One Sportsystem Plaza
Skating is many things to many people. To some, skating is about turning physical exertion into mental exhilaration. To others, it's about the heart racing at the mere smell of freshly laid asphalt. And to others still, it's about hearing music in the throbbing cadence of eight rolling wheels. Rollerblade knows that whether on boardwalks or city streets or the manicured cul-de-sacs of suburbia, skaters are ever striving to build speed and momentum. It's instinctive. The freedom of inline demands not that skaters leave well enough alone; but rather, that they leave it behind.
Rollerblade, Inc., originator of the sport of inline skating, is a leading manufacturer in the ever-evolving inline skate market. Through product innovation and aggressive marketing Rollerblade established a sport and fitness craze that became synonymous with its name. The downside, however, was that Rollerblade had suddenly become a generic term for inline skates and skating, prompting the company to unleash a marketing campaign to protect its name. Despite its phenomenal growth from the 1980s into the mid-1990s, a slump in the late 1990s forced Rollerblade and its rivals to diversify into faster and flashier skates. Sales rebounded and by the 21st century inline skates were still the rage for fun, fitness, and sport--even spawning inline hockey, skating, and even soccer leagues. Rollerblade products are sold in dozens of countries, from the United States and Canada to Colombia, Hong Kong, India, Norway, Switzerland, Saudi Arabia, the United Kingdom, Uruguay, and others.
Something Borrowed, Something New: 1700s to 1981
Rollerblade started the inline skating phenomenon by improving and rejuvenating an existing product. Inline skates were invented in The Netherlands in the early 1700s: a Dutchman looking for a way to skate in the summer months nailed wooden spools to strips of wood and attached them to shoe bottoms. The first patent for skates with wheels in a single line was issued in Paris in 1819 to M. Petitbled. Models of the skate were made in both Europe and the United States, but all were unstable and difficult to turn. Skates with side-by-side wheels or 'quad' skates, were developed by American James L. Plimpton in 1863. The new skates were easier to control, and they quickly became popular. Versions of the single-line skates continued to be produced, but roller-skating dominated that segment of recreational sports. Yet a young semipro hockey player and his brothers changed everything when their innovations made single-line skates faster and more maneuverable than roller skates.
With thousands of new sport and recreation products introduced to the market every year, few have had the success and name recognition of the Rollerblade skate developed by Scott Olson and his brothers. Olson, after a successful high school hockey career in Minnesota, went north to play junior level hockey in Brandon, Manitoba. He advanced to the National Hockey League (NHL) system and played with the Winnipeg Jets' minor league teams. In 1978 Olson came upon a pair of ice skates with wheels. He loved the idea of being able to skate year-round and believed other hockey players would enjoy using the skates for off-season training. Olson obtained the distribution rights for Canada and the Upper Midwest from the Los Angeles-based company that sold the skates. In 1980 Olson left professional hockey and began selling the skates full-time. He pitched the skates by wearing them everywhere; he even skated from Minneapolis to Grand Rapids, Minnesota, a distance of about 200 miles, to promote the skates.
Because Olson was constantly on the skates he knew they could use some improvement. He devised a way to make the blade length adjustable and, therefore, more maneuverable and developed a dual-bearing wheel which made the skate faster. The manufacturer, however, was not interested in the innovations. Through a patent search Olson found that Chicago Rollerskate, the largest U.S. manufacturer of roller skates, had an inactive single-line skate which was similar to his design. The 20-year-old Olson went to Chicago to negotiate buying the patent, which he finally obtained in 1981.
Ultimate Highs and Lowest Lows: 1982-85
Olson incorporated Ole's Innovative Sports in 1982. The company started out small, with Olson, his brothers Brennan and Jim, and a few others assembling skates in the Olson family basement. First year sales on Rollerblade skates, which were equipped with a molded polyurethane boot shell for ankle support and a heel brake for stopping, exceeded $300,000. In 1983 the company moved to a facility in Eden Prairie, Minnesota, near the Minnesota Vikings Training Center. By then Olson had a growing company to manage. He also was busy seeking NHL player endorsements, promoting the skates to the media, and convincing sporting goods dealers to carry the skates. He needed more help and brought on a friend to handle the finances, but by the next year the growing business was in financial trouble which Olson attributed to his friend.
