A $99.99 Surfboard Upends the Industry
On a recent Saturday along the Los Angeles coast, from Venice Beach all the way up past Malibu, tens of thousands of surfers jostled for position on the small, clean waves the Pacific was churning out. Many were riding the same board: an 8-foot blue-and-white Wavestorm, sold exclusively at Costco Wholesale stores for $99.99—the same price as the store’s Italian sausage-stuffed turducken.
Since its debut in 2007, Wavestorm has become the most popular surfboard in the U.S., with about half a million sold. Novices and veterans have embraced the mass-produced soft-foam boards, which cost much less than competing products. Entry-level soft boards typically sell for around $300, and hand-shaped long boards can go for upwards of $1,000.
Unlike just about every other surfboard brand, Wavestorm wasn’t started by a revered “shaper” (board designer) or surfer. It’s the brainchild of Matt Zilinskas, a onetime hockey player from landlocked Waterloo, Ont., and John Yeh, a Taiwanese businessman. Zilinskas moved to California in the late 1990s to work for the toy company Wham-O, where he managed the popular Boogie Board brand. After three years on the job, he approached Yeh, the founder of AGIT Global, Boogie Board’s manufacturer, with the idea of starting their own brand of products and selling them through big-box retailers. Along with surfboards, Wavestorm has produced stand-up paddleboards, bodyboards, and sleds.
Surfing schools used to be the main customers for soft-top surfboards, which are covered in a thin membrane of absorbent foam that makes them more forgiving for beginners than traditional fiberglass models. In recent years, however, Wavestorm boards have found favor even among dedicated surfers, who buy them for their kids and friends, or for themselves. Veteran Scott Mortensen tested his Wavestorm against Hawaii’s epic waves. “The 8-foot model had good paddle power, turned well, and was very forgiving, unlike other soft-top boards with designs that caused the nose to pearl, ” says Mortensen, using surfer speak for a board that bends like a wet noodle, resulting in a wipeout. “We know how to put a sandwich of foam together with different layers and substrates,” Zilinskas says, “so it has adequate flexibility for different functions.”
AGIT says this year it will sell more than 100,000 Wavestorm surfboards through Costco, the only retailer that carries them. Because most board makers, including AGIT, are privately held, there are no reliable data on the size of the market. However, the industry consensus is that Wavestorm is now the leader, selling five times more boards annually than the largest surfboard brands.
Zilinskas, who as AGIT’s vice president for sales travels from his home in San Francisco to Taiwan several times a year to help oversee design, production, and marketing, says the decision to bypass traditional sales channels has been key to Wavestorm’s success. “We don’t want to mess around collecting money from little surf shops and sporting goods stores,” he says. “Margins are slim at Costco, but we pump out volume and get paid on time.”
While Costco stocks several Wavestorm products, with some paddleboards costing more than $500, the $100 8-foot board accounts for 90 percent of sales. That price, along with Costco’s policy of issuing refunds to customers whose boards break (a hazard of inexpensive foam models), has had a ripple effect on the industry. Huntington Surf & Sport, one of the largest surf shops in Huntington Beach, Calif., an epicenter of the global surf scene, no longer stocks soft-top boards. “Why even bother when you can go to Costco for $100?” says assistant manager Cody Quarress.
Wavestorm’s upward trajectory is an anomaly in a market that’s pretty much flatlined. There are about 2.7 million surfers in the U.S., and their numbers are growing a paltry 1.7 percent each year, according to data compiled by Transworld Business. (Surf gear maker Quiksilver recently declared bankruptcy.) Independent surf retailers said in Transworld’s survey that competition from manufacturers selling directly to consumers and from big-box stores were their two biggest concerns.
“Would we like to see something revered like [a surfboard] sold at Costco?” says Sean Smith, executive director of the Surf Industry Manufacturers Association. “No, it’s not what we’d like to see.” (Wavestorm isn’t an association member.) Still, Smith suggests there may be a silver lining if Wavestorm’s inexpensive boards lure more people into the sport. “On the positive side, it could eventually lead someone to a surf shop to buy a custom-made surfboard or a high-end surfboard.”
The theory that a rising tide will lift all surfboards seems to hold true. “I think Wavestorm actually helps put surfers into the market,” says Mark Kelly, chief executive officer of Australia’s Global Surf Industries, which makes several surfboard lines. Sales of GSI’s soft boards, which are priced at $224 and higher, have soared 200 percent since 2012. Surf Technicians and Surf Hardware International are also experiencing growing demand for their soft boards. AGIT’s Taiwan factory produces boards for many of these companies as well.
Zilinskas, who surfs occasionally with his family, says he’s regularly accosted at trade shows by people saying, “You screwed the industry and brought prices down!” He has a ready response: “I tell them, ‘How many of the hundreds of thousands of people who bought our board have moved on to higher-end product?’ Ask any surfer in the water about Wavestorm. They probably own one.”
The bottom line: A Taiwanese manufacturer and a Canadian toy executive joined forces to make a low-price surfboard that’s a best-seller in the U.S.