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Segment 3: How Tower Paddle Boards Cut Out Middlemen to Deliver More Value To Consumers

Below is an excerpt from our 2019 interview with Stephan Aarstol, the Founder & CEO of Tower Paddle Boards, who continues his conversation with Brad Kauffman of NoMiddleman.com. If you’d like to read or listen to the full interview, visit the Tower Paddle Boards blog post.

 

Brad: Before and after Shark Tank, what were some of the things you did to reduce the costs of middlemen and deliver more value to consumers?

Stephan: Well when I was a consumer for a paddle board and I was looking out there in the industry and it was literally like $1,600 for a paddle board, it doesn’t make any sense because I’d bought a surfboard 10 years ago for like $300. And I mean today maybe surfboards go for about $600 at a surf shop. So I was like, why does this (paddleboard) cost $1,600? It’s just an oversized surfboard. That doesn’t make any sense. And there were a few companies like online selling them for maybe $1,800 to $2,000, and they were these no-name brands that just had a goofy online presence.

So I went to the manufacturers and asked what it costs to actually make these. I could buy the best paddle boards in the world from these factories for maybe $400, and I could get a really good paddle board for $300. And so I’m like, well geez, I can mark that up 100%, and I can sell a paddle board for $600 bucks, or $800 bucks on the high end.

I wanted to start on the high end. In the poker chip market, I went with high end chips. They were really hard to get. And so it was a different market opportunity there. I was bringing to market a product that really wasn’t around into direct to consumer fashion. But with the paddle boards we didn’t really innovate the product at all, I just innovated the distribution channel, instead of having to buy this through retail, or some online non-brand company that is paying a bunch for advertising to get you to buy their product. We didn’t advertise the first four years of the company, and that allowed us to have very good margins when only selling a paddle board for $600.

We created value by going into direct to consumer. Interestingly, we tried to go into the high end of paddle boards. There was this factory in Thailand where the three top brands (which probably had 50 or 60 percent of the market share of paddle boards at the time) were made, all from the same factory of Thailand. And I went to that factory. I mean I went to them by e-mail. I was talking to them and they had agreed to make us some paddle boards.

We were going to get an order of 200 paddle boards. We had the pricing, everything was set, and then, right when I was about to pay the deposit to get this thing moving, they just ghosted me. I was like what’s going on here?

And so finally I flew over to Thailand, and I said, I’m coming to the factory. They didn’t respond. And then like day before they said okay, if you’re gonna walk in our door, we’ll meet you. So then I went in there, and they made me wait, and they were sort of rude to me. I had like a little hallway meeting with somebody and he said well, we can’t sell to you. And I’m like, what do you mean you can’t sell to me? And they said, well, we took a look at your website and saw what you’re selling the paddle boards for, and it’s too cheap. And so they wouldn’t sell to me.

I said, that’s ridiculous! Like you don’t have any say on what I sell them for. And they said, well, our big customers wouldn’t like it, and we want to keep our big customers. So essentially these three firms that had controlled production at this factory told them they didn’t want anybody selling direct to consumer paddle boards because it would undercut their price. So it was this price-fixing scheme.

I wrote an article for Fast Company about price-fixing in the paddle board industry. And that was how threatening a direct to consumer company was in the paddle board industry. So I couldn’t use that factory. So then I had to find and identify a factory in China and sell them for even a little cheaper. So I had to start again.

Today we’ve been able to get the same technology they were using in Thailand eventually ported over into some of the Chinese factories, so you can do these molded boards in China now. So the quality’s there but it took us years to get there. It’s kind of interesting, like a lot of these established companies really don’t care about their consumers. They care about protecting their market share. And the way the retail world is changing, all these retailers are going out of business, and the traditional brands are getting disrupted. They’re trying to protect what they have, for as long as they can. And you’ve got all these direct to consumer brands coming in and just creating waves.

First they’re trying to block (the DTC brands) by not letting letting them use the factories. Then they’re sort of shit-talking them online, like “Oh these guys are crappy. That’s why they sell for so cheap. You get what you pay for!” That whole thing. And so it took us two or three years for customers to realize, wait—this is actually the same product made in the same factory as I’m paying$1,200 or $1,300 for, when I can get it here for $600.

Not only that, but because we’re an online, direct to consumer company, we are shipping every product directly to a consumer. The transaction is with the end customer.

With traditional brands, they wholesale their product to some surf shop or sporting goods store, and then the customer comes in the sporting goods store. So the customer is a customer of a sporting goods store and there’s a clerk in there selling a thousand different products. He doesn’t know paddle boards from kayaks. He really has no product information. Not very helpful.

If they (consumers) come to us, we’re a company of five people where everybody is involved in the product development. Everybody knows these product intimately. So when a customer comes in and asks us a question, we’re very knowledgeable about it. If they have an issue, they call us. We take care of it directly.

So people it took two or three years, but people realized (our) prices were half the price of everybody else. But also, the customer service is better. This is this is what direct to consumer is. They (DTC brands) can offer stuff for half the price, and they can give you incredible service. I mean much better than a traditional brand. You try to call a traditional brand. They won’t even answer their phone. It’s like, “We don’t want talk to customers. We want to talk to our wholesale accounts.”


