07: From Quiksilver to SurfStitch: the revolutionary story of Surf Retailing

John O'Neill

Harry Hodge made surf movies so he could travel the world, washed up in France where he built Quiksilver into a $500 million European Brand. Now he’s on the board of industry disruptor SurfStitch. His story epitomises the evolution of surf retailing.

John: I’m sitting here in Newport Beach in Sydney, magnificent part of the world and I’m with Harry Hodge who I think could fairly be described as one of Australia’s preeminent retail entrepreneurs. Harry started his life as a surf journalist and film maker, went on to join the surf company Quiksilver and establish and grown the brand to a half billion-dollar business in Europe. He also served as Executive Director of Quiksilver when it was listed on the New York Stock Exchange and was recently appointed to the Board of SurfStitch. Harry also invested and advised the fashion label Ksubi, consultant to a range of, to an array of companies via the Hodge Consulting Group and was as I said a recent appointment to SurfStitch. He also likes to give back. He’s done that via SurfAid where he was a long-serving non-executive director and Surfing New South Wales where he’s Deputy Chairman and I’ve enjoyed working alongside him and getting to know him since 2009. Harry welcome to Customers Matter.

Harry: Thanks John. Good to be here.

John: Before we get into the way in which retailing has evolved during your career, can you tell us a bit about your early days in the Surf Industry, how you started as a writer and demonstrated some early entrepreneurial leanings if you like to fund a surf movie?

Harry: Well I actually started off as a racing writer, horse racing writer at the Melbourne Age and I talked the Editor of the Sunday Edition into letting me write a surfing column because that’s what I wanted to do surf and after that I quit the Age and I started a surf shop on the Mornington Peninsula with a friend of mine called the Peninsula Surf Centre and I gravitated into making films and photography and basically as an excuse to travel the world with the hope that the film would make money. The film turned out okay. It wasn’t a commercial success, but over the years it has become a bit of a cult film now so.

John: So tell me about the film? What was it called and…?

Harry: It was called Band on the Run, with the title track by Paul McCartney and the title of Paul McCartney’s album and back then in the ‘70s, I actually wrote a letter to Paul McCartney’s Management just asking them: ‘Could Mr McCartney write some original music for the film? And, can we use Band on the Run for the title track?’ and they came back and basically said: ‘Yes, Mr Hodge, you can use the title and you can use the song, but he doesn’t have any time to write any original music.’ So, you know, being young and naïve, it’s kind of a pretty wonderful thing to have when you’re in your early twenties.

John: And tell me you know even have the [inaudible] to get a surf film together and how did you fund it? How did you go about making it all happen?

Harry: Well I raised funds through some surf companies, most notably Quiksilver and Rip Curl and that’s when surf companies didn’t sponsor surf films like that and one of the provisos is we only show product that we couldn’t put credits or anything on the film because that was the underground way that you did it. I also was funded by the Coca-Cola Corporation and the Australian Film Commission and Qantas Airways were our major sponsor and flew us around the world for two years.

John: Wow.

Harry: So it was a pretty fun time. I learnt a lot. I always say to people you know travelling for me is the best university you can go to.

John: So how did you go and I’m guessing this was part of it from writing about surfing, making a surf film, then into the business of surf retailing?

Harry: Well as I said Quiksilver invested in the film Band on the Run and I got to know the Founders very well, John Law and Alan Green, and I went to work for them in the early ‘80’s as a Marketing Director and back in those days no surf company had a Marketing Director and I said I’m good at marketing and they said we don’t need to do marketing. Anyway, I went and worked for them and an opportunity came up to to get the licence for Quiksilver in Europe which I took in about ’84, went over there with my colleagues and we started Quiksilver Europe, so you can see how the line was you know Quiksilver. I started a surf shop and we bought our product off Quiksilver. Then I started a surf film, Quiksilver sponsored a surf film, I became the Marketing Director and then I became the licensee for Quiksilver Europe.

John: So beautifully organic in a way because you know I guess you’re a writer, a film maker and a surf shop owner…

Harry: Yeah…

John: …now why not a marketer?

Harry: Exactly. No it was kind of ah, you couldn’t script it better than that and it was never planned like that, it just happened as you said organically.

John: So what was Quiksilver like as a business and how would you describe its culture when you joined it because obviously there was something fairly you know ?? is different in surfing and no doubt was even more pronounced back then?

