Merge, Inc.

Apparel maker gets back to business.

After almost a decade establishing themselves as two of the most prominent apparel brands in the skate and snow markets, both Droors and Dub took a definite wobble last spring. But after a few necessary management changes and a rethinking of some of the brands’ market and design positions, they appear to be sticking it again with strong orders for Spring 2001.

The elements involved in the misstep are easy enough to identify. In 1998, Droors and Dub Founders Ken Block and Damon Way were focused 24/7 on their rapidly expanding DC brand and sold a 75-percent interest in Droors and Dub to Kubic Marketing, owners of such holdings as World Industries and Dwindle Distribution. The two brands were paired under a third newly created division of Kubic–Merge, Inc.

But the transfer fell far short of seamless, and problems started showing up almost immediately. “Initially the problem was setting up the infrastructure,” says Way. “I think Kubic didn’t fully anticipate the problems of having a full-blown apparel line. We’re so busy at DC that we probably weren’t involved enough in the transition–we should have been more vigilant in ensuring continuity and infrastructure.”

Merge General Manager Frank Vu, who was brought in to clean up the problems in January 2000, agrees with Way’s assessment: “Under the new Kubic management, we were a hardgoods company trying to be a softgoods company. It’s different–hardgoods are made-to-order, while in the apparel biz you have to plan much farther out. It’s more complex–much more can go wrong with planning and delivery. In fact, the brands immediately hit delivery problems, and we didn’t finish shipping Spring 2000 product until May. This did nothing to help our relationships with our retailers, who were already complaining about poor merchandising in the line.”

Current Senior Designer Dino explains: “The previous creative director was highly talented as a designer, but he designed without thinking much about the price and target market. Suddenly our line was heavy with items that were simply too expensive for our retailers. Our reps didn’t think they would sell, and our retailers didn’t want to buy them.”

Vu’s first management move was to restructure the design team, return the focus to ‘core riders, and promote Dino to the senior designer position. A new emphasis on product design has also shifted the majority of items to mid pricepoint and added many more lower pricepoint items.

Block and Way were also asked to give greater input in the concept and marketing of the lines. They meet with the Merge staff twice a month, although Way is confident in the new staff and the Spring 2001 line, and hopes that will help get the company back on track so his hands-on involvement can again be reduced.

Vu has also improved relationships and communication with the company’s overseas sourcing agent to better understand timing requirements: “Our agent didn’t grasp that in a process requiring samples, catalogues, advertising, production, and delivery, our small problems were quickly escalating throughout the process.”

Vu came to Merge’s Los Angeles headquarters from New York with a background that includes work for major brands like Tommy Jeans, Perry Ellis, and Polo. He’s used this big-company experience at Merge to impose tough practices on the brands. “I think mainstream experience helps to apply high management standards, which in turn enables brands like Dub and Droors realize their full potential,” he says. “Of course our focus is still on the ‘core store, but with so many new brands in the market as competition for us, and with mom-and-pop stores so much more sophisticated, it is essential to match that sophistication,” he says. “We’re trying to take the best practices from larger companies and apply them to what is still a start-up by big-company standards. My goal now is to ild the company and the way it runs from the ground up, utilizing these standards in all aspects, including the product-development process, looking at colors and products, and professionalizing the entire research and design process.”

One move Vu made this season was to fly the entire design team to Korea. “Instead of spending the two months sending samples back and forth for alterations, we sat down and went through the whole line with our manufacturers piece by piece,” he says. “I think it’s always better to be face-to-face in any negotiation. We went through every item in one outerwear and two cut-and-sew lines, talking, cutting, drawing on the garments–whatever it took to nail down every loose end. Yes, it was expensive, but ultimately far cheaper in time and improvement in quality.”

The impact of the new moves are already being reflected in orders for the upcoming season. Spring 2001, the second season for Dub Streetwear under the new management, and the first year for which they are solely responsible, has seen orders up 262 percent over last year, according to Vu. Even more encouraging, he adds, is that Dub is up 400 percent in the crucial trendsetting Southern California market.

Meanwhile, Vu reports that Droors’ orders are up 22 percent from last year, and perhaps more importantly, up ten percent over the previous year when it was still under the direction of Block and Way at DC. Vu also reports that the denim component of the line, for which Droors is primarily known, is up 64 percent.

In relative terms, Dub is the larger brand by dollar volume due to the high cost of snowboarding outerwear, though Droors remains stronger in unit sales. But in terms of just streetwear, the denim-oriented Droors outsells Dub’s streetwear line 80 percent to twenty percent in dollar volume.

“We really focused on merchandising and pushing Dub Streetwear’s design this season,” says Dino. “Other than lowering the average pricepoints, what I did was work a bit more on the outerwear look. At the same time, we used many more custom prints, included fabric blends such as cotton and nylon, and played with silicon and high-density prints. Overall, the line is more technical.”

Vu believes that as a part of the denim market, Droors shouldn’t veer from offering a number of basics. Currently the line includes five basic jeans, with plans to drop its more fitted model. Going forward, the brand is likely to offer a couple of new fashion lines each season, depending on overall market trends. “It all depends on what sells.” says Vu. “If a new item sells well, it may one day become a basic.”

While the simplicity of the Droors line keeps it anchored firmly to the ‘core skate market, Dub continues to use a musical theme as a marketing attribute. Originally conceived as a way of taking street fashion to the slopes, the brand continues to use top DJs for promotion and incorporates devices such as the silhouette of a DJ, keyboards, and sound waves on some apparel.

Marketing for the brands is pushed through Merge’s three-team structure–one for Droors, and one each for Dub street and snow. “The teams totally reflect the brands,” says Vu. “Droors is made up of very hardcore technical skaters who are more into competing. Dub Streetwear’s team are top street skaters who are also heavily into music. For example, Rob Dyrdek has his own record label. We let the teams do their own recruiting. They also do a lot of product testing and represent our target consumer. We let them get involved early on in concepts, but less on specific details of the lines. They clearly push product–these are very influential guys on the street, and we use them a lot in our advertising. Their personal popularity and influence alone makes them our most effective marketing vehicle.”

Vu reports that Kubic is happy to take a fairly hands-off approach while providing the financial muscle needed to grow. “We bounce ideas around between the other Kubic companies to get their perspective,” says Vu. “All the general managers talk often about what works and what doesn’t. We want to be ‘core, but also corporate enough to be able to grow–having structure and sophistication means we can offer better customer service.”

Vu points to certain group economies of scale, but these are derived primarily from Kubic’s ownership of Douglas Manufacturing, which produces T-shirts and sweats for several Kubic brands, including Droors and Dub.

Despite the common focus among Kubic’s companies on the ‘core market, Merge shares only about twenty percent of its reps with sister company World Industries. However, Vu has tweaked the distribution policy by identifying what he calls “key-tailers,” believing that certain stores greatly influence which lines other stores decide to carry. And retail chains like Zumiez are also being opened to help deliver higher sales volumes. “This is a rebuilding year, and next year will be a slight expansion,” says Vu. “So far we’re ahead of schedule. We stay unique in an increasingly crowded market due to our focus on skating. We don’t look closely at our competitors because I think there is a danger that if you use them as the basis of differentiation, you in fact end up looking like them. We will certainly be looking to innovate with fabric and colors, but will retain our basic direction. The lines will stay fresh, but not dramatically different.”

row. “We bounce ideas around between the other Kubic companies to get their perspective,” says Vu. “All the general managers talk often about what works and what doesn’t. We want to be ‘core, but also corporate enough to be able to grow–having structure and sophistication means we can offer better customer service.”

Vu points to certain group economies of scale, but these are derived primarily from Kubic’s ownership of Douglas Manufacturing, which produces T-shirts and sweats for several Kubic brands, including Droors and Dub.

Despite the common focus among Kubic’s companies on the ‘core market, Merge shares only about twenty percent of its reps with sister company World Industries. However, Vu has tweaked the distribution policy by identifying what he calls “key-tailers,” believing that certain stores greatly influence which lines other stores decide to carry. And retail chains like Zumiez are also being opened to help deliver higher sales volumes. “This is a rebuilding year, and next year will be a slight expansion,” says Vu. “So far we’re ahead of schedule. We stay unique in an increasingly crowded market due to our focus on skating. We don’t look closely at our competitors because I think there is a danger that if you use them as the basis of differentiation, you in fact end up looking like them. We will certainly be looking to innovate with fabric and colors, but will retain our basic direction. The lines will stay fresh, but not dramatically different.”

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