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, Sydney, a 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 filmmaker, went on to join the surf company Quiksilver, and established and grew 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 in and advised the fashion label Ksubi, consulted for 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. I’ve enjoyed working alongside him and getting to know him since 2009. Harry, welcome to Customers Matter.
Harry: Thanks, John. It is 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 did you start as a writer and demonstrate some early entrepreneurial leanings to fund a surf movie?
Harry: Well, I actually started off as a horse racing writer at the Melbourne Age. I talked the editor of the Sunday edition into letting me write a surfing column because that’s what I wanted to do: surf. After that, I quit the Age and started a surf shop on the Mornington Peninsula with a friend of mine called the Peninsula Surf Centre. I gravitated into making films and photography, 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.
John: Tell me about the film. What was it called?
Harry: It was called Band on the Run, using the title track and the title of Paul McCartney’s album. Back then in the ‘70s, I actually wrote a letter to Paul McCartney’s management just asking: “Could Mr. McCartney write some original music for the film? And can we use Band on the Run for the title track?” 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.” Being young and naïve, it was a pretty wonderful thing to have when you’re in your early twenties.
John: And tell me, how did you have the audacity to get a surf film together and how did you fund it? How did you go about making it all happen?
Harry: I raised funds through some surf companies, most notably Quiksilver and Rip Curl, back when surf companies didn’t sponsor surf films like that. One of the provisos was that we only show product; 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 was our major sponsor and flew us around the world for two years.
John: Wow.
Harry: So it was a pretty fun time. I learned a lot. I always say to people that traveling is the best university you can go to.
John: So how did you move from writing about surfing and making a surf film into the business of surf retailing?
Harry: 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. I went to work for them in the early ‘80s as a Marketing Director. In those days, no surf company had a Marketing Director. I told them I was good at marketing and they said they didn’t need to do marketing. Anyway, I went to work for them and an opportunity came up to get the license for Quiksilver in Europe, which I took in about ’84. I went over there with my colleagues and we started Quiksilver Europe. You can see how the line was organic; I started a surf shop and we bought our product from Quiksilver. Then I started a surf film which Quiksilver sponsored. I became the Marketing Director and then I became the licensee for Quiksilver Europe.
John: It was beautifully organic in a way because you were a writer, a filmmaker, and a surf shop owner; now, why not a marketer?
Harry: Exactly. You couldn’t script it better than that. It was never planned; it just happened organically.
John: What was Quiksilver like as a business and how would you describe its culture when you joined? There was obviously something different about surfing, and no doubt it was even more pronounced back then.
Harry: Back then, more so than now, surfing was a real lifestyle. A surf trip meant getting in the car and driving or traveling overseas to exotic locations that were hard to get to. Quiksilver stayed very true to its mission and vision that we were selling a lifestyle. It wasn’t about making money; it was about being able to live the lifestyle, grow the business, and be inclusive to the market we were selling to. Then, in the late ‘80s and early ‘90s, they became serious businesses. Quiksilver has always been very customer-focused. Alan Green was always saying, “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 guide us, almost unknowingly, to where we could plan to go with them rather than devising a boardroom strategy and saying, “Now we’re going to market this way.”
John: And how would you get the insight into what it was that the customers wanted?
Harry: It was a sixth-sense instinct. You listen and you just get a gut feeling. We were very lucky back in that period because the business was following a pathway that was very natural. There was nothing contrived about it; there were no politics back then and no huge turnover. There were no public companies in the sector, so it was organic and very inclusive in the way we worked together. Quiksilver globally was run by a group of about ten of us who would get together to reach a consensus. If you get general consensus all the time, you’re not doing your job. We would have different opinions and bring different parts of our experience from different parts of the globe, but it always came back to the market, the customer, and the retailers.
John: I remember Quiksilver as a boardshort company. That was my first encounter with the business. How did it grow? What were its product lines? What did it start doing and what did it end up doing?
Harry: You’re right. Quiksilver’s first slogan was “a boardshort company” because the founders wanted to make the best boardshorts in the market. The most notable boardshorts that came out in the early ‘80s were the polka dots, the checks, the stars, and the harlequins. That changed the whole surfing industry. Ironically, not many people know this, but Alan Green—one of the founders who recently was a part-owner of last year’s Melbourne Cup winner—is a mad horse racing fan. That is one of the reasons Alan and I connected. He went to the horse races and saw the jockey silks with polka dots, checks, harlequins, and stripes, and he put them on boardshorts. They sold like crazy and we’re still famous for it today.
