Up the Creek Without a Paddle

The recent layoffs and departures at Confluence and the rumored challenges of flattening sales and overstocked warehouses at other large paddlesports companies are proof enough, we think, that the paddlesports boom is sadly over. The reality is that paddlesports, like everything in business life, is subject to boom-and-bust cycles. No, paddlesports isn’t going bust. It’s just going through a natural cycle.

What attributed to the end of the upswing? Let’s start with the obvious cause: Business school basics and business acumen were conveniently pushed aside in favor of a reckless pursuit of sales increases. Many suppliers got used to 30 to 40 percent growth every year. Sales managers didn’t have to do much to look like heroes. And we know how some sales managers think – If huge increases happened last year then there is no reason to believe they can’t happen this year and next.

The problem is those increases started to come at the expense of other suppliers and through consolidations and not in the generation of brand new customers.

The need to constantly up sales projections, and the battle for market share leads, as it often does, to over-supply and over-inventoried retailers. A lot of very bright marketing and sales folks overlooked the possibility that kayaks and canoes are not like bandanas and flashlights. People don’t lose them and buy one or two every year. People tend to hang onto their boats and upgrade every decade at best. Need proof? Talk to most major paddlesports retailers. We know of at least one retail chain back east that agreed to accept a trailer full of 90 boats (marked as “blems,” a code for overstock) months ago and they are still trucking the load from store to store trying to get customers to bite. The only possible exception to the boating purchase sales trend is that of the whitewater rodeo crowd which changes boats as quickly as starlets change boyfriends.

Which brings us to yet one more reason we believe the paddlesports manufacturers are in need of a business plan overhaul: SNEWS® has long wondered why so many paddlesports companies threw, and continue to throw, good money after bad. For these companies, rodeo and whitewater became the tail wagging the marketing dog. The category with the lowest sales demands the highest amount of advertising and promotional dollars. Sounds reminiscent of cross-country skiing, where companies throw ad and promotional dollars at the telemark and racing categories that represent no more than 15 percent of total ski sales.

Boat loads of money has been thrown away on kayak teams, team travel and in general helping a small group of paddlers live like major sports stars. Has the resulting increase in boat sales justified this expense? SNEWS® thinks not.

Which brings us to the other major revenue drain — top heavy, and expensive, management. While we don’t question the addition of skilled leaders in key positions, the percentage increase of upper management numbers and associated salaries appears to have dramatically outstripped the percentage increase in sales. Overhead skyrockets, revenues plummet, and the banks, stockholders, or owners see their profits ebb away —can you say layoffs?

SNEWS® doesn’t dispute that poor weather and the worsening state of the economy has certainly hurt boat sales. But what’s hurt more is that during the height of the boom no one put in place a contingency plan for the time when sales would start to plateau or to drop off. We can only assume these same managers must have a habit of paddling sans life preserver too.