The wild ride

By David MacGregor, May 31, 2006 @ 1:08 pm

Idealog May/June 2006, page 46. Picture by Graeme Murray

Two creative entrepreneurs navigate the world of sports apparel marketing by the seat of their pants—and live to tell their tale

Gary Sullivan doesn’t look like one of New Zealand’s adventure sport pioneers: he resembles Elton John more than an extreme sports hero. But Sullivan and partner Glen Anderson have been building an iconic Kiwi brand since 1998. It’s been an uphill slog: just a few years ago they could have closed the doors but today their company, N-ZO, has sales of over a million dollars and rising, designing cyclewear and distributing it through New Zealand, Australia and Europe.

N-ZO’s journey has been anything but a straight line sprint. Nobody expects launching a business or a brand will be an easy job, but it’s usually harder than was ever imagined. Sullivan and Anderson’s story is a reminder that persistence, ambition, self-belief and a willingness to take risks is the best protection against the perils of business and the vagaries of chance.

Gary Sullivan has been crazy about cycling since his early teens. He enjoyed some success in New Zealand and on the competitive Australian pro circuit, represented New Zealand and came close to selection for our Olympic team. Cycling was his passion but he turned to advertising to pay the bills.

In 1984 he heard about a rugged new kind of cycle—a hybrid known as a ‘mountain bike’. When he found a tourist riding the new contraption in Auckland, Sullivan chased after the rider to get a closer look. But building a mountain bike of his own turned out to be impossible: there were no local suppliers of the oversize wheels and tyres he needed, New Zealand still had protected light manufacturing industries and it wasn’t easy to either get currency out or products into the country. Through the cycling grapevine Sullivan heard local manufacturer Healing had brought in 15 examples from Japan to reverse-engineer, managed to acquire one and became one of our earliest exponents of mountain biking as a sport.

Partner Glen Anderson has been involved in the fashion and apparel industry since the 1970s. At one stage she ran a street label called Get Frocked, which she sold on weekends at the Cook Street Markets. Later she became involved with the swimwear manufacturer Moontide.

Careers didn’t take precedence over fun, however. The couple took a lengthy stint travelling around Australia and later traversed the United States and Europe. Friends would be surprised by their willingness to leave behind careers, homes and salaries to head off into the wild blue yonder. “We would sometimes return to New Zealand with just enough money to make it back to our house from the airport,” recalls Sullivan.

Their taste for adventure led to the decision to “do something really ridiculous”, combining Anderson’s knack for designing body fit and stretch fit garments and Sullivan’s illustration and design talent. “We decided to start our own brand of clothing, for mountain biking, because there wasn’t anything else—or nothing we liked,” Sullivan says.

They knew they wouldn’t build a manufacturing operation and that they would need to sell in a much bigger market than New Zealand. They made samples of their ideas, packaged them up with unique branding and graphics and headed to the United States “for a little holiday”.

Like many creative entrepreneurs the duo based their decisions on self-belief and a ‘why not?’ attitude. They contacted some American distributors and clothing manufacturers who were willing to see their wares. “It was “easier for them to say ‘yes, let’s have a look’, than ‘no’ and possibly miss out on something,” Sullivan recalls.

“As it turns out none of the ideas we had in the first burst were particularly good. We needed more time to hone our thinking and we came up with an outburst of creativity that we could show people. One of the people we showed was a professor at a university in the Garment District of New York City. He took one look at it and said ‘This is really interesting.

I don’t know anything about your market but I can see this is interesting stuff. Take it back to New Zealand and do it yourselves … and don’t show it to anyone in America because they’ll just steal your idea and rob you.’ In spite of that advice, all of the people we had showed it to were interested and we talked to two companies for about 12 months about a manufacturing and royalty deal.”

Gary Sullivan and Glen Anderson don’t let the perils of business affect their relationship. “It&rdsuo;s about respect really,” says Anderson. “It works because we’re mates”

But getting “wheels on the deal” proved difficult. “I couldn’t make it stick and come up with anything that looked worth doing. Then we just got impatient and decided to do it ourselves back here.”

Back home Sullivan and Anderson realised their failure to land a US deal was probably for the best. In spite of their freewheeling natures, both were cautious about blowing it in the North American market. “We also realised that we were going to have to keep experimenting with products to find out what people really wanted,” Sullivan says. “Bike shops weren’t very sophisticated so we decided to have our own shop, like a sort of boutique, to find out what people wanted and to give ourselves a unique platform to get started.”

N-Zone, as the brand was originally called, opened its retail operation in Rotorua in 1998. Rotorua seemed the right spot: the town is full of mountain bikers, both locals and those passing through in search of adventure and forest trails. The decision to open their own store also gave them freedom from the conservative buying practices of retail buyers, although Sullivan says the initial range wasn’t all that different to any other, despite attracting customers who liked the well-made, multi-functional garments.

