The BASE failure: What it means for the industry
This is the second article Swellnet has written regarding BASE. The first article, written one day after the collapse and featuring 40+ comments, can be found here.
United they stood, united they fell. Eight years after BASE began, the collective of big name board manufacturers has collapsed leaving huge debts and approximately 35 employees out of work.
The surfboard manufacturing industry has been struggling in recent years and many smaller operators have silently gone under. BASE however, included Darren Handley, Simon Anderson and Murray Bourton - three of Australia's most successful shapers - and was conceived as a new business model for the industry. The gravity of the failure can't be ignored.
The original impetus for BASE was to counter cheap imports by combining the purchasing power, manufacturing space and distribution costs of individual shapers. The venture however created a new set of problems and rumours had been circulating regarding BASE's precarious financial situation. Now that the rumours have come to pass people in the industry are left to ponder the ramifications of the failed business model.
Mike Psillakis is a shaper running his own label on Sydney's Northern Beaches. Psillakis worked with Simon Anderson for eight years when Simon was working out of his Mona Vale factory. Because of the close ties Psillakis is sympathetic to all those involved at BASE. "I have the utmost respect for Simon, and Darren too," says Psillakis.
Asked why the BASE concept didn't work, Psillakis believes one of the reasons is they were too top heavy in staffing. "There were a lot of people who worked at BASE yet didn't touch a surfboard – reps, bookkeepers, secretaries, you name it. There's simply not enough margin in surfboards to cover all those wages."
"Team riders too," Psillakis added, "they are another cost. You've got to facilitate such payments just to break even." Darren Handley sponsored World Tour surfers Mick Fanning and Steph Gilmore. Another shaper I spoke to, who declined to be named, also said, "The outgoing costs, on admin and team riders, was never going to be covered by market prices. Workers need to get paid and each wage is a percentage of the final price. The margins aren't there in the surfboard industry."
The view, shared by a few shapers I spoke to, is that surfboard manufacturing is a very difficult business to scale up in size. Production line manufacturing is the typical method of increasing output, yet it's hard to make production lines viable with surfboards – they're notoriously time and labour intensive. The result is that time spent working on each board remains the same while staffing costs increase. Asian manufacturers can make it succeed largely through cheaper labour costs.
Some people I spoke to think it was as much the current economic climate as anything BASE did wrong. Luke Short, who shapes LSD Designs and up until a month ago was part of BASE, refused to point the blame. "Times were tough," said Short, "but they were for everybody."
It's a sentiment shared by Michelle Blauw, President of the Australian Surf Craft Industry Association (ASCIA). Blauw wouldn't share her opinion on the cause of BASE's demise saying, "the economy is tough for everybody," though she did concede, "they must've known they did something wrong. I don't know how anyone could get in so much debt."
Rather than pointing fingers Blauw would instead like to see the BASE collapse throw a spotlight on the industry and how badly it's faring. "Small manufacturers go broke all the time but you don't hear about it, yet now the big guys have fallen and the media is giving us attention. I'd like to see some positives come from this."
The Australian surfboard industry once had a very lucrative export market but the strong Australian dollar is now restricting exports and making imports - from both Asia and America - very competitive against domestic boards. I asked Blauw what is possible. "At this stage I'm not too sure. I couldn't rule government subsidies out, or tax concessions to protect the industry. What I do know is that if something isn't done soon in ten years we won't have much of an industry left."
Another thing Blauw is sure about is the need for all imported boards to be correctly labelled and the issue is high on the ASCIA agenda. "All imported boards need to be labelled so buyers know what they are getting." The bugbear is unbranded Asian-made boards masquerading as locally-made boards.
Mike Psillakis however, feels no threat from Chinese imports. "The Chinese market doesn't concern me. They make entry level boards only." On top of his model and stock boards Psillakis builds 3 to 4 custom boards per day and says "no custom boards come out of China." A staunch hand shaper, Psillakis says the only way to improve his craftsmanship, and hence create a better product, is by hand shaping.
Cory Roberts shapes Cory Surfboards in Victoria and he too feels less threatened by Chinese imports. "It's up to the market to show what we can provide differently than the Chinese," says Roberts. Like Psillakis, Roberts thinks custom shapes for the average or better surfer are an obvious point of differentiation. Diversifying with alternative shapes is another.
Asked about the BASE collapse Roberts was sympathetic to those involved but also optimistic about the outcome. "It could be the best thing to happen to the market in ages," Roberts said. "The last 12 to 24 months have been an incredibly creative time and this may enable young guys an entry into the market. This could help a cottage industry take a great leap forward."
Cottage industry: it's a term I heard many times while researching this story. The perception I gleaned was that, at the time BASE was conceived, the surfboard industry was in a semi-organised state and vulnerable to cheap imports. BASE sought to counter the threat by conglomeration but it has now failed and some are thinking that smaller, leaner operations – those lending themselves to a cottage industry – may be the best way forward.
Mike Psillakis was frank about it. In his view the top heavy staffing at BASE was a perfect example of why large operations don't work. "The surfboard industry should be a cottage industry," he said. "Rather than hiring lots of staff the shaper should be the secretary, bookkeeper and salesman. The surfboard industry can only work as a cottage industry."
Smaller and leaner may be one of the answers but Michelle Blauw believes all manufacturers - irrespective of their size - need to be clever, efficient and customer-driven. "The cottage guys will always be around and probably underpin the whole industry as that is where trends and innovation usually start." However, they "need to ramp up their game a little and find a balance between creativity and the basics of business," citing unanswered phones, late deliveries and environmental short-cuts as typical.
Further, Blauw says for the surfboard industry "to be taken seriously, so we can pass on our skills through proper apprenticeships, training and education and entice a whole new generation into the industry, we have to not only make great boards but also run businesses."
As a last point, Blauw says of the BASE failure, "Let it be a lesson more than anything else."