Online retailer SurfStitch plans to be 'the Netflix of extreme sports'

Big waves at Sydney’s Bronte Beach in 2008. Ezra Shaw/Getty Images

SurfStitch, the online surf wear retailer started in Sydney’s Northern Beaches by Justin Cameron and Lex Pedersen in 2007, has a game plan for growth.

It wants to be the Netflix and Amazon of extreme sports, the centre of a digital ecosystem around the surf and action sports lifestyle.

It’s all about the idea that owning content is good for business because it creates and audience which can be converted to sales.

In May this year, the high growth retailer bought a surf weather site, Magicseaweed, and a global online news magazine, Stab Magazine, for $13.8 million cash and 4.8 million shares.

Today Cameron, the CEO, revealed exactly what impact having this new content this is having.

The normal conversion rate — the percentage of visitors to the SurfStitch site who actually buy something — is about 3%.

However, when they come from the new content sites, Magicseaweed or Stab Magazine, this rises to 10%.

That’s three times better than usual, a very significant improvement. And the benefits don’t stop there.

The content means that the average spend per customers also increases, by about 50%, to $180 each from around $120.

And the purchase frequency — how often people come back to buy more — is about 5 times a year compared to the usual 32%.

From the briefing by Justin Cameron .

Cameron revealed the numbers in a briefing to analysts as he was announcing the latest content acquisition, action and extreme sport video producer Garage Entertainment, a local Sydney company, for $15 million in cash and shares.

Garage, founded by Nick Cook and Mick Lawrence in 2009, has the largest library of actions sports online with more 3,000 titles which it distributes through its own video-on-demand platform and dedicated TV channels.

Assets include the acclaimed Australian documentary Bra Boys, the TV series The Crew, and Missing, a top 5 download in the iTunes chart.

This is how Cameron sees the purchase.

“Our demographic spends 1.2 hours daily on online TV, second only to social networking,” he says. “Statistics show that the mass market engages through TV (Pay and free-to-air), digital subscription and apps.”

SurfStitch isn’t alone is recognising that trend.

“Netflix is a significant contributor to network audience projection decline,” Cameron says.

“Amazon Prime has made significant investment in original content to bolster the popularity of Amazon Prime membership. We have a head start in this arena today. We have significant, short‐form content capabilities, a community of engaged users and marry commerce alongside it.”

Garage has about 150,000 subscribers of its own video on demand platform. But the real opportunity is driving SurfStitch’s current 6 million audience to Garage and back again to transact, to buy clothes.

Cameron says there are three driving forces behind SurfStitch’s mass consumer demographic:
  

Commerce

“When we look at the shopping behaviour of our consumers, online purchasing of categories carried by the SurfStitch Group (apparel and hardware) emerges as by far the most popular online purchases,” he says. “Fifty-one percent of consumers in our age demographic have purchased an item in these categories in the last month highlighting the importance of SurfStitch Group’s assortment in online shopping habits.” 
 

Community

More connected devices today than there are people.  “As many as 50 billion devices will be connected to the internet within the next 5 years,”Cameron says. “These individuals are connected both through apps and a communities with shared interests. Consumers spend 85% of their time on smartphones in apps. SurfStitch Group’s utility platform, Magicseaweed, leverages this community opportunity.”  

Content

Video is growing in importance online. “In the next five years, global mobile traffic is expected to increase 10 fold with three quarters of that growth expected to be video,” Cameron says. “Our long‐form and short‐form platforms of Garage Entertainment and Production and Stab (Magazine) address these user trends and interests.”

Cameron says its acquisitions create a full media and content set to support the strategy of becoming a destination site for customers to connect with everything action sports-related.  

“Across our unified platform of 6 million plus enthusiasts, the action sports community will be engaging daily to watch videos, see movies, read up on athletes and news and get updates on conditions,” he says.

Late last year SurfStitch raised $65 million from a group of Australian and offshore institutional and sophisticated investors. It used the investment to acquire a holding in Billabong and 100% of the USA-based e-commerce action sports business, Swell.com.

SurfStitch stands out in the surf wear world. Quiksilver, founded in Australia in 1973, has filed for bankruptcy and ASX-listed competitor Billabong posted a small profit this year after instigating a major turnaround program to address significant financial losses.

SurfStitch is on track this year to double earnings to between $15 million and $18 million.

Editor’s note: An earlier version of this article incorrectly stated Billabong was “looking for buyers”. This is not correct. We are happy to clarify.

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