But the store was not an early success. “It was horrifying,” says Sullivan. “We went for weeks selling one or two things a day. I had budgeted for $1,000 of retail sales per day. We were doing $100 or $200. It was ridiculous. A massive hole in the ground we were pouring money into.

“But from a brand-building point of view it was fantastic. We always thought that if we got the shop looking great and created a good range and acted like we were succeeding in all of our communications, something would happen. That’s about as scientific as it got. Oh, it was fun and there wasn’t anything else like it.”

Gradually the accounts improved—in year three the store turned over enough to pay the rent and a shop assistant. By then, however, the combination of well-designed garments, specifically tailored for the mountain biker, and a slick in-store experience meant the NZone shop on the corner of Hinemoa Street had become a familiar place for locals and visitors. The brand was becoming known.

Competitive challenges

In the tight-knit world of cycling it doesn’t take long for word to spread. “By the third year we’d had a key product knocked off by two other New Zealand companies.” Sullivan is reluctant to get specific but says rivals got some of the product right—but not exactly right. “The bits that were making our product work were too hard for them to emulate, so they had a kind of half-arsed version of it.” When a deal with a leading cycling retail chain fell over, the retailer hired a surfwear company to copy the NZone products. “They said, well, if we can’t have your product we’ll have your product with someone else’s name on it.” But again, the copies were inferior and did not fool demanding mountain bikers.

NZone products were in demand but Sullivan and Anderson couldn’t afford to sit on its laurels. “We realised we were pedalling really hard and getting nowhere,” says Sullivan. “The only way to go forward was to concentrate on wholesaling, so we started to look for ways to make our product at a price that would allow us to find retail customers who would sell our product well.”

In 2001 N-ZO headed to Las Vegas for Interbike, one of the world’s biggest bicycling trade fairs. Trade New Zealand coordinated a group of cycling manufacturers to attend as an export network group. “We had a very good response to our stuff. We were reviewed by two of the top magazines in the States, who only covered ten or so products a day from thousands of exhibitors.” The coverage and presence at the fair resulted in interest from 65 retailers, including a couple of major cycling chains and a dozen distributors. But, at the time, NZO had no way of manufacturing in sufficient volume to serve a market as large as the US.

“He could see that we were either going to go broke or give up, or both, unless something fairly radical happened.”

Australia beckoned, and this time not as a holiday destination. Sullivan returned with confirmed orders from ten key specialist retailers and looked for someone to make the clothing. “We spent a considerable amount of time and money establishing a relationship with a manufacturer who guaranteed us they could do what we wanted.”

Things were getting expensive. Sullivan and Anderson poured all their resources into N-ZO. They sold everything and Sullivan worked nights as a freelance designer and illustrator to meet the costs. Investors had offered cash but Sullivan had never felt comfortable with the idea. “I didn’t want to sell something that I wasn’t totally confident would make somebody money, you know. And I still wasn’t sure if it would go.”

He was right to have his doubts. Problems became evident with the first batch of product that arrived in Rotorua. “It was a disaster. And our key product had to be manually examined to establish whether our particular bar tag was in the right place. The only way you could find out whether it was in the right place was by trying to pull the garment apart. If it failed, it was in the wrong place … basically this was failing in about half the products. And the other thing is that they’d made such a hash of the cutting. We laugh in retrospect, but they had made such a bad job of cutting it that the stuff was the wrong size.”

Reality had hit—hard. Behind schedule and with Australian orders to be filled, Sullivan made the call to cancel the order. They had everything returned to Rotorua—half-finished, finished, raw fabric, the lot. “We got it all delivered and then we sorted it out all into piles and then we found some guys in South Auckland who were in a hideous little joint underneath a building in a part of Otahuhu you don’t go to. And they took all this stuff and assembled it in a way that was deliverable. I remember thinking at the time, if these are the conditions where my stuff is going to get made, what’s the difference between here and China?”

As if things couldn’t get worse, fabric from a wholesaler in Auckland proved unusable. “It had a stripe down the middle of it in a different colour. The range ended up made in different colours than what we’d sold and had photographed for our catalogue which we had already printed.”

It was a desperate time. The Australian orders were filled, late and in different colours than promised. Meanwhile the store in Rotorua was closed down and a deal was struck with a large outdoor lifestyle store to have an N-ZO concept store-within-a-store. The experience very nearly spelled the end.

Until this point Sullivan and Anderson had built a reputation for a terrific product and brand concept. They had worked hard to design, manufacture and promote NZO but had obviously stretched their No. 8 wire and resources to the limit. The Australian adventure was a dismal failure.

Late on delivery and with no money left to market the range, Sullivan couldn’t follow up on promises. He thought long and hard about the future.

Luckily, fortune favours the brave

Just as the Aussie misadventure reached its nadir, Sullivan met three people who would help turn N-ZO around. The first, Leon Grice, a businessman with experience in the rag trade, saw N-ZO’s potential. “He thought we looked like an interesting little company that was ‘born global’, but he could see that we were either going to go broke or give up, or both, unless something fairly radical happened.”

