Rollerblade, Inc.

views updated May 09 2018

Rollerblade, Inc.

One Sportsystem Plaza
Bordentown, New Jersey 08505
U.S.A.
Telephone: (609) 291-5800
Toll Free: (800) 283-6647
Fax: (609) 291-5900
Web site: http://www.rollerblade.com

Wholly Owned Subsidiary of Benetton Sportsystem USA
(Division of Benetton Group S.p.A.)
Incorporated: 1982 as Ole’s Innovative Sports
Employees: 200
Sales: $150 million (1999 est.)
NAIC: 33992 Sporting and Athletic Good Manufacturing

Rollerblade, Inc., originator of the sport of inline skating, is a leading manufacturer in the ever-evolving inline skate market. Through product innovation and aggressive marketing Rollerblade established a sport and fitness craze that became synonymous with its name. The downside, however, was that Rollerblade had suddenly become a generic term for inline skates and skating, prompting the company to unleash a marketing campaign to protect its name. Despite its phenomenal growth from the 1980s into the mid-1990s, a slump in the late 1990s forced Rollerblade and its rivals to diversify into faster and flashier skates. Sales rebounded and by the 21st century inline skates were still the rage for fun, fitness, and sport—even spawning inline hockey, skating, and even soccer leagues. Rollerblade products are sold in dozens of countries, from the United States and Canada to Colombia, Hong Kong, India, Norway, Switzerland, Saudi Arabia, the United Kingdom, Uruguay, and others.

Something Borrowed, Something New: 1700s to 1981

Rollerblade started the inline skating phenomenon by improving and rejuvenating an existing product. Inline skates were invented in The Netherlands in the early 1700s: a Dutchman looking for a way to skate in the summer months nailed wooden spools to strips of wood and attached them to shoe bottoms. The first patent for skates with wheels in a single line was issued in Paris in 1819 to M. Petitbled. Models of the skate were made in both Europe and the United States, but all were unstable and difficult to turn. Skates with side-by-side wheels or “quad” skates, were developed by American James L. Plimpton in 1863. The new skates were easier to control, and they quickly became popular. Versions of the single-line skates continued to be produced, but roller-skating dominated that segment of recreational sports. Yet a young semipro hockey player and his brothers changed everything when their innovations made single-line skates faster and more maneuverable than roller skates.

With thousands of new sport and recreation products introduced to the market every year, few have had the success and name recognition of the Rollerblade skate developed by Scott Olson and his brothers. Olson, after a successful high school hockey career in Minnesota, went north to play junior level hockey in Brandon, Manitoba. He advanced to the National Hockey League (NHL) system and played with the Winnipeg Jets’ minor league teams. In 1978 Olson came upon a pair of ice skates with wheels. He loved the idea of being able to skate year-round and believed other hockey players would enjoy using the skates for off-season training. Olson obtained the distribution rights for Canada and the Upper Midwest from the Los Angeles-based company that sold the skates. In 1980 Olson left professional hockey and began selling the skates full-time. He pitched the skates by wearing them everywhere; he even skated from Minneapolis to Grand Rapids, Minnesota, a distance of about 200 miles, to promote the skates.

Because Olson was constantly on the skates he knew they could use some improvement. He devised a way to make the blade length adjustable and, therefore, more maneuverable and developed a dual-bearing wheel which made the skate faster. The manufacturer, however, was not interested in the innovations. Through a patent search Olson found that Chicago Roller-skate, the largest U.S. manufacturer of roller skates, had an inactive single-line skate which was similar to his design. The 20-year-old Olson went to Chicago to negotiate buying the patent, which he finally obtained in 1981.

Ultimate Highs and Lowest Lows: 1982–85

Olson incorporated Ole’s Innovative Sports in 1982. The company started out small, with Olson, his brothers Brennan and Jim, and a few others assembling skates in the Olson family basement. First year sales on Rollerblade skates, which were equipped with a molded polyurethane boot shell for ankle support and a heel brake for stopping, exceeded $300,000. In 1983 the company moved to a facility in Eden Prairie, Minnesota, near the Minnesota Vikings Training Center. By then Olson had a growing company to manage. He also was busy seeking NHL player endorsements, promoting the skates to the media, and convincing sporting goods dealers to carry the skates. He needed more help and brought on a friend to handle the finances, but by the next year the growing business was in financial trouble which Olson attributed to his friend.

Help came from a Twin Cities automobile dealer, Jack Walser, who first put $75,000 into the company to keep it afloat and later offered $300,000 for 50 percent of the business. Robert L. Sturgis, a Minneapolis entrepreneur, was also interested in the company. According to Terry Fiedler in the September 1989 Corporate Report Minnesota, “Sturgis told Olson he could raise $1.5 million in a limited partnership for that same half of the company’s stock.” Olson agreed to the deal, and Sturgis and Robert O. Naegele (president of the investment company Naegele Communications and former owner of his family’s billboard concern), extended Olson $100,000 in the form of a note. Sturgis was named CEO of Ole’s Innovative Sports, and Scott Olson continued with sales and promotion of the skates. A few months later Sturgis told Olson he was having difficulty raising the $1.5 million and cut the offer in half. By late 1985 the money still had not been raised, and Sturgis and Naegele finally offered to buy out Olson. Unable to pay back the money the investors had put into the company Olson settled for $96,000 over two years and a royalty package. Olson’s brothers stayed with the company.

In addition to pulling in Rollerblade royalties (which were expected to total about $10 million over the ten-year deal), Olson went into competition with the company he founded. He produced his Switch-It brand skates through Innovative Sports Systems, Inc. (ISS), and then through O.S. Designs Inc., he developed the Nuskate, which he sold in 1993 to CCM Sport Maska, Inc. of Canada. The company Olson first founded went on without him under a new name—as North American Training Corporation before becoming Rollerblade, Inc.—and under new leadership.