Harry: Well back then more so than now Quiksilver, sorry surfing was a real lifestyle. You know a surf trip is get in the car and drive, travel overseas to exotic locations and they were hard to get to and Quiksilver stayed very, very true to its mission or vision that we you know are selling a lifestyle to, it wasn’t about making money, it was about being able to live the lifestyle and grow the business and be inclusive to the market we were you know selling to. Then in the late ‘80’s early ‘90’s, they became serious businesses and Quiksilver has always been very, very customer focused. Alan Green was always saying: ‘Well, what will the customers think? What will the kid on the beach think? What will the surfers think?’ It was never about what we thought. We always let the market almost guide us unknowingly to where we could plan to go with them, rather than devising a Board Room strategy and saying now we’re going to you know market this way.

John: And how would you get the insight into what it was that the customers did want?

Harry: You know it was it was sixth sense instinct and you listen and you just get a feeling, a gut feeling that this is the, we were very lucky back in that period because the business was you know it was following a pathway that was very natural. There was nothing contrived about it. You know there was no politics back then. There was no huge turnover. There was no public companies in the sector, so it was kind of organic and it was very inclusive the way we worked together and I guess Quiksilver globally was run by a group of people, about ten of us, that would get together with rock consensus because if you get general consensus all the time, you’re not doing your job and we would you know have different opinions, we’d
bring different parts of our experience from different parts of the globe, but it always came back to the market and the customer and the client, the retailers.

John: So, I remember Quiksilver I think as a board short company. That was my first encounter with the business. How did it grow? What were its lines and what were its product lines? What did it start doing and what did it end up doing?

Harry: Well you’re right. Quiksilver’s first slogan was a board short company because we were, the Founders wanted to make the best board shorts in the market. The most notable board shorts that came out were in the early ‘80’s and were the polka dots and the checks and the stars and the harlequins and that changed the whole surfing industry as far as board shorts and ironically not many people know because Alan Green, one of the Founders, who actually recently was a part owner of last year’s Melbourne Cup, he’s a mad horse racing fan and that’s one of the reasons Alan and I connected, and he went to the horse races and he saw all the the jockey silks and they were polka dot, checks, harlequins and stripes and he put them on board shorts and they sold like crazy, we’re still famous for it today.

John: Wow, quite a story. So what what happened from there? So you found yourself really in fashion in you know in a way too. It wasn’t just about being in board shorts, it was about being in fashionable board shorts?

Harry: Well when, when we took Quiksilver to Europe, the product line had expanded, but not that great. You know it was T shirts and some long pants and some sweaters and some sweats, but it was still pretty basic and we realised when we got to Europe whoa this is not going to work. I was in a Trade Show in Paris one January and there was two feet of snow outside and we’re selling board shorts and T shirts and I said to my partner Jeff Hackman hey this is not going to work. So we went to the mountains and the Quiksilver logo is the mountain and wave of the famous Japanese artwork the tsunami and we just figured that we had to connect the dots and we were probably the first Quiksilver global territory to do that, so we started making ski wear, snow board wear for the snow boarders and it really lead us to become very creative because the early snowboarders were, wanted to be different, anti-establishment just like the early surfers. So whereas the skiers in the late ‘90’s were all wearing tight fitting clothing, the snowboarders had all this baggy stuff on, so it was really an exciting period and it was quite easy to really work with your athletes and your consumer in in that environment.

John: So what I was sort of inquiring about before is the sort of the fashion side of the business because really what you’re describing is almost counter-cultural fashion isn’t it in a sense and so was that clearly it was about sort of understanding the vibe, but how did you grapple with fashion because it is such a fickle thing and there you are in Paris?

John: The only recognition is a different line of product, but it’s I imagine for the European market it’s even more than that?

Harry: Well we didn’t realise we were actually going into fashion, but we were. We made denim. We made women’s wear and a lot of it was kind of dumb luck or good decisions. For example, the Roxy label started because Quiksilver had never done any women’s wear and we’d ordered as board short fabric and all our fabrics came from Japan and arrived in Biarritz where we were based and the fabric was lycra which you couldn’t make board shorts out of, so someone said well let’s make women’s swimwear and we put it into our local shop in Biarritz, it sold like crazy and that’s how women’s wear started. So there’s a little bit of that morphing into well this is where we’ve got to go because we can’t afford to throw the fabric out. Q So, now when you went to Europe, you weren’t expecting to be there for a huge amount of time. Tell me what your expectations were and what actually transpired? H Well we thought we were going over there for a a good stint, start Quiksilver, it’s not a big, the action sports industry wasn’t big back then. Surf for a few years, build a little business, have fun and come back to Australia and get real jobs. But as the business grew and took over, it almost was like a tsunami that we just went along with because it was so much fun. Everything we did was fun and we would, you know the old cliché find something you love and do it, well we found it and everyone that joined our team you know joined in that fun factor and there was very tough times. I mean you know not having a winter business in the early days and you know living in the south of France with no money and the French Government who were helping us didn’t want us to be in the south of France, they wanted us to move to the north of France because that’s where the industrial area was, but we wanted to be where the surf and the mountains were because the Pyrenees are only two hours away from the surf, so it kind of happened like that.