John: That is quite a story. So what happened from there? You found yourself in fashion in a way, too. It wasn’t just about being in boardshorts; it was about being in fashionable boardshorts.
Harry: When we took Quiksilver to Europe, the product line had expanded, but not by much. It was T-shirts, some long pants, and some sweaters, but it was still pretty basic. We realized when we got to Europe that this was not going to work. I was at a trade show in Paris one January and there were two feet of snow outside while we were selling boardshorts and T-shirts. I said to my partner, Jeff Hackman, “This is not going to work.” So we went to the mountains. The Quiksilver logo is the mountain and wave from the famous Japanese artwork of the tsunami, and we figured that we had to connect the dots. We were probably the first Quiksilver global territory to do that, so we started making skiwear and snowboard wear. It led us to become very creative because the early snowboarders wanted to be different and anti-establishment, just like the early surfers. Whereas the skiers in the late ‘90s were all wearing tight-fitting clothing, the snowboarders had all this baggy stuff on. It was a really exciting period and it was quite easy to work with your athletes and your consumer in that environment.
John: I was inquiring about the fashion side of the business because what you’re describing is almost counter-cultural fashion. Clearly, it was about understanding the vibe, but how did you grapple with fashion when it is such a fickle thing, especially in Paris? I imagine for the European market, it’s even more than just a different product line.
Harry: We didn’t realize we were actually going into fashion, but we were. We made denim and womenswear. A lot of it was kind of “dumb luck” or good decisions. For example, the Roxy label started because Quiksilver had never done any womenswear. We had ordered boardshort fabric from Japan that arrived in Biarritz, where we were based, and the fabric was Lycra, which you couldn’t make boardshorts out of. Someone suggested we make women’s swimwear and we put it into our local shop in Biarritz. It sold like crazy and that’s how womenswear started. There was a bit of morphing into that direction because we couldn’t afford to throw the fabric out.
John: 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.
Harry: We thought we were going over there for a good stint: start Quiksilver, surf for a few years, build a little business, have fun, and come back to Australia to get “real jobs.” But as the business grew and took over, it was like a tsunami that we just went along with because it was so much fun. Everything we did was fun. We followed the old cliché: find something you love and do it. Everyone who joined our team joined in that fun factor. There were very tough times, like not having a winter business in the early days and living in the south of France with no money. The French government, who were helping us, didn’t want us to be in the south; they wanted us to move to the north because that was the industrial area. But we wanted to be where the surf and the mountains were, as the Pyrenees are only two hours away from the surf. It just happened like that.
John: What was the scale of the operation when you finally left, and how long did you stay?
Harry: I stayed there for roughly twenty years. We grew from $1 million to about $600 million Australian dollars. It was very successful during the late ‘90s because we grew it well and kept the same ethos. However, in hindsight, we probably grew a little too quickly and with too wide a distribution. When the house of cards started to come down due to poor decisions in the 2000s, we couldn’t unravel that fast growth.
John: So what happened? How did your time in France come to an end and what did you decide to do then?
Harry: Basically, Quiksilver had built its business by doing all these things in its heyday. Then, in the early 2000s, the board made some poor decisions. The major one was to acquire the Rossignol skiwear brand. Pretty well everyone knew that was a mistake except the board and the people who were passionate about it. That really brought the company to its knees. Around that time, I realized my time was up. I had built a very good succession plan and wanted to implement it. I also wanted to come back to Australia and take a bit of time away from the 24/7 CEO and Executive Directorship. At that point, Quiksilver had just acquired Quiksilver Asia Pacific, so I served as Executive Chairman for two years to integrate that model into the business.
John: So you returned to Australia about a decade ago? What year was it when you came back?
Harry: About 2004 or 2005.
John: You jumped back into entrepreneurship during challenging times for retailers. There was some high-flying stuff, but then we had the GFC. Can you tell me what transpired for you post-return?
Harry: I came back and tried retirement, but I failed miserably. I invested in the fashion denim brand Ksubi because I wanted to step outside my comfort zone and learn about another industry—real fashion—even though we were already in the apparel industry. I learned a hell of a lot, but things didn’t turn out the way they should have. The brand had some fundamental problems in commercializing, and it came unglued in that respect. But you always learn from your mistakes more than your successes.
John: What would you say you learned from Ksubi that might be practical advice for other entrepreneurs?