Help came from a Twin Cities automobile dealer, Jack Walser, who first put $75,000 into the company to keep it afloat and later offered $300,000 for 50 percent of the business. Robert L. Sturgis, a Minneapolis entrepreneur, was also interested in the company. According to Terry Fiedler in the September 1989 Corporate Report Minnesota, 'Sturgis told Olson he could raise $1.5 million in a limited partnership for that same half of the company's stock.' Olson agreed to the deal, and Sturgis and Robert O. Naegele (president of the investment company Naegele Communications and former owner of his family's billboard concern), extended Olson $100,000 in the form of a note. Sturgis was named CEO of Ole's Innovative Sports, and Scott Olson continued with sales and promotion of the skates. A few months later Sturgis told Olson he was having difficulty raising the $1.5 million and cut the offer in half. By late 1985 the money still had not been raised, and Sturgis and Naegele finally offered to buy out Olson. Unable to pay back the money the investors had put into the company Olson settled for $96,000 over two years and a royalty package. Olson's brothers stayed with the company.
Once out of the company Olson fought for the rights to his product designs, and when his royalties were reduced from two to one percent he filed a suit against Naegele and began a legal battle that lasted six years. Two disparate views of the high-profile Scott Olson were circulated. In one he was portrayed as a business owner without management skills or capital, and that he was fortunate to get as much as he did from the sale of the company. In the other he was cast as too honest and trusting and was forced out of the company he had founded. Dick Youngblood, in April 1993, wrote, 'There's no need to mourn for Scott Olson, whose creative genius produced a gold mine called Rollerblade Inc. in 1979--but whose dearth of capital and management expertise cost him control of the company six years later.'
In addition to pulling in Rollerblade royalties (which were expected to total about $10 million over the ten-year deal), Olson went into competition with the company he founded. He produced his Switch-It brand skates through Innovative Sports Systems, Inc. (ISS), and then through O.S. Designs Inc., he developed the Nuskate, which he sold in 1993 to CCM Sport Maska, Inc. of Canada. The company Olson first founded went on without him under a new name&mdash North American Training Corporation before becoming Rollerblade, Inc.--and under new leadership.
A New Era: 1986-91
In 1986, the year financial expert John Sundet and sports marketing veteran Mary Horwath joined Rollerblade Inc., the company was still losing money. The next year Sturgis sold his share of the company to Naegele, and Sundet succeeded him as president. Sundet, along with Horwath, repositioned the company in the marketplace. Rollerblade skates were trimmed down, painted neon colors, and given to beach-side skate rental shops on popular California beaches. The skate took off. 'Instead of trying to market inline skates as an adjunct to ice hockey, we focused on selling the product as a leisure sport in and of itself,' said Sundet in a February 1995 Minneapolis Star Tribune article. Rollerblade sales doubled in 1988, and the company claimed to have 70 to 75 percent of the estimated $10-$12 million market. Another Minnesota-based company, First Team Sports, Inc., was a distant second in the inline skate market.
Top sales for Rollerblade were in the ice skating strongholds of Minneapolis/St. Paul and Boston, but sales in southern California were rising rapidly. By 1990 nearly one-quarter of Rollerblade's business was in California, and the total inline market had grown to about $60 million. The sagging sporting goods industry was getting a boost from sales of inline skates priced from $100 for basic skates up to $330 for five-wheel racing models. Inline skating was no longer only a cross-training sport for hockey players and cross-country skiers; moreover, one-third of the new breed of skaters were female. Demand for Rollerblade skates started to outstrip production. The number of retail outlets selling the skates had grown from 31 in 1984 to 3,000 in 1990. The skates were sold in Canada, Europe, Australia, New Zealand, and Korea, as well as the United States.
In January 1991, Rollerblade doubled its space with a move to new headquarters in Minnetonka. Three months later the world's leading ski boot manufacturer, Nordica, purchased 50 percent of Rollerblade, Inc. from Naegele for an undisclosed amount. Naegele continued in his position as chairman of the newly formed board. Competitors, Scott Olson (then president of ISS) and David G. Soderquist (president of First Team Sports, Inc.), saw the purchase as a positive development for the inline skate industry. Nordica, with consolidated revenues of $450 million, had money available to promote the sport and establish it as more than just a fad.
Fad or not, Rollerblade sales had at least doubled every year from 1987 to 1991, and the competition was heating up. Number-two manufacturer First Team Sports brought NHL hockey superstar Wayne Gretzky aboard to promote its Ultra-Wheels line. Canstar Sports, Inc. was gaining market share with its Bauer Precision InLine Skates. The low end of the market was being tapped by Taiwanese-made skates selling for under $50, but because all but First Team Sports were privately held, market figures for the rapidly growing industry remained sketchy, and claims by the leading manufacturers conflicted with each other.