John: And what was the scale of the operation when you finally left and how long did you stay?

Harry: Well I stayed there for roughly twenty years and we grew from $1 million dollars to about $600 million Australian dollars and it was very successful during the late ‘90’s because where we grew it we grew it well and kept the same ethos, but in hindsight we probably grew it a little bit too quickly and a little bit too wide a distribution because when the house of cards started to come down with some bad, poor decisions in the 2000’s, we couldn’t unravel that fast growth.

John: So what did happen? How did your time in France come to an end and what did you then decide to do?

Harry: Well basically what happened was Quiksilver had built its business because of doing, in its heyday doing all these things. Then in the early 2000’s, the Board made some quite poor decisions. The major one was to acquire the ?? ski wear brand, French ski wear brand Rossignol and pretty well everyone knew that was a mistake except the Board and the people who were passionate about it and that really brought the company to its knees in a nutshell and about that time, I realised my time was up, it was time for me, I’d built a very good succession plan. I wanted to implement the succession plan and also I wanted to come back to Australia and take a bit of time away from you know the 24/7 CEO Executive Directorship and at that point in time Quiksilver had just acquired Quiksilver Asia Pacific, so I was in charge as Executive Chairman for two years to integrate that model into the business.

John: So you returned to Australia what about a decade ago? What year was it when you came back?

Harry: About 2004, 2005.

John: And you jumped back into entrepreneurship in the challenging times it turned out to retailers with the I guess there were still some high-flying stuff, but then we had the GFC. Can you tell me you know what transpired for you in the sort of time post your return to Australia?

Harry: Well I came back and I tried retirement and failed miserably and I invested in the fashion denim brand Ksubi and I wanted to step outside my comfort zone and learn about another industry, you know real fashion. Even though we’re in the fashion apparel industry and I learnt a hell of a lot, things didn’t turn out the way they should’ve. The brand had some fundamental problems in commercialising the brand and it you know it came unglued in that respect. But the learning curve, you know you always learn from your mistakes more than you learn from your successes I believe.

John: So what would you say you learnt from Ksubi in a way that might be practical advice for other entrepreneurs on their you know their journey?

Harry: They weren’t customer focused. They were self-centred and creatively focused, but their, it’s pretty easy in the apparel industry, you deliver good quality, commercial product in an accurate and timely manner and if you look up each of those in a dictionary, you know good quality pretty easy, commercial product means intended to make a profit and deliver when people want it and deliver what they ordered. Ksubi couldn’t get their heads around that and therefore the brand couldn’t be commercialised.

John: So after Ksubi you reinvested, you like departed the business and it struggled. What did you then do?

Harry: Well I had my consulting business, which has now become Hodge Consulting, I bought on some colleagues, I was doing independent consulting, sitting on the Board of Surfing New South Wales. I’d just stepped off the Board of SurfAid. My consulting business, I started consulting for Jamie Drury Designs, Jamie is a good mate of mine and he’s building his company, he’s very successful, spending a lot of time in America, so I enjoy that flexibility in getting involved with young, dynamic entrepreneurs and giving you know my experience and expertise to add value to their model.

John: And of course now SurfStitch, it’s an extremely interesting business. It’s ridden the rollercoaster of the new economy up. Obviously had some challenges that saw it go back down and now once more headed I think in the right direction. How have organisations like this do you think changed the world for retailing and customer experience?