A New Era: 1986–91

In 1986, the year financial expert John Sundet and sports marketing veteran Mary Horwath joined Rollerblade Inc., the company was still losing money. The next year Sturgis sold his share of the company to Naegele, and Sundet succeeded him as president. Sundet, along with Horwath, repositioned the company in the marketplace. Rollerblade skates were trimmed down, painted neon colors, and given to beach-side skate rental shops on popular California beaches. The skate took off. “Instead of trying to market inline skates as an adjunct to ice hockey, we focused on selling the product as a leisure sport in and of itself,” said Sundet in a February 1995 Minneapolis Star Tribune article. Rollerblade sales doubled in 1988, and the company claimed to have 70 to 75 percent of the estimated $10-$ 12 million market. Another Minnesota-based company, First Team Sports, Inc., was a distant second in the inline skate market.

Top sales for Rollerblade were in the ice skating strongholds of Minneapolis/St. Paul and Boston, but sales in southern California were rising rapidly. By 1990 nearly one-quarter of Rollerblade’s business was in California, and the total inline market had grown to about $60 million. The sagging sporting goods industry was getting a boost from sales of inline skates priced from $100 for basic skates up to $330 for five-wheel racing models. Inline skating was no longer only a cross-training sport for hockey players and cross-country skiers; moreover, one-third of the new breed of skaters were female. Demand for Rollerblade skates started to outstrip production. The number of retail outlets selling the skates had grown from 31 in 1984 to 3,000 in 1990. The skates were sold in Canada, Europe, Australia, New Zealand, and Korea, as well as the United States.

In January 1991, Rollerblade doubled its space with a move to new headquarters in Minnetonka. Three months later the world’s leading ski boot manufacturer, Nordica, purchased 50 percent of Rollerblade, Inc. from Naegele for an undisclosed amount. Naegele continued in his position as chairman of the newly formed board. Competitors, Scott Olson (then president of ISS) and David G. Soderquist (president of First Team Sports, Inc.), saw the purchase as a positive development for the inline skate industry. Nordica, with consolidated revenues of $450 million, had money available to promote the sport and establish it as more than just a fad.

Company Perspectives:

Skating is many things to many people. To some, skating is about turning physical exertion into mental exhilaration. To others, it’s about the heart racing at the mere smell of freshly laid asphalt. And to others still, it’s about hearing music in the throbbing cadence of eight rolling wheels. Rollerblade knows that whether on boardwalks or city streets or the manicured cul-de-sacs of suburbia, skaters are ever striving to build speed and momentum. It’s instinctive. The freedom of inline demands not that skaters leave well enough alone; but rather, that they leave it behind.

Fad or not, Rollerblade sales had at least doubled every year from 1987 to 1991, and the competition was heating up. Number-two manufacturer First Team Sports brought NHL hockey superstar Wayne Gretzky aboard to promote its Ultra-Wheels line. Canstar Sports, Inc. was gaining market share with its Bauer Precision InLine Skates. The low end of the market was being tapped by Taiwanese-made skates selling for under $50, but because all but First Team Sports were privately held, market figures for the rapidly growing industry remained sketchy, and claims by the leading manufacturers conflicted with each other.

Competition was not the only threat to Rollerblade’s market domination. Because Rollerblade was so successful in establishing the sport of inline skating its trademark was in danger of becoming a generic name—aspirin, linoleum, and cellophane were all once brand names that lost their trademarks to general use. The brand name Rollerblade was being used as a noun (rollerblades or blades) and as a verb (rollerblading or blading), much as the Xerox Corporation found its name synonymous with making copies. In 1990 the company had launched a campaign to protect its identity. Its market strategy shifted from promoting the sport of inline skating to developing brand identification. Print advertising and national TV ads were added to the company’s less traditional promotional tool box. Concept shops, which highlighted Rollerblade skates, brightly-colored Blade Gear sportswear, accessories, and protective gear, were opened in sporting goods stores, but the company continued to use the unorthodox promotions that brought them early success.

When Mary Horwath had joined Rollerblade, she relied on “guerilla marketing” tactics that equated inline skating with a fun, active, and sexy lifestyle. With only a $200,000 budget she depended on aggressive and unorthodox yet inexpensive methods to get the skates into the public eye. Rollerblade skates were given to high profile celebrities and athletes who were seen and often photographed wearing the skates. Cross promotional tieins paired Rollerblade with large well-known companies that sought to be identified with youthful, athletic activities. Team Rollerblade, a group of elite stunt skaters, traveled around the country on “Rock ‘N’ Rollerblade Tours,” appeared in commercials, and performed at the Super Bowl and at the Olympic games. Perhaps most importantly, the company took the skates out on the streets and gave the public opportunities to try them. Wherever people gathered—fairs, festivals, theme parks, and college campuses—Rollerblade demonstration vans arrived.

Rivals Gaining Ground: 1992-95

The year 1992 was a time of transition for Rollerblade as it moved further away from its entrepreneurial roots. The inline market and the inline leader were maturing. In an executive overhaul, former Tonka executive John F. Hetterick assumed the roles of president and COO, and other top level positions were filled by people with experience in major corporations. John Sundet resigned as CEO in May 1992 and was succeeded by Hetterick. Mary Horwath, who in 1992 was ranked as one of the nation’s 100 top marketing executives by the trade journal Advertising Age, left Rollerblade the next year. Rollerblade began to place more emphasis on the efficiency of operations, especially striving to meet shipping dates: late orders had been an ongoing headache for distributors. Twenty-four jobs were cut, mostly in marketing, sales, and finance, and more emphasis was placed on customer service. By the end of 1992 the company was again looking for more space to accommodate its rapid growth. Corporate Report Minnesota estimated Rollerblade’s average annual growth rate to be 115.5 percent between the years 1987 and 1992.

Rollerblade’s growth rate was propelled by a tripling of the number of inline skaters in the United States; however, the Wall Street Journal predicted in November 1993 that the industry was headed for a fall: sales growth had slowed, big ski industry concerns had entered the high-end market ($150-$300 range), and low-end skates accounted for 44 percent of total inline sales. Michael Selz of the Wall Street Journal wrote, “To cope with competition, skate makers are fighting harder. Rollerblade mounted one of the most aggressive responses, partly because it has the most to lose.” In February 1993, Rollerblade filed a patent lawsuit against 33 competitors. Later that year, Rollerblade settled out-of-court with seven of the manufacturers, including the number two maker. First Team Sports, which was ranked 15th on BusinessWeek’s 1993 Hot Growth list, had experienced depressed earnings due to the suit.