Harry: They weren’t customer-focused. They were self-centered and creatively focused. It is actually pretty easy in the apparel industry: you deliver good quality, commercial product in an accurate and timely manner. If you look those up in a dictionary, “good quality” is straightforward; “commercial product” means intended to make a profit. You must 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 commercialized.
John: After Ksubi, you departed the business and it struggled. What did you do then?
Harry: I had my consulting business, which has now become Hodge Consulting. I brought on some colleagues and was doing independent consulting while sitting on the board of Surfing New South Wales. I had just stepped off the board of SurfAid. I started consulting for Jamie Durie Designs; Jamie is a good mate of mine and he’s building a very successful company. I spend a lot of time in America, and I enjoy that flexibility of getting involved with young, dynamic entrepreneurs and giving my experience and expertise to add value to their model.
John: Of course, now there is SurfStitch, which is an extremely interesting business. It’s ridden the rollercoaster of the new economy. It had some challenges that saw it go down, and now it’s once more headed in the right direction. How have organizations like this changed the world for retailing and customer experience?
Harry: It’s interesting because since the Global Financial Crisis, people were talking about eCommerce, online, and bricks-and-mortar, but no one had really figured out how it was going to work. I don’t think people have completely figured it out yet. The reality is we know online eCommerce is here to stay; it’s a growing sector and it’s all about the user experience and the customer. SurfStitch’s model in the action sports industry is very good for that sector. A successful SurfStitch would be one of the most important stimulants to reviving the surf industry, which is under a lot of stress right now because a lot of loyal customers left. It’s all about the customer and 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. It becomes easy. The younger demographics now don’t watch television; they look at everything on their devices and shop online. They rarely go into bricks-and-mortar stores. Now, I believe that will be cyclical and change. I think they will decide that since they’ve had the online experience, now they want to go to bricks-and-mortar, just like bricks-and-mortar people found online. I think they will coexist.
John: But by the sound of it, there will probably be less bricks-and-mortar, making it more important to invest in your online presence and user experience to make it as seamless as possible. Is that your view?
Harry: Well, I think it means a better bricks-and-mortar business. Department stores are figuring this out.
John: What do you think a better bricks-and-mortar experience looks like? Is there anything you’ve seen that stands out?
Harry: You have to change your model. You can’t use the old model. It has to be fast to market, with fewer brands and a vertical offering in a department store like David Jones, Myer, Selfridges, or Harvey Nichols. It needs a better customer experience and better staff training. One of the biggest problems in Australian department stores when I came back was that you’d go into a store and couldn’t get served. There would be a guy in the corner playing the piano for ambience, but that doesn’t help. I don’t know if the staff on the floor are being trained well enough. When I go into a store, I don’t want someone to ask me if I’m having the afternoon off because I’m shopping at 2:00 PM. In the online experience, people don’t mind having that human equation taken away because they are the shopper and they’re dealing with the device and the product; there’s no pesty human being annoying them.
John: So, really, the physical retailing model needs to focus on how the people who are serving actually add value to the customer experience.
Harry: Yeah, and how the store itself adds value as opposed to just having a guy on the piano. Where are the benefits?
John: It has to supplement the online experience as opposed to simply trying to compete.
Harry: It is very difficult, apart from department stores, for brands like Quiksilver or Billabong to have a really strong online business because the consumer who shops online generally wants to go into an online department store. They want to be able to buy Levi’s and Quiksilver in one place. If you just go to the Quiksilver website, you’re only buying Quiksilver. It really comes back to the customer experience. The customer now has more benefits; they are “king” more than they’ve ever been. Therein lies the effort to provide value for money. You still have your luxury fashion section with Armani, Dior, and Gucci, but basically since the GFC, people have reined in that type of spending unless they have high disposable income. 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 been a big part of your modus operandi. Could you share your motivation for your long-time involvement in SurfAid? Also, could you explain exactly what SurfAid is for those who are unfamiliar with it?
Harry: Since the early ‘90s, I’ve always believed that businesses should have a corporate social responsibility ethic. Apart from being the right thing to do, it is very good marketing and it’s inclusive to the staff. I met the guys from SurfAid at a summit in Mexico in 1999. We learned that a doctor named Dave Jenkins went on a surf trip to the Mentawai Islands, which is home to the best surf in the world. But he went behind the palm trees and found incredible poverty: a three-out-of-five mortality rate for kids under five, malaria everywhere, no sanitation, and no clean water. He started SurfAid to do something about it. The surf industry got behind it along with individuals, AusAID, and NZ AID. I read recently that the mortality rate is now down to 0.5 out of five kids under six. Malaria has pretty well been eradicated and clean water sanitation is working because everyone knows you have to have clean water. The educational approach over the last fifteen or sixteen years has worked. Now, SurfAid is working on emergency preparedness for tsunamis or earthquakes. The villagers always used to live on the ocean, and now SurfAid encourages them to live a bit further inland.