Harry: Well it’s interesting because since the global financial crisis, before that people were talking about eCommerce and online and bricks and mortar, but no one’s really figuring out how it’s going to work and I don’t think that they knew people have really figured it out. The reality is we know online eCommerce is here to stay and it’s a growing sector and it’s all about the user experience and the customer and I think it’s you know SurfStitch’s model in the action sports industry is very good for that sector and a successful SurfStitch is probably the, would be one of the most important stimulants to reviving the surf industry which is under a lot of stress like right now because a lot of loyal customers left and it’s all about the
the customer, the user experience. We all know if you go online, you want to order your product, you want it delivered, you want it to fit and you want good value for money and it becomes easy. We know the younger demographics now don’t watch television, they look at everything on their devices, they shop online, they don’t very rarely go into bricks and mortar stores. Now that will, I believe, that will be cyclical and change too. I think they’ll go on now I’ve had the online experience, now I want to go to bricks and mortar, like the bricks and mortar people would find online, so I think they will coexist.

John: But by the sound of it, probably less bricks and mortar and and probably more important to be investing in your online presence and your user experience and really trying to make it you know as seamless for the customer as possible? Is that your sort of…?

Harry: Well I think a better bricks and mortar business. Department stores are figuring this out you know. Q What do you think that looks like a better bricks and mortar experience? Is there anything you’ve seen that [talk together] on that?

Harry: Well you’ve got to change your model. You can’t use the old model, it’s got to be fast to market, not as many brands, vertical offering in a department store like David Jones or Myers or you know Selfridges or Harvey Nix and the customer experience, better staff training. You know one of the biggest problems in Australian department stores I thought when I came back to Australia is you go into a store and you couldn’t get served.

Harry: But there’d be a guy in the corner playing the piano you know for ambiance, that doesn’t help and I don’t know if the todays on the floor staff are being trained well enough. I mean I don’t know about you but when I go into the store, I don’t want someone to ask me am I having the afternoon off because I’m shopping at 2 o’clock in the afternoon, so and the online experience, from what I’ve learnt, people don’t mind having that equation taken away because they are actually the shopper online and they’re dealing with the device and the product, there’s no pesty human being annoying them.

John: So really I think what you’re saying is that the physical retailing model needs to be one thing, it’s a lot harder about how do the people who are serving actually add value to the customer experience?

Harry: Yeah and how does the store add value to the customer experience as opposed to go on the piano, like where are the benefits?

John: The fact is there’s a supplement with the online experience as opposed to simply try and go…

Harry: It it’s very difficult, apart from department stores, for brands like a Quiksilver or Billabong to have a real strong online business because the consumer that shops online, I believe from what I’ve learnt, wants to go into an online department store. They want to be able to buy Levi’s to Quiksilver to you know whereas if you just go to the Quiksilver website, you’re only buying Quiksilver and I think it really does come back from what I’ve gleaned is the customer experience. The customer now has more benefits, is the the bigger king than than they’ve ever been and they actually and therein lies the effort to provide value for money. You’ve still got your luxury fashion section with Armani, Dior, Gucci and all that, but basically since the GFC people have reigned in that type of spending, unless you have the disposable income, and with production around the world these days, the value on quality for money is exceptional.

John: I mentioned in the introduction that giving back has also been a big part of your modest operandi and I wonder if you could share with me and the people who are listening and watching this a bit about the background to your motivation for your long-time involvement in SurfAid first of all and maybe just explain exactly what SurfAid is because some people may be unfamiliar with it?

Harry: Well since the early ‘90’s, I’ve always believed that businesses should have a corporate social responsibility ethic in their company because apart from you know being the right thing to do, it’s very, very good marketing and it makes it, it’s inclusive to the staff and when I met the guys from SurfAid at a Summit in Mexico in 1999, what we learnt there the surf industry here’s this doctor went up there on a surf trip, Dave Jenkins, to the Mentawai Islands which is the best surf you can have find in the world pretty much for you know a boating holidays. But he went behind the palm trees and he found incredible poverty, a three out of five-mortality rate with kids under five, malaria everywhere, no sanitation, no clean water and he started SurfAid to do something about it and the surf industry got behind it with a lot of individuals and Ozaid and NZaid and I read recently that the mortality rate is now down to half out of five kids under six. Malaria has pretty well been eradicated and the clean water sanitation is working because everyone knows you have to have clean water, so the educational approach over the last fifteen, sixteen years and now SurfAid is working on emergency preparedness, when you have a tsunami or an earthquake. You know too because, excuse me, the villagers always use to live on the ocean. Now SurfAid says well live inland a bit.

John: So you are a Director there. How long where you involved and what was involved in being a Director of SurfAid?

Harry: I was involved with SurfAid for I think fourteen years. Pretty much like Surfing New South Wales, four or five meetings a year. I’d call the meetings, working with the industry and working with the government agencies to formulate the best method to achieve the missions and goals.