Rollerblade remained the big name in recreational inline skates, but Bauer and Cooper brands, owned by the largest hockey equipment maker in the world, Canstar Sports, Inc., were the skates of choice for inline hockey. Sunbelt in-line hockey leagues were becoming as popular as Little League, and Canstar banked on brand name recognition and status as official sponsor of a professional league to help them overtake Rollerblade and First Team. Canstar’s 1993 inline sales grew to $26 million. Second place First Team had sales of $38.2 million, and Rollerblade planned to challenge Canstar with its own inline hockey skate.

Key Dates:

1981:: Scott Olson buys single-line skate patent and begins making Rollerblade skates.
1982:: Olson incorporates Ole’s Innovative Sports (later renamed North American Training Corporation).
1984:: Money problems force Olson to team up with Robert Sturgis, who becomes CEO.
1985:: Olson is forced to sell out to Sturgis and local Minneapolis entrepreneur Robert Naegele.
1987:: Sturgis sells his share of Rollerblade to Naegele.
1988:: Rollerblade dominates the market with sales nearing $10 million.
1991:: Naegele sells 50 percent stake to Nordica.
1993:: Rollerblade files patent infringement lawsuits against competitors.
1994:: Company introduces award-winning Active Brake Technology (ABT).
1995:: Naegele sells the remainder of stake in Rollerblade to Nordica.

Safety was an ongoing concern for all the manufacturers. As the number of inline skating injuries rose, the Consumer Product Safety Commission issued warnings about the dangers of the sport. The June 1994 issue of the Journal of the American Medical Association (JAMA) cited key factors that contributed to inline injuries: cruising speeds of 10–17 miles per hour; sharing the roadways with motor vehicles, bicyclists, pedestrians, and pets; and falling on hard surfaces. Rollerblade encouraged use of safety equipment and lessons for beginners through its “Skate Smart” safety education program and its “Asphalt Bites” campaign. In 1994 Rollerblade introduced Active Brake Technology (ABT), an award-winning innovation which made stopping easier for beginners and improved speed control.

Rollerblade’s 1994 sales were estimated by Newsweek to be about $260 million or about 40 percent of the $650 million inline market, and its competitors appeared poised to capture more of Rollerblade’s market share. In late 1994 Canstar was purchased by Nike Inc., the athletic footwear and clothing giant. Already benefitting from the resurgence of hockey, Canstar received an added boost from Nike’s marketing and sales mastery. First Team Sports also was capitalizing on the inline hockey boom and reported sales revenues of $86 million in fiscal 1995. Rollerblade was still relying on its grassroots activities and promotional tie-ins to sell its skates. The company’s advertising budget remained modest—$4 million in 1995—and was limited to spot markets.

In November 1995—following months of speculation about the company’s future—Naegele sold his stake in Rollerblade to Nordica. The New York Times said Naegele received at least $150 million for his 50 percent share of the company, though later reports put the figure at $200 million. Nordica, in turn, had sold a minority interest of Rollerblade to an affiliate of Goldman, Sachs & Company. No longer under a dual ownership Rollerblade appeared to be in a better position to capitalize on the financial strength, research and development support, manufacturing capacity, and international distribution capabilities that Nordica offered.

Rollerblade and inline skating had moved into the mainstream of recreational sports, yet had plenty of room for growth with only 14 percent of U.S. households owning inline skates in 1995 as compared with 51 percent owning bicycles. Inline makers were optimistic about growth in the international marketplace, where Rollerblade had a foothold by way of Nordica. According to industry and company estimates Rollerblade still held nearly half of the market in 1995, but it remained to be seen if inline skating would continue to grow or would follow the path of the roller-skate industry and slip into a cycle of boom and bust.

Boom & Bust Indeed: 1996-99

In 1996 inline skating was far more than just a fad and brought revenue to the recreational, fitness, and athletic markets. Statistics from the International Inline Skating Association charted the meteoric rise of inline skating, and cited it as the fastest growing sport in the nation. No longer a radical form of roller-skating, it was instead a burgeoning fitness craze for people of all ages. Rollerblade rode the crest to its peak and, inevitably, the market faltered in 1997. In the obligatory bust all three of the inline skate behemoths lost their footing; Rollerblade still dominated with about 40 percent of the U.S. market and $355 million in sales, yet second and third place producers First Team Sports and K2 Inc. were the worse for wear. According to an October Forbes article, First Team experienced an estimated 36 percent falloff in sales while K2 tumbled some 15 percent. All this despite research figures finding in excess of 30 million inline skate owners (divided evenly between men and women) in the United States, and the burgeoning preteen market. According to Rollerblade’s web site, nearly two-thirds of all 11-year-olds owned a pair of inline skates in 1997.

Yet while it seemed as if the inline skating boom was over with faltering sales and sports stores slashing prices to move product, Rollerblade’s parent company, Benetton Sportsystem (which also owned Nordica) upped the ante by raising prices and bringing fancier models to stores to concentrate on diehard enthusiasts rather than beginners. Then the Benetton family, major shareholders in both the public company and its private subsidiaries, began selling off its shares in the sports-related division to the publicly traded parent company, Benetton Group, in 1998. Benetton Sportsystem was renamed Playlife in Europe and Asia after the transition, and several Playlife megastores were opened in Europe. Subsequently, rather than open such stores in the United States, Benetton instead made a surprising deal with Sears to market both its clothing and sporting goods through the retailer’s stores. For many, it was a drastic dressing down to Benetton’s image, but the company was soon dumped by Sears. After the debut of another of the parent company’s controversial ad campaigns (which had been stirring up debate for several years), this time featuring death row inmates, Sears pulled all Benetton products from its stores in early 2000. Rollerblade’s products, it seemed, were lost amid all the chaos.

Though the inline skating industry faltered briefly, Rollerblade and its rivals continued to entice customers with newer and wilder versions of its skates and sales rallied once again. With the increased popularity of “extreme” sports, Rollerblade was there with several new models of skates, as well as accessories (helmets, elbow, wrist, and knee pads, etc.) specifically designed for all age groups. Inline skating reinvented itself and became the impetus for rethinking other sports—from Scott Olson’s original use for inline skates, off-season hockey training—came inline basketball and hockey leagues, speed skating, extreme skating (dubbed “aggressive” or “stunt” skating), and even more unusual variations such as inline dancing and even inline soccer. Though growth for the industry was only in the low single-digits, as opposed to huge leaps earlier in the decade (such as 51 percent from 1991 to 1992 and 49 percent from 1993 to 1994, according to Rollerblade’s web site), there was still growth. Sales were also subject to weather restrictions, except in fair weather states such as California and Texas (which led the market in sales), but spring and summer always brought a surge in sales.

Inline Skating in the 21st Century and Beyond

The future of inline skating was anyone’s guess in the 21st century, but the sport demonstrated serious staying power. For fitness, strapping on a pair of Rollerblade skates was an excellent workout. For skaters both young and old, inline skating was fast fun that burned calories, strengthened muscles, and was less stressful to the body than running. Even Prevention magazine had begun recommending inline skating to its readership as a good, low-impact form of exercise and recreation (with proper protective equipment). More and more cities built inline skating trails and paths, and in case anyone was forgetting its name, Rollerblade had donated millions of dollars to be the official inline skate of New York City’s parks. With increased emphasis on safety, injuries had fallen nationwide and some parks even favored inline skating patrols to police recreational areas. Roll-erblade, meanwhile, eyed continued comfort and flexibility as a key to its market share. Newer innovations included convertible skates (removable shoe-boots on plastic wheel frames, called “Nature” skates), models with shock absorbers for rougher terrains (such as the “Coyote” and “Outback X”), and even “Xtenblade” skates with adjustable framing for the constantly growing feet of children.

Principal Competitors

First Team Sports, Inc.; K2 Inc.; Variflex, Inc.

Rollerblade, Inc.

views updated May 23 2018

Rollerblade, Inc.

5101 Shady Oak Road
Minnetonka, Minnesota 55343
U.S.A.
(612) 930-7000
Fax: (612) 930-7030

Private Company, Wholly Owned by Nordica, which is part of Benetton Sportsystem of Italy, a division of Edizione Holdings
Incorporated: 1982 as Ole’s Innovative Sports, later renamed North American Training Corporation
Employees: 280
Sales: $265.0 million (1994 est.)
SICs: 3949 Sporting & Athletic Goods Manufacturer

Rollerblade, Inc., founder of the sport of in-line skating, is the leading manufacturer in the estimated $700 million in-line skate market. Through product innovation and aggressive marketing Rollerblade established a sport which became synonymous with its name and, according to the National Sporting Goods Association (NSGA), is close to becoming one of the top ten participant sports in the United States. Kevin Krajick wrote in the September 1995 issue of Smithsonian, “No one thought it would go this far. Every year of the 1990s as the number of inline skaters doubled, triple, quadrupled, pundits said the ‘fad’ would peak.”

Rollerblade started the in-line skating phenomenon by improving and rejuvenating an existing product. In-line skates were invented in Netherlands in the early 1700s: a Dutchman looking for a way to skate in the summer months nailed wooden spools to strips of wood and attached them to shoe bottoms. The first patent for skates with wheels in a single line was issued in Paris in 1819 to M. Petitbled. Models of the skate were made in both Europe and America, but all were unstable and difficult to turn. Skates with side-by-side wheels, or “quad” skates, were developed by an American, James L. Plimpton, in 1863. The new skates were easier to control, and they quickly became popular. Versions of the single-line skates continued to be produced, but rollerskating dominated that segment of recreational sports. A young semi-pro hockey player and his brothers changed everything with innovations that made the single-line skates faster and more maneuverable than roller skates.

Thousands of new sport and recreation products are introduced to the market every year, but few have the success and name recognition of the Rollerblade skate developed by Scott Olson and his brothers. Olson, after a successful high school hockey career in Minnesota, went north to play junior level hockey in Brandon, Manitoba. He advanced to the National Hockey League (NHL) system and played with the Winnipeg Jets’ minor league teams. In 1978 Olson came upon a pair of ice skates with wheels. He loved the idea of being able to skate all year round and believed that other hockey players would also want the skates for off-season training. Olson obtained the distribution rights for Canada and the Upper Midwest from the Los Angeles-based company that sold the skates. In 1980 Olson left professional hockey and began selling the skates full time. He pitched the skates by wearing them—everywhere. He even skated from Minneapolis to Grand Rapids, Minnesota, a distance of about 200 miles, in order to promote the skates in Minnesota’s hockey towns.

Because Olson was constantly on the skates he knew they could use some improvement. He devised a way to make the blade length adjustable and, therefore, more maneuverable and developed a dual-bearing wheel which made the skate faster. However, the manufacturer was not interested in the innovations. Through a patent search Olson found that Chicago Roller-skate, the largest U.S. manufacturer of roller skates, had an inactive single-line skate which was similar to his design. The twenty-year-old Olson went to Chicago to negotiate to buy the patent, which he finally obtained in 1981.

Help came from a Twin Cities automobile dealer, who first put $75,000 into the company to keep it afloat and later offered $300,000 for 50 percent of the business. Robert L. Sturgis, a Minneapolis entrepreneur, was also interested in the company. According to Terry Fiedler in the September 1989 Corporate Report Minnesota, “Sturgis told Olson he could raise $1.5 million in a limited partnership for that same half of the company’s stock.” Olson agreed to the deal, and Sturgis, and Robert O. Naegele, president of an investment company, Naegele Communications, and former owner of his family’s billboard concern, extended Olson $100,000 in the form of a note. Sturgis was named chief executive officer of Ole’s Innovative Sports, and Scott Olson continued with sales and promotion of the skates. A few months later Sturgis told Olson he was having difficulty raising the $1.5 million and cut the offer in half. By late 1985 the money still had not been raised, and Sturgis and Naegele finally offered to buy out Olson. Unable to pay back the money the investors had put into the company Olson settled for $96,000 over two years and a royalty package. Olson’s brothers stayed with the company.

