01.05.01
by: John Maynard
TransWorldSurf.com

In 1961, Ron DiMenna opened the doors to his first Ron Jon surf shop on Long Beach Island in New Jersey, which marked the beginning of an enterprise that would eventually flourish into 100,000-plus square feet of retail floor space, and counting.

Today there are four Ron Jon outlets that span the continent: the original Ron Jon on Long Beach Island; a 25,000-square-foot store at The Block in Orange, California; another monster emporium in Fort Lauderdale, Florida; and 52,000-square-foot behemoth in Cocoa Beach, Florida that's open 24 hours a day, attracts more than 2.4-million visitors annually, and is also catty-corner to Ron Jon's corporate headquarters. A fifth Ron Jon is scheduled to open in Orlando late Summer 2001.

Ron Jon Senior Buyer John Sabo is in charge of filling all that floor space, which would be a daunting task for most people. But Sabo, who joined Ron Jon eight years ago after a stint as a merchandiser at Federated Department Stores (Bloomingdale's, Burdines, and Macy's, among others), is used to handling large volumes, although he says the higly specialized surf market is trickier to buy for.

TransWorld SURF Business caught up with Sabo for a look behind the operation that employs more than 350 people worldwide, receives 20,000 hits per day on its Web site, and has a private-label program that's made some surf companies nervous.

TransWorld SURF Business: So what's it like buying for more than 100,000 square feet of retail floor space?

Jon Sabo: It's a challenge. I came from the department-store industry where I routinely bought for a lot more square footage than that, but it wasn't as specialized or targeted as the surf business is.
We have a particular challenge because every one of our stores is in a different geographical location with very different demographics. The assortments are almost completely different in each location.
We have sort of a Midwest, Northeastern tourist customer who comes into Cocoa Beach. New Jersey has a lot of people from New York, Philadelphia, and New Jersey. Ft. Lauderdale has a big Latin influence. California is super 'core.

TransWorld SURF Business: How do you decide what to buy for each store?

Jon Sabo: I work with my local reps and with the merchandisers in California, and I try to see as much product as early as I can. That helps me with my planning. I'm always looking for something that's edgier in California. It's more basic for the Northeast, and more tropical for Cocoa Beach. If I buy ten trunks, there may be four or five that would be the same for all locations, and another four or five that are different in all locations.

TransWorld SURF Business: What's the advantage of being such a big shop?

Jon Sabo: Since we're bicoastal, we get to test a lot of things in California and look at the trends maybe six months to a year before they happen on the East Coast -- that's a huge advantage.
We're not the biggest player in the surf industry, and I probably pay the same price as every surf shop as far as basic price on prebooks. Our advantage is that we work very hard on the retail side of business: What do we need for fixturing? What do we need for P.O.P. or additional signage? What could we do from the marketing end to promote the brand in-store? We concentrate on the things that help us promote the brands rather than going in and saying, "I need a buck off this or I need two bucks off that."

TransWorld SURF Business: So is it sometimes a disadvantage being so big?

Jon Sabo: Yeah, if you make a mistake, you make a big mistake!
With the stores being so spread out, a lot of it is communication. If you're a smaller shop, where you're only dealing with one location, you can be in the stores talking to your sales associates, talking to the customers, and physically looking at your inventories. I can do that in Cocoa Beach because my office is two blocks away from the store, but it's tough to get to the other stores all the time. That's a big disadvantage.

TransWorld SURF Business: You have a very strong private-label program. Does that cause problems with the brands you carry?

Jon Sabo: Our private label has changed quite a bit. Five years ago in Cocoa Beach the ratio of private-label to brand-name product would probably have been 45 percent private label and 55 percent brand. That's a pretty high percentage, but we're in a tourist environment here. When we opened the California store, we felt we could have a similar percentage. We were wrong.
It took a year to figure out we couldn't have that high of a percentage of private label in California, and what private brand we did have on the floor had to be very fashion driven. So our ratio now is probably going to end up 75-percent branded, 25-percent private label. That's probably the right mix.
Our private-label program has been successful because we don't sell it head-to-head against the brands. So I don't think it's affected our relationships with them.

TransWorld SURF Business: Where are you seeing the biggest growth?

Jon Sabo: The skate market is just exploding. Not only in decks, but the apparel and the shoe business as well. Going into next year, we're going to continue to expand our kids' business. Our accessory business is another area we're targeting going into 2001.

TransWorld SURF Business: So what's been lagging?

Jon Sabo: The trunk business was really tough last summer. Retailers not in the surf arena had trunks on their sales floor, didn't sell them well, and then really promoted them to get out of that business. That educated the customer to a pricepoint we didn't want to be at.
But that just means we had to find other parts of our business that performed well. Men's accessories did very well this year. Walkshorts, when you got away from cottons and into cotton-nylons and nylons, did very well. And actually there was also a nice pickup in T-shirts. It was kind of a trade-off in different businesses.