John: You were a director there. How long were you involved and what did that entail?
Harry: I was involved with SurfAid for about fourteen years. Much like Surfing New South Wales, it involved four or five meetings a year. I’d call the meetings, working with the industry and government agencies to formulate the best methods to achieve our missions and goals.
John: Turning to Surfing New South Wales—an organization we both know well—what motivated you to get involved and what do you enjoy about it?
Harry: I figured it was time at SurfAid to hand the reins to someone else. I spoke to a few people at Surfing New South Wales and I liked the model. I’ve always been involved with surfing associations. Back in the ‘70s, the Australian Surfing Association used to run the Bells Beach contest. Surfing associations are the core pathway for the sport. Without strong state and individual associations, surf clubs, and surf schools, the sport wouldn’t thrive. Everyone working together as a collective is for the betterment of the sport.
John: Regarding your role at Surfing New South Wales, when did you join and what do you find rewarding about it?
Harry: I joined about six or seven years ago when it was a bit ad hoc. The quality of the people working there is great; they really believe in it. When I spoke earlier about starting Quiksilver, you could feel that same vibe, morale, and ethic. You know the business is going to succeed when that is present. Being a non-profit, there are challenges you don’t have as a public or private company, and your responsibility to stakeholders is very important. As directors, you have to elevate yourself to another level, which is good for anyone who wants a career as a director of businesses.
John: Obviously, you love the surfing ethos, the lifestyle, and the characters it produces. Who are the people that most inspired you from the world of surfing and why?
Harry: In any business, I’ve always found mentors. Whether I was in my twenties, thirties, or sixties, a mentor is someone you talk to. It doesn’t have to be someone older; it can be someone younger, but they give you a different perspective. I think it’s important to have that knowledge because we never want to stop learning. I wouldn’t go to a lawyer, doctor, or accountant who hasn’t upskilled lately. As long as you get that reward from these organizations, you can see the added value. You’re involved with various demographics, from eighteen-year-old kids running surf events on the beach to aging board members.
John: What about the surf lifestyle itself and the characters you’ve encountered?
Harry: Alan Green was always a great mentor of mine. He could be a grumpy young man, and now he’s a grumpy old man, but he was very sure about what he wanted his business to do. There are great characters like Wayne, who is a great friend of mine, Simon Anderson, and Micky Dora. “The Cat” from Malibu was a very close friend of mine in France; he lived over there and we looked after him. Micky was a rogue who never worked a day in his life, but he was a pure surfer. I also met a guy called Jacques Bergerac in France, who was a founder or co-founder of Revlon, and he was a great mentor to me. You meet all these characters on your life’s journey, and in some respects, you become a character yourself as you mentor and advise younger groups of people. You become old enough and have enough “barnacles” on you that you can really add value to someone coming up. The old cliché is true: learn from others because you won’t have enough time in your life to make all the mistakes yourself.
John: Does surfing itself remain an activity you engage in? Is it still important in your life?
Harry: I don’t surf much anymore. I probably do it more vicariously through my kids, but I stand-up paddle and I snowboard. There’s a bit of a myth when people say they want to get involved in the surf industry so they can surf. Often, once you’re involved, you’re too busy to surf. The guys not involved in the industry—the ones working at banks or as stockbrokers—are the ones going on the surf trips.
John: Finally, Harry, looking at the commercial landscape today and thinking about the challenges of growing a successful business that exceeds customer expectations, what would you say are the three biggest ingredients for success?
Harry: I learned there are two rules in business. The first rule is that you have to make a profit. The second rule is: don’t forget the first rule. Apart from that, the way to do it is to look after your customers—from the product to the experience, the customer service, the bricks-and-mortar experience, and the online experience. To me, it’s all about the customers. If you take care of them, it creates the right ethos. Facebook and Instagram are great examples because they focus on the user experience. I think if you’ve got a good product you’re passionate about, a great team of people, and you’re well-funded, then combined with looking after your customer, you’ve got the five steps to being successful.
John: Harry, thanks for your time today.
Harry: Thanks, John. I appreciate it.