Once out of the company Olson fought for the rights to his product designs, and when his royalties were reduced from two to one percent he filed a suit against Naegele and began a legal battle that lasted six years. Two disparate views of the high-profile Scott Olson were circulated. In one he was portrayed as a business owner without management skills or capital, and that he was fortunate to get as much as he did from the sale of the company. In the other he was cast as too honest and trusting and was forced out of the company he had founded. Dick Young-blood, in April 1993, wrote, “There’s no need to mourn for Scott Olson, whose creative genius produced a gold mine called Rollerblade Inc. in 1979—but whose dearth of capital and management expertise cost him control of the company six years later.” In addition to pulling in Rollerblade royalties (which were expected to total about $10 million over the 10-year deal), Olson went into competition with the company he founded. He produced his Switch-it brand skates through Innovative Sports Systems, Inc. (ISS), and then through O.S. Designs Inc., he developed the Nuskate, which he sold in 1993 to CCM Sport Maska, Inc. of Canada. The company Olson first founded went on without him under a new name—as North American Training Corporation before becoming Rollerblade, Inc.—and under new leadership.

In 1986, the year financial expert John Sundet and sports marketing veteran Mary Horwath joined Rollerblade Inc., the company was still losing money. The next year Sturgis sold his share of the company to Naegele, and Sundet succeeded him as president. Sundet, along with Horwath, repositioned the company in the marketplace. Rollerblade skates were trimmed down, painted neon colors, and given to beach-side, skate-rental shops on popular California beaches. The skate took off. “Instead of trying to market in-line skates as an adjunct to ice hockey, we focused on selling the product as a leisure sport in and of itself,” said Sundet in a February 1995 Minneapolis Star Tribune article. Rollerblade sales doubled in 1988, and the company claimed to have 70 to 75 percent of the estimated $10 to $12 million market. Another Minnesota-based company, First Team Sports, Inc., was a distant second in the in-line skate market.

Top sales for Rollerblade were in the ice skating strongholds of Minneapolis/St. Paul and Boston, but sales in Southern California were rising rapidly. By 1990 nearly one-quarter of Rollerblade’s business was in California, and the total in-line market had grown to about $60 million. The sagging sporting goods industry was getting a boost from sales on in-line skates priced from $100 for basic skates up to $330 for five-wheel racing models. No longer only a cross-training sport for hockey players and cross-country skiers, one-third of the skaters were female. Demand for Rollerblade skates started to outstrip production. The number of retail outlets selling the skates had grown from 31 in 1984 to 3,000 in 1990. The skates were sold in Canada, Europe, Australia, New Zealand, and Korea, as well as, the United States.

In January 1991, Rollerblade doubled its space with a move to new headquarters in Minnetonka, Minnesota. Three months later the world’s leading ski-boot manufacturer, Nórdica, purchased 50 percent of Rollerblade, Inc. from Naegele for an undisclosed amount. Naegele continued in his position as chairman of the newly formed board. Competitors, Scott Olson, then president of ISS, and David G. Soderquist, president of First Team Sports, Inc., saw the purchase as a positive development for the in-line skate industry. Nórdica, with consolidated revenues of $450 million, had money available to promote the sport and establish it as more than just a fad.

Fad or not, Rollerblade sales had at least doubled every year from 1987 to 1991, and the competition was heating up. Number two manufacturer First Team Sports brought NHL hockey superstar Wayne Gretzky aboard to promote its Ultra-Wheels line. Canstar Sports, Inc. was gaining market share with its Bauer Precision In-Line Skates. The low end of the market was being tapped by Taiwanese-made skates selling for under $50, but because all but First Team Sports were privately held, market figures for the rapidly growing industry remained sketchy, and claims by the leading manufacturers conflicted with each other.

Competition was not the only threat to Rollerblade’s market domination. Because Rollerblade was so successful in establishing the sport of in-line skating its trademark was in danger of becoming a generic name—aspirin, linoleum, and cellophane were all once brand names that lost their trademarks to general use. The brand name Rollerblade was being used as a noun (rollerblades or blades) and as a verb (rollerblading or blading). In 1990 the company launched a campaign to protect its identity. Its market strategy shifted from promoting the sport of in-line skating to developing brand identification. Print advertising and national TV ads were added to their less traditional promotional tool box. Concept shops, which highlighted their skates, brightly-colored Blade Gear sportswear, accessories, and protective gear, were opened in sporting goods stores, but the company continued to use the unorthodox promotions that brought them early success.

When Mary Horwath joined Rollerblade in 1986, she relied on “guerilla marketing” tactics that equated in-line skating with a fun, active, and sexy lifestyle. With only a $200,000 budget she depended on aggressive and unorthodox, yet inexpensive, methods to get the skate into the public eye. Roller-blade skates were given to high profile celebrities and athletes who were seen and often photographed wearing the skates. Cross promotional ties-ins paired Rollerblade with large, wellknown companies that sought to be identified with youthful, athletic activities. Team Rollerblade, a group of elite stunt skaters, traveled around the country on “Rock ’N’ Rollerblade Tours,” appeared in commercials, and performed at the Super Bowl and at the Olympic games. Perhaps most important, the company took the skates out on the streets and gave the public opportunities to try them. Wherever people gathered—fairs, festivals, theme parks, and college campuses—Rollerblade demonstration vans arrived.

The year 1992 was a time of transition for Rollerblade as it moved further away from its entrepreneurial roots. The in-line market and the in-line leader were maturing. In an executive overhaul, former Tonka executive, John F. Hetterick, assumed the roles of president and chief operating officer, and other top level positions were filled by people with experience in major corporations. John Sundet resigned as CEO in May 1992 and was succeeded by Hetterick. (Mary Horwath, who in 1992 was ranked as one of the nation’s 100 top marketing executives by the trade journal Advertising Age, left Rollerblade the next year.) Rollerblade began to place more emphasis on the efficiency of operations, especially striving to meet shipping dates: late orders had been an ongoing headache for distributors. Twenty-four jobs were cut, mostly in marketing, sales, and finance, and more emphasis was placed on customer service. By the end of 1992 the company was again looking for more space to accommodate its rapid growth. Corporate Report Minnesota estimated Rollerblade’s average annual growth rate to be 115.5 percent between the years 1987 and 1992.

