape.