VK Sports gives shops an e-commerce engine and the inventory to fuel it.
Much of the skate retail world continues to view online ordering systems with suspicion, identifying them closely with mail order-a snake pit of discounters, gray-marketers, and the relentless competitive strength of CCS. But for the past few years Huntington Beach, California-based VK Sports has been attempting to challenge this anti-online prejudice with simplified ordering systems that offer a number of clear benefits to retailers.
Since 1974, VK has been distributing in the So Cal market, offering major brands like Santa Cruz alongside lesser-known niche brands such as Clockwork, Kingdom, and Scum. But this extensive inventory range meant that by 1996 the warehouse contained over 3,700 SKUs.
To simplify warehousing and shipping, VK Owner Victor Katsuyama invested about 90,000 dollars in an inventory-management software system, called Mail Order Manager, from New Jersey-based Dynacomp. While the package is fairly common in other industries, it is still highly sophisticated. So VK brought in outside-expert Eric Lee, who also happens to be a top-ranked downhill skateboarder, to apply the software and play an ongoing role in running the system. “The program focuses on organizing and tracking inventory and shipping,” says Lee. “We spent the first six months inputting all the products in the warehouse. But while we have never been interested in offering mail order direct to the consumer, our system meant there was no reason why our existing retail-customer base shouldn’t take advantage of our investment to place wholesale orders directly online.”
VK has always operated an “open warehouse” policy, allowing a shopping-cart approach for orders of only one or two items. The software removes any disadvantages of handling business in this way. “We can now handle 50 online orders of one item as easily as one order of 50 items,” says Lee. “All the shipping and labeling information is generated automatically.”
In 1998, VK entered phase two of its online strategy, taking full advantage of the software. Since then, any existing VK account with an established online shop front-needed primarily for tracking orders-has been able to link its page directly with VK’s “back-end” site, allowing retail customers to order from the distributor’s full inventory. VK collects payment from the customer online, ships the ordered product to the store or directly to the customer, and then cuts a check to the retailer for the amount of the retail markup. The retailer not only makes a sale of a product not in stock on their own shelves, but is also able to offer the full range of VK’s inventory, including brands the shop might not carry.
According to Lee, setting up a similar mail-order function is far beyond the scope of many smaller retailers who now have access to “personalized” off-the-shelf mail-order software. “The system works very well for us,” says Bob Gettinger of Rat City Sports in Burbank, California. “Our customers placed almost one-million dollars in orders via our online shop front to VK last year. And as we don’t need sales staff, packers, or shippers to handle that business, the one-million dollars has perhaps a twenty-percent-higher margin than direct retail sales would. In fact, our online sales are now about 70 percent of our total volume, and VK accounts for about 75 percent of that.”
A third phase is being planned where VK will actually install basic terminals inside retailers. Retail customers who want a specific product will simply order via the terminal while in the store. The product is then shipped, and the retailer just waits for a check, never having to carry that product in inventory. “Most aspects of doing business with VK are the same as they would be with a conventional distributor,” says Lee. “For example, volume discounts are still assessed in the same way. Our previous systemm, with buyers ordering ones and twos of items, meant volume was typically assessed by retaining open invoices. Nothing has changed. And of course retailers still get the cash-flow benefits of being able to order small quantities or only order specific items their customers have already paid for.”
So far VK has about 60 stores utilizing their basic wholesale system, and currently seven stores are taking advantage of the “shop front” system, offering mail order to their customers. “It’s hard to cut through the existing industry suspicion of mail-order to the point that retailers see the benefits of what VK is offering,” says Lee. “We hear so many negative rumors about who we are and what we’re trying to do. We’re still basically a traditional warehouse distributor. Online sales represent no more than ten percent of our sales in total, and they’ll probably never replace the face-to-face walk-in aspect of the business. We have to accept that most retailers use distributors for fill-ins and for smaller lines, rather than as the majority of their buy. But the smaller brands we carry strongly believe in what we’re doing. We think we have something to offer many of the markets outside So Cal, where it’s impossible to find a wide range of brands. Gradually, we’ll convince retailers we’re not in competition with them but are actually offering them a service.”