TransWorld SURF Business: Will the surf boom continue?

Jon Sabo: I think so. But anyone who pigeonholes themselves to being just "surf" is going to have a difficult time. There's a lot more going on in the board-sports lifestyle than just 'core surf. There's a skate influence, there's a streetwear influence. Surf is extremely important, but you've got to pull all that together to come up with what your brand is going to represent going forward. We struggle with that all the time.
If you go back to Spring 2000, the feeling was, "Surf is hot, and we don't have to do anything else." Then all of the sudden brands looked over their shoulder and said, "What's Hurley doing?" They're not necessarily a surf company. They're a young-men's active-lifestyle company, and they touch a lot of bases.

TransWorld SURF Business: Which brand has the most momentum?

Jon Sabo: Billabong is on a great roll. They've done a fabulous job with the new [management] team they've put together. The product looks excellent -- great merchandising and great marketing.
Hurley and Volcom are doing a great job, and I still see great growth potential for both of those guys.

TransWorld SURF Business: Do surf contests help sales?

Jon Sabo: Contest are one of the reasons the skate business is continuing to grow. They can put together more of these contests and have their athletes available for the average consumer to see, so consumers actually know who they are. A lot of the stuff we do in surfing still is in Indonesia, South America, or Australia -- places that the U.S. consumer really doesn't identify with.

TransWorld SURF Business: Ron Jon has an extensive billboard campaign. What's the strategy there?

Jon Sabo: In Florida, the billboards you see along the interstate coming in and out of the state are just part of Ron Jon. Thirty-five percent of our marketing budget is for billboard advertising. You can't be on I-75, I-95, or I-4 and not see a Ron Jon billboard. It's a big draw to the store. We have more than 100 billboards up and down the Florida coast.
But when you try to take that marketing philosophy to California on the I-5 or the I-405, it's just not feasible from an economic standpoint. We could buy twenty billboards in Florida for the price of one in California.
In Florida, the billboard campaign is geared toward the tourists, a family that's on vacation in Florida. We want Ron Jon's to be part of their tour, whether they're going to Disney or Universal or Kennedy Space Center or Sea World.
We also market very hard to all of the hotels in Central Florida, making sure everybody knows where Ron Jon's is and what we do. The Cocoa Beach store gets five- or 600 tour buses a year.

TransWorld SURF Business: What about marketing toward the 'core customer?

Jon Sabo: We do much more of that in California. We're one of the sponsors of the Huntington Surf Series. We do those types of things in Florida as well. It depends upon the location and the demographics of the customer who's coming in.

TransWorld SURF Business: Is Ron Jon a 'core surf shop or more for tourists?

Jon Sabo: It depends upon the location. One of the advantages we have over a lot of people in our marketplace is that we can appeal to a much broader audience than almost any other store. We're not just appealing to a local mall customer, we're not appealing to just a tourist, and we're not appealing to just a 'core surfer. We're not just going after a teenage surfer who might be between thirteen and twenty, and we're not just going after a family tourist. We can cover all those consumers, and that makes us unique.

TransWorld SURF Business: Do you sell many surfboards?

Jon Sabo: People are amazed at how many boards we sell, particularly in Orange. Even I'm surprised sometimes when I look at the numbers.
This year in California we'll probably end up selling 500 boards, which is a lot for a landlocked store. In Cocoa Beach, we'll sell between 750 and 800.

TransWorld SURF Business: E-commerce: boon or boondoggle?

Jon Sabo: It's something we're spending a lot of energy on. We're actually targeting some marketing, radio and television, in different parts of the U.S., specifically toward our Web site during key times of the year for people who can't necessarily get to a store. The Web site might be as much as one percent of sales this year, but it's going to continue to grow in the next couple of years.

TransWorld SURF Business: What are some of the biggest issues facing the surf industry?

Jon Sabo: One of them is for the brands to continue to be fresh with their merchandising. You can't sit for one season on the same old stuff. You have to be constantly searching out new ideas, fabrics, and colors because we're definitely in the middle of a fashion cycle in the marketplace right now.
And how the brands market themselves is another big topic. Are they going to continue to spend the marketing dollars on surf magazines, contests, or sponsorships? Those plans, and how they fit with the retailers, are going to be a big challenge.
There are a lot of things retailers on the East Coast face as common problems, and the ability to sit down and just casually talk about those issues is really important. Surf Expo does a good job hosting a casual forum just prior to their show where East Coast retailers can get together and talk about business. I'd like to see more of that.

TransWorld SURF Business: How much bigger can Ron Jon get?

Jon Sabo: We're going to continue to open stores. We're still a small company, and the stores we open are big. So if we open one or two stores a year, that's a lot for us.
We're also going to be licensing the Ron Jon brand overseas. We already do a very good job with that in Japan, and we'll target another seven or eight countries over the next two years. We want to continue to build our brand internationally.

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