Rollerblade’s growth rate was propelled by a tripling of the number of in-line skaters in the United States. However, The Wall Street Journal (WSJ) predicted in November 1993 that the industry was headed for a fall: sales growth had slowed, big ski industry concerns had entered the high-end market ($150-$300 range), and low-end skates accounted for 44 percent of total inline sales. Michael Selz, of the WSJ wrote, “To cope with competition, skate makers are fighting harder. Rollerblade mounted one of the most aggressive responses, partly because it has the most to lose.” In February 1993, Rollerblade filed a patent law suit against 33 competitors. Later that year, Roller-blade settled out-of-court with seven of the manufacturers, including the number two maker. First Team Sports, which was ranked 15th on Business Week’s 1993 Hot Growth list, had experienced depressed earnings due to the suit.

Rollerblade remained the big name in recreational in-line skates, but Bauer and Cooper brands, owned by the largest hockey equipment maker in the world, Canstar Sports, Inc., were the skates of choice for in-line hockey. Sunbelt in-line hockey leagues were becoming as popular as Little League, and Canstar banked on brand name recognition and status as official sponsor of a professional league to help them overtake Roller-blade and First Team. Canstar’s 1993 in-line sales grew to $26 million. Second place First Team had sales of $38.2 million, and Rollerblade planned to challenge Canstar with its own inline hockey skate.

Safety was an ongoing concern for all the manufacturers. As the number of in-line skating injuries rose, the Consumer Product Safety Commission issued warnings about the dangers of the sport. The June 1994 issue of the Journal of the American Medical Association (JAMA) cited key factors that contributed to in-line injuries: cruising speeds of 10-17 miles per hour; sharing the roadways with motor vehicles, bicyclists, pedestrians, and pets; and falling on hard surfaces. Rollerblade encouraged use of safety equipment and lessons for beginners through its “Skate Smart” safety education program and its “Asphalt Bites” campaign. In 1994 Rollerblade introduced Active Brake Technology (ABT), an award-winning innovation which made stopping easier for beginners and improved speed control.

Rollerblade’s 1994 sales were estimated by Newsweek to be about $260 million or about 40 percent of the $650 million inline market, and its competitors appeared poised to capture more of Rollerblade’s market share. In late 1994 Canstar was purchased by Nike Inc., the athletic footwear and clothing giant. Already benefiting from the resurgence of hockey, Canstar received an added boost from Nike’s marketing and sales mastery. First Team Sports also was capitalizing on the in-line hockey boom and reported sales revenues of $86 million in fiscal year 1995. Rollerblade was still relying on its grassroots activities and promotional tie-ins to sell its skates. The company’s advertising budget remained modest—$4 million in 1995—and was limited to spot markets.

In November 1995—following months of speculation about the company’s future—Naegele sold his stake in Rollerblade to Nórdica. The New York Times said that Naegele received at least $150 million for his 50 percent share of the company. Nórdica, in turn, had sold a minority interest of Rollerblade to G.S. Capital Partners II L.P., an affiliate of Goldman, Sachs & Company. No longer under a dual ownership Rollerblade appeared to be in a better position to capitalize on the financial strength, research and development support, manufacturing capacity, and international distribution capabilities that Nordica offered.

Rollerblade, Inc. and in-line skating have moved into the mainstream of recreational sports, yet there is still room for growth with only 14 percent of U.S. households owning in-line skates in 1995 as compared with 51 percent owning bicycles. In-line makers were optimistic about growth in the international marketplace in which Rollerblade had a foothold by way of Nórdica. According to industry and company estimates Roller-blade still held nearly half of the market in 1995, but it remained to be seen if in-line skating would continue to grow or would follow the path of the roller skate industry and slip into a cycle of boom and bust.

Rollerblade, Inc.

views updated Jun 27 2018

Rollerblade, Inc.

founded: 1980

Contact Information:

headquarters: 5101 shady oak rd.
minnetonka, mn 55343 phone: (612)930-7000 fax: (612)930-7030 url: http://www.rollerblade.com

OVERVIEW

The idea behind Rollerblade Inc., the world's leading manufacturer of in-line skates and related equipment, was born in 1980 when two hockey-loving brothers from Minnesota ran across a primitive in-line skate while browsing through a sporting goods store. They immediately saw immense possibilities for the product as an off-season training tool for hockey players. The two refined and improved the skate and before long they were turning out the first Rollerblade skates in their family basement.

Contrary to popular opinion, in-line skates are not purely a phenomenon of the late twentieth century. In fact, the first such skates date back to the early eighteenth century when, legend has it, a Dutchman, frustrated by his inability to use his ice skates during the warm weather months, simulated summer ice skating by nailing wooden spools to strips of wood attached to the soles of his shoes. Shortly after the development in the 1860s of the first roller skates with wheels arranged side by side, the in-line skate was forgotten. Although they occasionally reappeared for brief periods through the years, they never really captured much of the market. Not until the 1980s did the in-line skate make a truly successful impact on the market. It was an idea whose time had finally arrived.

Based in a suburb of Minneapolis, Minnesota, Rollerblade Inc.'s earliest success came when its in-line skates were adopted as summer training equipment by hockey players and skiers. From this relatively narrow market, Rollerblade proceeded to successfully market its skates to the general public. In a short time Rollerblade's in-line skates were a leading brand on the market, capturing the interest of athletes in a number of fields, not to mention fitness enthusiasts and those simply looking for a healthy and enjoyable pastime.

In-line skating has graduated from its early status as a healthy hobby, developing its own group of sports, including stunt and speed skating as well as roller hockey. Rollerblade continues to dominate the market for in-line skates, accounting for nearly 40 percent of global sales. In fact, the word has become synonymous with in-line skates, leaving the company to regularly defend its trademarked name.

