It is according to surfstitch.com founder Lex Pedersen. Just months before Billabong moved to acquire the e-tailer, Kate McDonald spoke to PEDERSON about abandoning Bricks and Mortar. Here he is, pre-acquisition style.
He may not be making a great deal of money just yet, but just over a year after launching the online surf and swim portal surfstitch.com, Lex Pedersen and his team are pioneering the concept of the online retail warehouse. The team has signed up an impressive list of top-flight brands and is doing booming business in the always popular surf, swim and street category.
It was a hard slog to get the site up and running, however. While every other brand and retailer has an online presence, the idea of online-only retail has proven difficult to sell.
In fact, when Pedersen first approached some of the big brands with his idea, they were none too keen and insisted he set up a bricks and mortar store as well.
“We wanted to be online only but we needed the store to get supply,” he says. “It took us several years to get supply from the big surf labels – they all had a very anti-online approach.”
Pedersen says many in the sector are extremely guarded about who does what with their brands and he was forced to go through a number of hoops before the concept took hold. “The final hoop was that we had to be a bricks and mortar retailer, so we ended up with a shop. It’s the bastard child.”
That shop is in the surfing hotspot of Mona Vale on Sydney’s northern beaches, as is the company’s warehouse. His long-term plan, however, is to aim for 99-1 – 99 per cent online sales and one per cent retail. “Retail is totally overrated.”
Hard-core hardware
Pedersen looked at a number of online models upon which to base his site, but very quickly decided against the more common one of acting as a clearing-house for brands.
Under this model, orders are taken through a central site, sent to the brand itself and products are dispatched from the brand’s own warehouse.
“Those models have been tried around the world and I didn’t really like it,” he says. Instead, surfstitch warehouses the products itself. “We have 86 brands at the moment and we like to think we have ten-fold the range of the biggest surf shop in the country. We have 10,000 styles – most retailers wouldn’t even have a thousand SKUs in store. Everything we sell on our website we sit on in our warehouse. If an order comes in, it goes out that day.”
The hardest slog was to get the brands on board. Now boasting all of the big ones – Billabong, Rip Curl, Seafolly, Mambo, Tigerlily, Stussy and O’Neill – surfstitch also sells an eclectic mix of men’s, women’s, kids’ and toddlers’ clothing, footwear and accessories. Hardware for the hard-core surfers is also catered for, along with sunglasses, watches and even a range of surfer publications.
“I had to convince the brands that I had brand in mind too,” Pedersen says. “We wanted to create a brand ourselves that was as premium as theirs. For some of the big brands, their concern was that we are retailing their product and if we don’t deliver then it’s substandard and our brand is damaged as well as theirs. We had to convince them their brand was in safe hands.”
Fine young cannibals
He also had to convince them that if they didn’t go with him, there was a looming threat – eBay. “A lot of people shop on eBay because they don’t think they can get it anywhere else, but they’re sometimes buying counterfeit and stolen goods and they get ripped off. We spend a lot of money advertising on eBay itself to draw them away.
“My theory is that there are two hits of adrenaline when you buy online: one when you click ‘buy’ and another when it actually turns up. And the shorter the gap between them, the happier you are. Everything we sell on our website we sit on in our warehouse. We indent the purchase stock, we sit on it and we sell it. We spend a lot on the presentation and the imagery and our breadth of range.”
Pedersen says his site’s customer retention is “unbelievable” and repeat purchasing is “mindboggling”. He also insists that returns are very low – about a quarter of the industry standard in America and Europe.
He also insists an online shop like his actually helps bricks and mortar retail. “People look at our website, they’ll print off products they like and then walk into a retail store. We’ve proven to everyone that we’re not here to cannibalise the market but to grow it.
“We have 86 brands and 10,000 products and I think that’s good for the industry, particularly for surf. Retailers will now have to put good product in their shops and give good service, otherwise the customer will go somewhere else. For surfwear, for many years, the retailers have had it too easy.”