Next: How Tower Paddle Boards Sourced Factories

When building a direct to consumer business, finding a dependable factory is a competitive advantage, Aarstol says. In this segment he reveals his best tools and tips in sourcing factories: how to find the best ones, how to avoid the scams, and why anti-competitive behaviors are a sign of bigger problems. Read more >>


 

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Full Interview: Tower Paddle Boards

If you’d like to skip ahead or go back for previous content, no problem! See below for links and summaries for every segment of our amazing interview with Tower Paddle Boards founder Stephan Aarstol.

Segment 1: Introduction To Tower Paddle Boards And Founder Stephan Aarstol

In this segment, we dive into where it all began for Tower Paddle Boards. We cover Aarstol’s background in online marketing, and how he pivoted away from his poker chip company to pursue his hunch that paddle boards would soon be mainstream. Read more >>

Segment 2: The Shark Tank Effect At Tower Paddle Boards

When Shark Tank came calling, Aarstol answered, and Tower Paddle Boards took off like a rocket ship. But it almost didn’t happen—Aarstol froze on stage, delivering what he calls “the worst pitch in Shark Tank history.” Learn how he crashed, recovered, and landed a deal with Mark Cuban. Read more >>

Segment 3: How Tower Paddle Boards Cut Out The Middlemen And Delivered More Value To Consumers

How did Aarstol figure out how to cut out the middlemen and deliver Tower Paddle Boards direct to consumer, for half of the retail price? In this segment, Aarstol explains how he overcame the price-fixing of the industry’s dominant players to bring consumers lower prices, higher quality, and better service. Read more >>

Segment 4: How Tower Paddle Boards Sourced Factories

When building a direct to consumer business, finding a dependable factory is a competitive advantage, Aarstol says. In this segment he reveals his best tools and tips in sourcing factories: how to find the best ones, how to avoid the scams, and why anti-competitive behaviors are a sign of bigger problems. Read more >>

Segment 5: The Retail Equation At Tower Paddle Boards

“We never want to be that company that just pads our direct-to-consumer margins so we can accommodate retail partners that are taking a 50% cut,” Aarstol explains. In this segment, you’ll learn how Tower Paddle Boards uses their core principles to evaluate retail opportunities. Read more >>

Segment 6: Tower Paddle Boards on Amazon

For direct to consumer brands, Amazon is the elephant in the room. In this segment, Aarstol explains how Amazon has become expensive for consumers and crowded for brands—and why he believes Amazon is merely an online convenience store, carrying the high markups of offline retail middlemen. Read more >>

Segment 7: Disadvantages Of Amazon For DTC Brands Like Tower Paddle Boards

Amazon was good for direct to consumer businesses—until it wasn’t. In this segment, you’ll see the astronomical sales numbers Aarstol enjoyed in the early days, but also the growing challenges: disconnected customer service, increased return rates, and increased fees. Read more >>

Segment 8: Will Tower Paddle Boards Walk Away From Amazon?

Is it time for direct to consumer brands to leave Amazon? How will they survive if so? In this segment, Aarstol explains the two consumer behaviors that he believes will not change in the future, and why that’s good news for brands like Tower—helping them survive without Amazon. Read more >>

Segment 9: On The Horizon At Tower Paddle Boards

What’s next for Tower Paddle Boards? In this segment, Aarstol reveals his perspective on the ideal balance between pricing and quality, and how keeping expenses low (and advertising minimal) impacts Tower’s ability to expand into popular products with exceptional value for consumers. Read more >>

Segment 10: What Informs New Product Ideas At Tower Paddle Boards

By living the beach lifestyle themselves, Aarstol’s team has insights into new products and quality design. “If a company out of New York is creating beach lifestyle products, they really don’t understand the market as well as we do,” Aarstol says. “Our brand has this authenticity, because we’re making products that we know.” Read more >>

Segment 11: What Tower Paddle Boards Is About (From A Value Standpoint)

Tower Paddle Boards went in two unique directions, when it comes to delivering value. Product development is focused on what the consumer needs (not what it costs), and team productivity is fueled by Aarstol’s revolutionary idea to live more by working less—with a five-hour workday. Learn the secrets behind Tower’s popular products and productive culture. Read more >>

Segment 12: Tower Beach Club Offers New Experience With Tower Paddle Boards

In this segment, you’ll learn how Tower Paddle Boards is taking the beach lifestyle experience to an entirely new level with the launch of Tower Beach Club in San Diego. Whether you’re a fan of Tower, or a direct to consumer brand exec, you’ll want to read the innovative retail plans and fun experience ahead for Tower customers and visitors. Read more >>

Segment 13: Connecting with Tower Paddle Boards

As we wrap up the interview, we provide links and information on connecting with your favorite Tower brands—from paddle boards to sunglasses to electric bikes—as well as how to reach out to Tower Founder & CEO, Stephan Aarstol. Read more >>