400+ DTC brands in 2,300+ product categories! Subscribe to receive deals from brands

A Mark Cuban Company

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

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: What else is Tower about, from a value standpoint? What is kind of inclusive in the Tower community?

Stephan: An interesting thing about living in these beach communities is you’re kind of living in a tourist area always. If you’re a couple blocks from the beach, and usually these areas are really kind of expensive. So you’ve got to figure out ways to basically live in an area that people usually only go to vacation.

It occurred to me when I was 18 years old and I moved to Hawaii, that it’s weird how people work 50 weeks a year, just so that they can go on their one week vacation to Hawaii, and look forward to that all year. I’m like, “Why not just live in Hawaii?”

So it dawned on me. You can look at the world a little differently, and you don’t have to do what everybody else does. So that’s what our brand is. How should we live life differently? As a beach lifestyle brand, we started looking even at how you run a company differently.

As a startup, we were the fastest-growing in San Diego. We were on the Inc. 500 list, but we got a few years in there and we said, “Okay, we figured this growth thing out, but we’re not being completely true to our brand, because we’re working these startup hours. We’re a block from the beach and we’re telling everybody to cut out work and go paddleboarding. We weren’t doing it authentically ourselves. So we said, “We need to live our brand, and our brand is ‘work hard, play hard’ “.

So in 2015, in the summer, we shifted the whole company to a five hour workday. The idea was we were going to work from 8:00 AM to 1:00 PM straight through, with no lunch, and we were going to basically give people their life back. We have a lot of smart people here that understand how to work efficiently. When we come in, we put our head down and we work, but we’re not just going to sit around all day and work these startup hours.

Can we do this? Can we really double down on the whole “work hard, play hard” thing?

We did an experiment for three months, and it worked fantastically. Productivity didn’t fall off at all. All of a sudden we have 9 or 10 hours after work to enjoy our lives. Our work week was better than most people’s vacation week, and the company was growing. In the next two years Tower grew 50% with this five hour workday.

As the CEO, I started writing articles about what we were doing. I’d always written our business articles and stuff like that, and I started writing about this five hour workday experiment that we were doing. The first article I wrote was in Inc. Magazine or something, and it got like 10,000 social shares. Usually an article I would write would get like 50 social shares, and so I’m thought, wow—something resonates here with people.

And obviously this dovetailed perfectly with our brand. This described our brand. We’re the surf company that works a five-hour workday. People like that. They like when you treat your employees (well) and respect your employees. This is a better way to live. So that was really the identity of our brand.

When we realized how much that resonated with people, we said, “This is the basis of our brand. We really should be sharing this with people.” So I ended up writing a book called The Five Hour Workday, and then the idea was we didn’t think we were going to sell a bunch of these books, but we were going to take a book and put it in every paddle board package that we sent out there.

So then, people get this free book and they’d read about what our company was doing. And we plant this idea that hey, a company can be successful and they can work a five hour workday. We thought maybe this could affect some change in society, and (change) how people work, and how they think about work.

We thought it would potentially spread, and when we published the book we got a ton of press. We got press in over 20 countries. I ended up doing half a dozen national TV and radio interviews. We actually sold quite a few books. I think we sold over 3,000 books that first year, and then we put the book in another 5,000 or 10,000 paddle board packages.

We still put those books in every package. We’ve probably had 20,000 or 30,000 books that we’ve given out, and we’re now known as the five hour workday company. We sort of invented this. It’s a perfect tie-in with our brand and the beach lifestyle.

There are really two elements of this, because the world has changed. There are all these productivity tools that have allowed us to work this five hour workday, by leveraging technology and tools to do that. On the flip side of this is the fact that consumers can buy products directly from producers. You can now buy pretty much anything for half the price it used to cost you when you bought through (offline) retail. So you can actually even make a little less money and have the same lifestyle, if you’re smart about how you buy.

So that’s really the two sides of our brand here. The world is a different place now. You can work less and be just as productive, and you can spend less and get better products.

Brad: That completely makes sense to me, especially when you explain there’s a spectrum there (in delivering the best product value), right? Typically the absolute bargain basement cost is something that’s not high quality, but the flip side is there’s absolutely no reason to overspend on anything anymore. So generally the best product is going to be somewhere in the middle.