In the third quarter of 1997 Italy's Benetton Group S.p.A. acquired control of Benetton Sportsystem, of which Rollerblade was a leading brand, from Edizione Holding, the holding company of the Benetton family. Other brand names under the umbrella of Benetton Sportsystem include Nordica, the leading manufacturer of ski boots; Prince, maker of tennis rackets; Killer Loop, which produces snowboarding equipment and apparel, among other products; Kastle, a maker of skis and mountain bikes and manufacturer of leisure footwear; and Ektelon, the market leader in racquetball equipment.

COMPANY FINANCES

As a privately held company, Rollerblade is not required to report its financial operations. Its parent company, Benetton Group S.p.A., reported in May 1998 that for the second half of 1997, Benetton Sportsystem, of which Rollerblade is one of the leading brands, showed a net loss of $16 million. Second-half revenue totaled $312 million. The disappointing performance was blamed largely on the slump in the sports equipment market, exacerbated by the financial problems in several countries of the Far East.

ANALYSTS' OPINIONS

Some of Rollerblade's competitors in the in-line skating industry scoffed at the company's claims for its Coyote skate, rolled out in early 1998. Promoted as an "all-terrain" skate equipped with pneumatic tires, the Coyote was designed to be used on rough surfaces, including dirt, gravel, and rock, Rollerblade announced. Many of its competitors said, in effect, "Big deal!"

Susan Joch, vice president of marketing for Ultra Wheels, an in-line skate brand manufactured by First Team Sports Inc., called the Coyote a "head-turner" that few would buy. Interviewed by the Minneapolis Star Tribune, Joch asked, "What happens when you get down the hill and have to get back up?"

HISTORY

In-line skates, which first appeared in primitive form in the early 1700s, enjoyed a resurgence in popularity in the early 1980s when winter sports enthusiasts, particularly hockey players and skiers, seized the skates as an ideal way to train during the warm off-season. Rollerblade's founders, Scott and Brennan Olson, were two hockey-playing brothers from Minnesota. They got the idea to market in-line skates after they discovered a pair in a sporting goods store and decided they could modify them to produce a more appealing product. In 1980 Scott Olson had negotiated the distribution rights for Canada and the upper Midwest. He proceeded to market the skates on his own, primarily by wearing them wherever he went, handing out business cards, and giving sales pitches each time he was stopped. Although the skates were crude, cumbersome, and comparatively slow, Olson was impressed with their training possibilities and reasoned that other hockey players would be as well.

By 1982 Olson, just 22 at the time, had established the Ole's Innovative Sports Corporation. In no time at all in-line skates caught on with winter athletes. First year sales for the fledgling company exceeded $300,000. Once the company had captured this fairly limited market, it set out to expand sales by marketing its skates to members of the general public who might use them as another way to stay healthy and active. Fueled no doubt by the growing public preoccupation with maintaining a healthy lifestyle, sales took off. The company's product line, initially limited to in-line skates, was expanded to include apparel and protective gear.

FAST FACTS: About Rollerblade, Inc.

Ownership: Rollerblade Inc. is a division of Benetton Sportsystem, a subsidiary of Benetton Group S.p.A., which is traded on the New York Stock Exchange.

Ticker symbol: BNG

Officers: Dennis Shafer, Pres. & CEO

Chief Competitors: Rollerblade's leading competitors include: Variflex; First Team Sports; and Nike.

The young company's early success caught the eye of investors who bought it from its founders in 1984. Olson departed the company a year later and in 1986 launched a competing company, Innovative Sports Systems, Inc., the maker of SwitchIt skates. By October 1987 Robert Naegle Jr., president of the Minneapolis investment company Naegle Communications, became the new owner and chief executive officer of the original company, renamed Rollerblade, Inc. In 1991 Robert Naegele sold 50 percent of the company to Italy's Nordica, one of the divisions of Benetton Sportsystem. Four years later, Nordica, which is the world's largest manufacturer of ski boots, bought the other half of Rollerblade. Edizione Holding, the Benetton family's holding company, owned Benetton Sportsystem at that time. In what amounted to a corporate restructuring, Benetton Group S.p.A. acquired control of Benetton Sportsystem from Edizione Holding, in effect buying the company from itself.

STRATEGY

While the company was putting itself back on track financially in the 1980s, it was also rethinking its overall marketing strategy. Up to that time in-line skate purchasers were predominantly hockey players, almost exclusively male, and between the ages of 18 and 25. Sales improved as the company broadened its core market to include both males and females between the ages of 18 and 35. The key to this change was transforming the Rollerblade corporate image from supplier of training equipment to the creator of an exciting new sport. Part of the aggressive promotion proved extremely successful on the west coast. The idea was to give away the latest Rollerblade models to skate shops along such famous southern California hotspots as Venice Beach. Giveaways to professional athletes and celebrities were also a part of this plan. Public demonstrations and trial-run campaigns were launched. Company vans filled with skates canvassed the country, stopping at parks and recreation areas and inviting passersby to test-drive the Rollerblade skates. The campaign was an enormous success and led to equally successful ongoing rental programs at beach shops, parks, and sporting goods stores throughout the years.

In December 1997 Rollerblade retained former marketing executive Mary Horwath as a consultant to help the company retain its market share. During Horwath's years as vice president of marketing between 1986 and 1993, the company's annual revenues skyrocketed from about $2 million to more than $100 million. The company specifically brought in Horwath to oversee its Blade Jam music and in-line skating promotion, which was scheduled to tour six cities in 1998, as well as other marketing programs that might be developed in the future.

Horwath was also retained to help oversee the roll-out of a new Rollerblade skate called the Coyote in early 1998. An "all-terrain" in-line skate, the Coyote features six-inch studded pneumatic tires instead of conventional wheels, making it ideal for use on uneven surfaces such as gravel, rock, or dirt. It was thought the Coyote might sell well in Europe, which has fewer areas developed specifically for use by in-line skaters. The Coyote represented a shift in marketing strategy for Rollerblade, which has concentrated less on the 12- to 17-year-old market and focusing instead on 18- to 24-year-olds. The latter market produced major sales for the company during Horwath's earlier tenure with the company.

CHRONOLOGY: Key Dates for Rollerblade, Inc.