Competition was not the only threat to Rollerblade's market domination. Because Rollerblade was so successful in establishing the sport of inline skating its trademark was in danger of becoming a generic name&mdashpirin, linoleum, and cellophane were all once brand names that lost their trademarks to general use. The brand name Rollerblade was being used as a noun (rollerblades or blades) and as a verb (rollerblading or blading), much as the Xerox Corporation found its name synonymous with making copies. In 1990 the company had launched a campaign to protect its identity. Its market strategy shifted from promoting the sport of inline skating to developing brand identification. Print advertising and national TV ads were added to the company's less traditional promotional tool box. Concept shops, which highlighted Rollerblade skates, brightly-colored Blade Gear sportswear, accessories, and protective gear, were opened in sporting goods stores, but the company continued to use the unorthodox promotions that brought them early success.
When Mary Horwath had joined Rollerblade, she relied on 'guerilla marketing' tactics that equated inline skating with a fun, active, and sexy lifestyle. With only a $200,000 budget she depended on aggressive and unorthodox yet inexpensive methods to get the skates into the public eye. Rollerblade skates were given to high profile celebrities and athletes who were seen and often photographed wearing the skates. Cross promotional tie-ins paired Rollerblade with large well-known companies that sought to be identified with youthful, athletic activities. Team Rollerblade, a group of elite stunt skaters, traveled around the country on 'Rock `N' Rollerblade Tours,' appeared in commercials, and performed at the Super Bowl and at the Olympic games. Perhaps most importantly, the company took the skates out on the streets and gave the public opportunities to try them. Wherever people gathered--fairs, festivals, theme parks, and college campuses--Rollerblade demonstration vans arrived.
Rivals Gaining Ground: 1992-95
The year 1992 was a time of transition for Rollerblade as it moved further away from its entrepreneurial roots. The inline market and the inline leader were maturing. In an executive overhaul, former Tonka executive John F. Hetterick assumed the roles of president and COO, and other top level positions were filled by people with experience in major corporations. John Sundet resigned as CEO in May 1992 and was succeeded by Hetterick. Mary Horwath, who in 1992 was ranked as one of the nation's 100 top marketing executives by the trade journal Advertising Age, left Rollerblade the next year. Rollerblade began to place more emphasis on the efficiency of operations, especially striving to meet shipping dates: late orders had been an ongoing headache for distributors. Twenty-four jobs were cut, mostly in marketing, sales, and finance, and more emphasis was placed on customer service. By the end of 1992 the company was again looking for more space to accommodate its rapid growth. Corporate Report Minnesota estimated Rollerblade's average annual growth rate to be 115.5 percent between the years 1987 and 1992.
Rollerblade's growth rate was propelled by a tripling of the number of inline skaters in the United States; however, the Wall Street Journal predicted in November 1993 that the industry was headed for a fall: sales growth had slowed, big ski industry concerns had entered the high-end market ($150-$300 range), and low-end skates accounted for 44 percent of total inline sales. Michael Selz of the Wall Street Journal wrote, 'To cope with competition, skate makers are fighting harder. Rollerblade mounted one of the most aggressive responses, partly because it has the most to lose.' In February 1993, Rollerblade filed a patent lawsuit against 33 competitors. Later that year, Rollerblade settled out-of-court with seven of the manufacturers, including the number two maker. First Team Sports, which was ranked 15th on BusinessWeek's 1993 Hot Growth list, had experienced depressed earnings due to the suit.
Rollerblade remained the big name in recreational inline skates, but Bauer and Cooper brands, owned by the largest hockey equipment maker in the world, Canstar Sports, Inc., were the skates of choice for inline hockey. Sunbelt in-line hockey leagues were becoming as popular as Little League, and Canstar banked on brand name recognition and status as official sponsor of a professional league to help them overtake Rollerblade and First Team. Canstar's 1993 inline sales grew to $26 million. Second place First Team had sales of $38.2 million, and Rollerblade planned to challenge Canstar with its own inline hockey skate.
Safety was an ongoing concern for all the manufacturers. As the number of inline skating injuries rose, the Consumer Product Safety Commission issued warnings about the dangers of the sport. The June 1994 issue of the Journal of the American Medical Association (JAMA) cited key factors that contributed to inline injuries: cruising speeds of 10-17 miles per hour; sharing the roadways with motor vehicles, bicyclists, pedestrians, and pets; and falling on hard surfaces. Rollerblade encouraged use of safety equipment and lessons for beginners through its 'Skate Smart' safety education program and its 'Asphalt Bites' campaign. In 1994 Rollerblade introduced Active Brake Technology (ABT), an award-winning innovation which made stopping easier for beginners and improved speed control.
