Retailers Take Price Increases in Stride for Spring/Summer 2009…

 

For the most part, it appears outdoor brands are staying true to form by continuing to innovate and raise prices rather than dumbing down their products to stay at key price points. Vendors and retailers alike continue to insist that declining household budgets create as much opportunity as peril for outdoor specialty retailers.

“The innovative brands will be a big benefactor because people are staying closer to home and doing things that are much more outdoor oriented,” said Gordon Seabury, CEO of Horny Toad. “I really think the outdoor industry has an opportunity to become much more successful and sustainable by taking hold in a much broader population than ever before.”

Despite all the talk about pricing pressure coming out of China, the European vendors are pushing through the biggest price increases and prompting the most grumbling from retailers. A few vendors are even backpedaling on fall ‘08 pricing, retailers said.  For the most part, however, retailers were pleasantly surprised at how well vendors are managing the cost pressures.

Those reached by BOSS seemed confident they can push through the higher prices, either because they see Americans turning to outdoor brands or because their own markets are growing.

 
For instance, camping gear sales are up 14% at Casual Adventure, just outside Washington D.C., which owner Neil Stern said enjoys one of the country’s strongest job markets. Still, Stern said he would handle pre-season orders more conservatively and may trim back on more expensive boots from Europe.

 
“I think we may be a little bit more cautious, not take as many risks and stick to more core product, unless there is a new trend,” said Stern. Among the trends Stern is buying into are Patagonia’s line of surf inspired apparel, which Casual Adventure launched last year, and Lolë women’s apparel.

 
The following is a sampling of price changes and thinking by some major outdoor brands.

Marmot held at the $99 price point for its lightweight, waterproof, breathable Precip jacket. Many retailers said they were impressed Keen kept price increases to the low-single-digits.  The retail price for the top-selling Newport H2, for instance, will rise just $5 to $95.

 
“Kelty being part of a large company (Kellwood’s American Recreation products group) and leveraging relationships, has been able to keep price increases under 10% or not raise prices at all,” said in-house rep Kevin Karch. “We are probably one of the few vendors who have locked pricing in for spring 09.”

Kelty has been able to hold on to some price points with carryover product and is redesigning some tents to reduce costs. The focus there has been on moving from nylons to polyester fabrics and simplifying construction to reduce the use of poles. The new tents will be backed by Kelty’s lifetime warranty.

 
But Kelty is also moving ahead with what Karch called “affordable innovation.” It will increase prices on upgraded packs in its Trail Series by less than 10%. Its flagship Redwing day pack will stay at $99.

The North Face, with its access to VF Corp.’s vast global resources and strong factory relationships appears poised to pick up market share by holding price increases to the high-single-digits or lower across many of its lines. The company has been able to minimize freight costs through global contracts and leverage decades-long factory relationships and global sourcing to minimize rising labor costs.

 

The company will not raise prices on any of its 200-weight fleece products thanks in large part to the fact that TNF sources that product out of Central America, where costs have been more stable, said Steve Rendle, president of The North Face.

“In the case of marquee styles, we prefer not to engineer costs out,” said Rendle. “They have become iconic because of those features sets. We prefer to continue to deliver product value and charge accordingly.”

Sleeping bag prices will move up $10 at retail, or by about 3% on carry over styles, an impressive feat given that bag vendors sourcing from Asia were reporting 30% increases in some costs earlier this year.  VF will introduce 19 new tents for Spring 2009 without raising – and in some cases lowering – prices.

 

By developing “unique end-pole architectures” with DAK, TNF found ways to use less fabric.  Day packs are another story. Prices are creeping up $4 to $6 at retail and carry over technical, or cragging packs, will rise $10. Retail prices on TNF’s  big Primeros and Catalyst packs will rise about 7%. Hydration packs will also move up at about the 7% level, or by about $5 at retail.

 
Mountain Hardwear has chosen by and large to improve styling and raise prices to maintain margins needed to sustain marketing spend, said CEO Mike Wallenfels. Its 2009 lightweight, waterproof breathable Cohesion jacket, for instance, will use a softer fabric, an improved hood and visor design and use different hues of fabric in its stretch panels to give it a classic tonal contrast. The retail price for the Cohesion will move to $175 from $150, up 16%. The company’s Epic jacket will also be upgraded and move from $99 to $120 retail.

At another key price point, Mountain Hardwear has taken another tack. Instead of keeping its Light Wedge 2 tent at the $200 price point, it is introducing a new category of camp tents that will use different materials and components and sell at the $200 price point. The Light Wedge 2 will move up to $230.

 
Wallenfels noted that companies that are pricing aggressively to stay at key price points will be forced to cut spending on marketing programs that support retailers. Mountain Hardwear has taken the tack of raising prices to maintain margins so it can continue providing the same level of pre-season discounts, consumer marketing and event promotions.

Outdoor Research is reporting price increases of 8% to 20% – the biggest seen in years, according Alex Kutches, VP of sales and marketing. The company increased the wholesale price of its Deluxe Spring Ring head net by 20%, largely because of rising steel prices. The company has been able to maintain prices on products that sell well in the fall and carry over into the spring. Gaiter prices will move up in the high-single-digits or lowteens, due largely to rising nylon costs.

 

Rack and Roll, maker of an aluminum trailer for transporting kayaks and gear, raised its prices 7% for the first time since going to market in 2004. Retail prices for its sleek trailers will now start at $2,149 rather than $1,999. President John Koch said domestic freight and Chinese manufacturing costs were equal factors.

 
Yakima will implement its first mid-year price hike in recent memory July 1. After raising prices 3% in January, it announced a 2.5% increase in April effective July 1. The company is struggling with rising steel, resin and freight costs.  It is striving to give dealers 90 days notice on price changes and expects to announce its next round in September for Jan. 1, 2009.

“We look at how it will cost to get into a whole system,” said Ron Ten Berge, Yakima’s VP of sales and business development. “So we were very surgical. We said let’s take a look at things we have not raised prices for in 8 years.” 

 

That has meant raising some prices 8% to 12%, while leaving others untouched.  For instance, the wholesale and MAP prices of bars and Q-clips rose to a higher price point. 

 

“Our strategy is raise the MAP as well so dealers can hold true on margin,” Ten Berge said. “So if you made 40 points of margin before and 40 points on the new price, you are putting more dollars in your pocket. Price increases can be very beneficial if the retailer manages them well.”

The problem with that argument is that consumer demand is not 100% elastic, said Mikel Massey, owner of Massey’s Professional Outfitters in New Orleans.

“Our business in New Orleans is not the true enthusiast,” he said. “Most of my customers are leisure travelers. For the through hiker on the Appalachian Trail, if presented with a $20 change in price on a pair of boots, it is not going to make that big a difference. For the guys in Asheville or Chattanooga it probably won’t have a big impact. For us it certainly will.”

Massey said he is fretting over how he will cope if gas prices hit $5 a gallon. Will he have to raise wages to help his staff or cut staff even as he needs better salesmanship on the floor to sell at the higher prices?

 
In Virginia, meanwhile, Casual Adventure’s Stern is fretting over the upcoming ski season.

 

“Looking ahead, things don’t bode well for the ski season, because people have to travel a lot, flying to Salt Lake and Aspen,” said Stern. “I’m a little leery about how that’s going to go.”