1980:: Scott Olson obtains the rights to distribute inline skates in Canada and the upper Midwest
1981:: Olson buys the patent on the skate
1982:: Incorporates as Ole's Innovative Sports, selling Rollerblade brand skates
1984:: Investors buy the company from Olson
1986:: Olson Launches Innovative Sports Systems, Inc., making SwitchIt brand skates
1987:: Ole's Innovative Sports becomes Rollerblade, Inc.
1991:: Rollerblade sells 50 percent of the company to Nordica
1995:: Nordica purchases the remaining 50 percent of Rollerblade
1998:: Rollerblade introduces the first all-terrain skate for uneven surfaces and gravel

INFLUENCES

The growing popularity of in-line skating as a sport in its own right is one of the factors helping to shape Rollerblade's marketing strategy for the future. In the early 1980s the skates were marketed largely as an off-season training tool for hockey players. Before long, nordic and alpine skiers jumped on the bandwagon recognizing the possibilities the skates offered for training and conditioning during warm weather months. In 1986 Rollerblade redefined and broadened the market for its skates to include general fitness enthusiasts and recreation seekers, as well as cross-training athletes from numerous sports.

The beginning of the 1990s saw a rapidly expanding market for Rollerblade's in-line skates with the introduction and growing popularity of such innovative new sports as in-line hockey and aggressive skating. It also inspired the creation of Team Rollerblade, a group of in-line skaters whose special promotional appearances have ranged from television commercials for Coors Light, Sunny Delight, and Mountain Dew to performances at the 1992 Winter Olympics and the 1993 Super Bowl. With nearly 30 million participants worldwide by the late 1990s, it was clear that in-line skates were an idea whose time had come.

CURRENT TRENDS

Rollerblade has remained the leader in the in-line skates industry by also investing much in product development. By the early 1990s the company had already boasted more than 180 issued and pending patents for its Rollerblade components. Among these was a new braking system, called Active Brake Technology (ABT). The value of ABT was that it allowed all wheels to remain on the ground. When the skater exerted pressure on the boot cuff, a lever was activated pressing the brake downward until it made contact with the pavement.

Rollerblade has been capitalizing on the growing popularity of in-line skating by sponsoring the Ultimate In-Line Challenge each spring, the third annual event of which was held in Orlando, Florida, in May 1998. More than 125 athletes from all over the globe showed up to compete in a wide range of in-line skating events, including the street course, during which competitors perform various moves during two 90-second runs on street equipment such as launch ramps, fun boxes, hand rails, and quarter pipes. In half pipe, also known as vert, skaters are given two 60-second runs to perform moves on the half-pipe ramp. In vert doubles, which debuted as an event in 1998, competitors in pairs take two 60-second runs to perform stunts on an 11-foot-high half-pipe ramp.

Other competitions offered at Rollerblade's Ultimate In-Line Challenge include best trick, high jump, a 20-kilometer race, sprints, and last man/woman out. In announcing the plans for 1998's event Carolyn Zucker, manager of special events and promotions for Rollerblade, said the company hopes its presence "in competitive in-line sports will encourage people to view in-line skating not only as a sport but also as a form of enjoyable exercise."

PRODUCTS

Rollerblade's product line is built around in-line skates, which are offered in a variety of models designed specifically for children, recreation, fitness/performance, in-line hockey, and aggressive skating. Among its other products is a complete line of protective gear and accessories.

Introduced in 1992, Blade Runner is an affordable line of in-line skates developed by Rollerblade for both children and adults. Blade Runner skates, as well as its companion line of accessories and protective gear, are available through large discount and department stores in the United States and abroad. In 1994 Rollerblade and Black Hole agreed on a strategic partnership under which Rollerblade became the exclusive distributor for Black Hole's wheels, bearings, and accessories.

In the first half of 1998, Rollerblade introduced four new skate models under its RB brand. The new models ranged from a couple that emphasized comfort and performance to one that can be customized by the skater. In making the product announcement, David Samuels, director of the RB brand, said: "We recognize that the skaters and their preferences are as individual as the sport. We want to have skates that appeal to each segment. We've even created our new Speedster CE skate that comes without wheels so the skaters can customize it to their personal style."

Designed with input from aggressive skaters, the new models include the Suede, Paw, El Oro, and Speed-ster. The Suede and Paw models both feature a large wing at the heel for greater balance on ledges. All four models have major box protection, integrated power straps for maximum fit and performance, and lace and buckle closures for a customized fit.

GLOBAL PRESENCE

Rollerblade's product line is marketed around the world. The company's in-line skates and skating-related equipment and apparel are distributed in 41 countries on five continents. In Asia Rollerblade sells in Japan, Hong Kong, Malaysia, the Philippines, Singapore, Taiwan, India, South Korea, and Indonesia. On the Australian continent, you can find Rollerblade products in Australia and New Zealand. Bahrain, United Arab Emirates, Saudi Arabia, and Israel make up the market in the Middle East. In Europe, countries carrying the Rollerblade line include Germany, Denmark, Norway, Austria, Sweden, Switzerland, Netherlands, Italy, Belgium, Finland, France, Spain, Portugal, and the United Kingdom. In North and South America, Rollerblade sells in Chile, Mexico, St. Maarten, Uruguay, Canada, Dominican Republic, Colombia, Panama, Argentina, Brazil, Venezuela, and Peru.

EMPLOYMENT

According to company literature, "As an employee of Rollerblade, you are a member of the family. We strongly believe in providing an environment which encourages high personal and professional integrity, accountability, customer orientation, and is principle-driven." The company offers competitive salaries and benefits as well as what it describes as "an outstanding culture." The company is committed to equal opportunity employment and encourages applications from people of diverse ethnic and racial backgrounds. In addition, Rollerblade uses the latest technology to improve its business processes, including communications such as e-mail and the Internet. This makes the company attractive to college graduates who feel comfortable with computers and are not tied to the paper-based approach to doing business as are some older workers. The new technology, according to Sussman, "has changed the complexion of the type of person we want to bring in here. We look more at the person's basic aptitude and how comfortable he is with technology."