Stephan: Yeah. So this is an interesting thing that happens when you cut out retail, because there’s all kinds of bad compromises you’ve got to make when you go to retail. You start targeting price points, okay? So you say, “We want to hit this price point. We’ve got to give 50 percent margins to the retailer. Okay, now we have to decide how we’re going to make a bike or an e-bike for this price. Okay, well we can shave 10 dollars here, we’ll give them a crappy battery. We’ll do this.” So you start making all these weird trade-offs. That’s how products get designed for retail. They’re trying to hit price points.

We take it completely differently (selling online and direct to consumer), because I don’t care what the end price point is. I don’t care how much it costs me to make a bike because I know with having this direct connection to consumers, where I’m going to mark it up a reasonable amount—we have a very low cost—and then I’m going to sell it for that amount. I know I can offer the best value proposition. So we can go to factories and say, “What’s possible here? What can we do?” And it’s even harder to work with Chinese factories on this because they’re so used to shaving cost in stupid ways.

We’ll say something like, “We want to use an aluminum frame instead of just a steel frame.” And they’ll say, “No, nobody does that. That’s crazy. You wouldn’t want to do that on a beach cruiser because that’s going to increase your cost.”

Then I’ll say, “Well okay. Just humor me. How much is it going to increase my cost?” And they might say, “It’s going to be another 12 dollars.” I’m like, you don’t understand what we’re going for here. I’m trying to get the best product. I don’t care what it costs to manufacture. I mean, I don’t want you ripping me off—I want you to give me the best price a factory can give me—but I want to create the best product.

So if you tell me it costs another 200 bucks to offer an aluminum frame, well then I’m going to look at this from a consumer perspective and say… “That $200, does it add this much value?” And then we’ll make those trade offs. You don’t just want to just do stupid stuff, but when you’re looking at (selling through traditional) retail, every time you add $12, that gets marked up to $50 because you’ve got to multiply it by four or five, to hit that retail price point.

When you sell direct-to-consumer, you only have to mark it up once, and sometimes you only need to operate on 30 or 35 percent margins and you can be healthy. So the $12 becomes $18, instead of $50 or $60 (with traditional retail markups).

It’s not just that you can get products for half price now, but (with direct to consumer products) you can get products that weren’t even available before, because people were designing products to hit (traditional retail) price points… but now they’re just designing products for people, for whatever makes the most awesome product, and then the price is what it is. And if there’s a market for that, then you’ve got an interesting product.

This happened exactly with our world’s greatest beach cruiser. We have a $500 beach cruiser. There’s not a huge market for it, but it’s unlike any other bike out there. People say, “I can’t believe you guys put a belt drive on a beach cruiser!” And we say, “Are you kidding me? You’re at the beach. If you put a chain on a bike, it rusts immediately.” A beach cruiser is the only bike in the world that should have a belt drive. (Some manufacturers) put them on a $6,000 road bike or mountain bike because they don’t care about cost at that point, but what you want a belt drive on, is a bike that’s likely to rust.

Brad: Right, right. And I’m very optimistic on the electric bike nationwide… I’ve lived in the two environments you mentioned. I’ve lived by the beach… six blocks away from the beach in Hermosa Beach, and I mean, (trying to ride up) one of those hills, just one time… I never rode that cruiser to the beach again, because it was like a mountain, especially the way back.

Stephan: Yeah, and you’ve got one speed.

Brad: Yeah, it was a nightmare. Then, now living in the midwest… it’s flat, but it is just boring. So you end up not riding your bike a lot because it just, it takes you so long to get between places on these nice greenbelts… you just get tired and bored. So something that could extend your energy to go further up and down these green belts, that’s going to be a hit, especially for people who are a little out of shape. I think it’s a huge benefit.

Stephan: Yeah, definitely. It gets a lot of people on bikes in the first place, so you’re going to get a little bit of exercise. So I think it’s actually going to be a net exercise positive.

Brad: Oh yeah, definitely.

Stephan: There are a lot of like the purist bicyclers that just hate electric bikes. They’re like, “Oh, that’s cheating.” But it’s going to get a lot of people that aren’t on bikes, on bikes.

Brad: I totally agree.

Stephan: I think that’s good for everybody. It’s good for the environment. It’s good for traffic congestion. It’s good all around.

Brad: Yeah, exactly.


Next: 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 >>


 

NoMiddleman Logo with Slogan

 


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 >>