Grice became a mentor to the couple. “He quite often told me what to do to stay afloat this week. That’s how desperate it was at the time.”

Grice also introduced them to Maurice Prendergast from Pumpkin Patch. “Here’s a guy who bought a company when it was turning over $1 million and grown it to, at that point, $220 million. He looked at our little project. And he said a couple of things that really have guided me since. One: you can’t make the stuff in New Zealand. At that stage everything we made was labelled ‘Made Right Here’. He said if you want to grow this business to the point where it will make you any money, sooner or later you will have to go offshore because your product is technical and difficult to make. And we don’t have the ability to make this in any large quantities in New Zealand. I shook my head and thought that’s not going to happen, because I thought that we were contributing to the economy.

“But when he showed us his operation, what impressed me the most was this very vibrant design department and logistics department. I was amazed by what they were doing there in East Tamaki—and we never saw a sewing machine! It wasn’t about making clothing, it was about designing it, and marketing it, and getting it to the market.

“We had a great product, a great idea and a unique proposition, which was that we are the New Zealand brand of mountain biking apparel, but that’s all we had. I thought we’re not doing this again. We have to find a way of doing this where people are good at it. So I emailed Maurice Prendergast and said ‘You were right, I’m wrong, how do we go to China?’”

Soon Sullivan was talking to Chinese manufacturers. In 2003 N-ZO and Fountain Apparel formed a joint venture company. Fountain takes care of production and logistics. “They made four million items of clothing last year in China. They’ve been in China for a long time so they’ve got long relationships with manufacturers. They’ve got Chinese people in their operation in Auckland. They’ve got their people up in China. And as we go along we realise that that’s the only way you can do it.”

Another twist on the trail

If it all seemed like a downhill ride from there, then the ride came with a few surprising bumps. The Fountain deal was struck knowing N-ZO had an exciting US distribution deal was lined up. Sullivan was contacted by a very well-connected American who wanted to distribute the brand in North America. “He’s young, early 30s, knows everybody. Had worked at Interbike and for a company that promotes mountain bike racing in the States. He had worked for various quite cool brands. He looked at our stuff and said far out, I’ll distribute it for you.

“He introduced us to people and he had a really good setup organised. He was going to use commission reps that he knew and who he’d worked with before in each geographic region. He would use a freight forwarding warehouse to deliver the product and also run the admin.

“When the Fountain deal was struck, the fuel for it was the fact that we had an agent there ready to go in the States.”

With the manufacturing agreement in place, Sullivan and Anderson took a Christmas holiday. When they returned the first email Sullivan read carried the news that their North American hope was dead. He had jumped from the Golden Gate Bridge.

Find the right people in the market

Many entrepreneurs write business plans showing steady, if not dramatic, growth. Most fail to realise that things usually take twice as long and cost twice as much as expected. Sullivan has learned to expect the unexpected.

With manufacturing funding and expertise in place, N-ZO looked for another overseas distributor. “I made a feeble attempt at trying to find someone else to do it, but, you know, it’s hard to explain, but you have to have someone in the market who believes.”

One day a believer arrived. Arthur Reber is a Swiss businessman deeply immersed in the cycling industry who had came to New Zealand for three months to learn to speak English, in order to specify bikes in Taiwan to sell in Switzerland. While on a Marlborough Sounds trip with three hardcore N-ZO devotees, Reber was introduced to the brand and was impressed.

“He looked at the product and said in Switzerland every shop has three or four brands of stuff and it’s all the same, it’s all absolutely top-drawer, there’s no crap stuff. And this is the same quality or better and it’s different.”

Reber was convinced the N-ZO brand would be popular in Switzerland and set up a distribution business there. “The Swiss are interested primarily because it is obviously from New Zealand,” says Sullivan. “It’s a brand called N-ZO, it’s got glossy pictures of New Zealand trails and they know it is definitely not Switzerland. We’ve got 20 dealers now—still small numbers, they’re still toe-in-the-water kind of people, but yeah, very exciting.”

Reber illustrates the importance of not only having a passionate advocate, but also one who can be relied on and who has credibility. And, after their first disastrous foray into Australia, N-ZO now has an advocate there. “We have a guy who gets it and we brought him over here and showed him what N-ZO means in Rotorua. He got it and he can sell it.”

Sullivan and Anderson are now able to concentrate on the things they do best: design and marketing. Using their talents as designers and with a willingness to risk everything, they created a product and brand which worked well on a cottage scale but was too difficult to scale up with local manufacturing resources. They went from being able to control everything to virtually losing control of everything, but they’re still in the saddle.

Sullivan is single-minded but he knows that some paths aren’t worth following. When he talks about mountain biking he likes to say that some tracks in the forests around Rotorua have permanent Sullivan-shaped dents in them. It seems a perfect metaphor for N-ZO’s wild ride.