John: If we then turn to Surfing New South Wales and you and I both know the organisation well. What motivated you to get involved in that organisation and what do you enjoy about it?

Harry: Well I figured like it was time at SurfAid to hand the reigns to someone else and I spoke to a few people at Surfing New South Wales and I liked the model. I’ve always been involved with surfing associations, the Australian Surfing Association back in the ‘70’s, it would, they used to run Bells to Bells Beach contest because your surfing associations are the core and the pathway for surfing and without strong State and individual surfing associations and now Surf Clubs and Surf School, it really you know it’s everyone working together as a collective really is for the betterment of the sport.

John: So in terms of your role at Surfing New South Wales, when did you join and you know how do you, what rewards you about it?

Harry: I guess the thing is when you see the evolution of the organisation. I joined about six, seven years ago and it was a bit ad hoc back then and just the quality of people and the people working there really believe in it. When I spoke earlier on about Quiksilver when we first started Quiksilver, when you feel that same vibe and morale and ethic, you know that this business is going to succeed and being a not for profit, there’s a lot of challenges that you don’t have as a public company or a private company and also your responsibility to your stakeholders is very important. So as Directors, you kind of have to elevate yourself to another level which is good for anyone that wants a career as being a director of businesses.

John: Obviously you love the surfing ethos, the surfing lifestyle right, the culture and I’m sure the characters it throws up. What is it about the lifestyle and who are the people that most inspired you from the world of surfing and how and why?

Harry: I guess in any business I’ve always found mentors. When I was in my twenties, thirties, forties, fifties, sixties you know a mentor is someone you talk to, it doesn’t have to be someone older it can be someone younger, but it just gives you that different bent on it and I think you know to have that knowledge and scope, I mean we never want to stop learning. I mean I wouldn’t go to a lawyer or a doctor or an accountant who hasn’t upskilled themselves lately, so I think as long as you know you get that reward from these organisations, you can see the add value and also the age demographics you’re involved with from eighteen-year-old kids running surf events on the beach, to you know ageing board members. Q And what about the surf lifestyle itself and the characters that you’ve encountered in the surf lifestyle? Who and what’s inspired you over the time that you‘ve been in the industry?

Harry: Well Alan Green was always a great mentor of mine. He can be a grumpy young man. Now he’s a grumpy old man and we’re all like that, but he was very sure on what he wanted his business to do and some of the great characters in surfing and they’re still there today they’re just you know but Wayne who is a great friend of mine, Simon Anderson, you know Micky Dora, the Cat from Malibu was a very close friend of mine in France, he lived over there and we looked after Micky. You know Micky was a rogue, he never worked a day in his life, but he he was a pure surfer, so you’d meet all those characters. I met a guy called Jacques Bergerac in France who was the Founder of Revlon or a Co-Founder and he was a great mentor to me. So you meet all these characters as you go along your life’s journey and I guess in some respects you become a character because as you mentor you know and guide and advise younger groups of people, it it kind of becomes like that because you become old enough and with enough barnacles on you, you can really add value to someone going through. What’s the old cliché you know learn from others because you won’t have, there’s not enough time in your life to make all the mistakes.

John: And does surfing itself as an activity is it something you still engage in and is it important in your life?

Harry: I don’t, I don’t surf much anymore. I probably do it more vicariously through my kids, but I stand up paddle, I snowboard, you know it’s kind of like there’s a bit of a myth when people say I want to get involved in the surf industry so I can surf. It’s more often and not you get involved you’re too busy to surf and the guys not involved in the surfing industry they’re working at banks and stockbrokers, they’re going on the surf trips.

John: Finally Harry, looking at the commercial landscape today and thinking about the manifold challenges of growing successful businesses and ideally exceed their customer’s expectations, what would you say are the three biggest key ingredients for success?

Harry: I learnt there’s two rules in business. The first rule is you know you have to make a profit. The second rule is don’t forget the first rule. Then apart from that the way to do that is look after your customers from product, to the experience, to customer service, to bricks and mortar experience with your customers, to an online experience. To me it’s all about the customers and if you take care of your customers, I mean Facebook is a great example because it’s a user experience, they love it you know, Instagram, so it can create that ethos it’s all about the customer. I think if you’ve got a good product, you’re passionate about it, you have a great team of people and you’re well-funded, I think all of that with the look after your customer, I think you’ve got the five steps to being successful.

John: Harry thanks for your time today.

Harry: Thanks John. Appreciate it.