Rollerblade's 1994 sales were estimated by Newsweek to be about $260 million or about 40 percent of the $650 million inline market, and its competitors appeared poised to capture more of Rollerblade's market share. In late 1994 Canstar was purchased by Nike Inc., the athletic footwear and clothing giant. Already benefitting from the resurgence of hockey, Canstar received an added boost from Nike's marketing and sales mastery. First Team Sports also was capitalizing on the inline hockey boom and reported sales revenues of $86 million in fiscal 1995. Rollerblade was still relying on its grassroots activities and promotional tie-ins to sell its skates. The company's advertising budget remained modest--$4 million in 1995--and was limited to spot markets.
In November 1995--following months of speculation about the company's future--Naegele sold his stake in Rollerblade to Nordica. The New York Times said Naegele received at least $150 million for his 50 percent share of the company, though later reports put the figure at $200 million. Nordica, in turn, had sold a minority interest of Rollerblade to an affiliate of Goldman, Sachs & Company. No longer under a dual ownership Rollerblade appeared to be in a better position to capitalize on the financial strength, research and development support, manufacturing capacity, and international distribution capabilities that Nordica offered.
Rollerblade and inline skating had moved into the mainstream of recreational sports, yet had plenty of room for growth with only 14 percent of U.S. households owning inline skates in 1995 as compared with 51 percent owning bicycles. Inline makers were optimistic about growth in the international marketplace, where Rollerblade had a foothold by way of Nordica. According to industry and company estimates Rollerblade still held nearly half of the market in 1995, but it remained to be seen if inline skating would continue to grow or would follow the path of the roller-skate industry and slip into a cycle of boom and bust.
Boom & Bust Indeed: 1996-99
In 1996 inline skating was far more than just a fad and brought revenue to the recreational, fitness, and athletic markets. Statistics from the International Inline Skating Association charted the meteoric rise of inline skating, and cited it as the fastest growing sport in the nation. No longer a radical form of roller-skating, it was instead a burgeoning fitness craze for people of all ages. Rollerblade rode the crest to its peak and, inevitably, the market faltered in 1997. In the obligatory bust all three of the inline skate behemoths lost their footing; Rollerblade still dominated with about 40 percent of the U.S. market and $355 million in sales, yet second and third place producers First Team Sports and K2 Inc. were the worse for wear. According to an October Forbes article, First Team experienced an estimated 36 percent falloff in sales while K2 tumbled some 15 percent. All this despite research figures finding in excess of 30 million inline skate owners (divided evenly between men and women) in the United States, and the burgeoning preteen market. According to Rollerblade's web site, nearly two-thirds of all 11-year-olds owned a pair of inline skates in 1997.
Yet while it seemed as if the inline skating boom was over with faltering sales and sports stores slashing prices to move product, Rollerblade's parent company, Benetton Sportsystem (which also owned Nordica) upped the ante by raising prices and bringing fancier models to stores to concentrate on diehard enthusiasts rather than beginners. Then the Benetton family, major shareholders in both the public company and its private subsidiaries, began selling off its shares in the sports-related division to the publicly traded parent company, Benetton Group, in 1998. Benetton Sportsystem was renamed Playlife in Europe and Asia after the transition, and several Playlife megastores were opened in Europe. Subsequently, rather than open such stores in the United States, Benetton instead made a surprising deal with Sears to market both its clothing and sporting goods through the retailer's stores. For many, it was a drastic dressing down to Benetton's image, but the company was soon dumped by Sears. After the debut of another of the parent company's controversial ad campaigns (which had been stirring up debate for several years), this time featuring death row inmates, Sears pulled all Benetton products from its stores in early 2000. Rollerblade's products, it seemed, were lost amid all the chaos.
Though the inline skating industry faltered briefly, Rollerblade and its rivals continued to entice customers with newer and wilder versions of its skates and sales rallied once again. With the increased popularity of 'extreme' sports, Rollerblade was there with several new models of skates, as well as accessories (helmets, elbow, wrist, and knee pads, etc.) specifically designed for all age groups. Inline skating reinvented itself and became the impetus for rethinking other sports--from Scott Olson's original use for inline skates, off-season hockey training--came inline basketball and hockey leagues, speed skating, extreme skating (dubbed 'aggressive' or 'stunt' skating), and even more unusual variations such as inline dancing and even inline soccer. Though growth for the industry was only in the low single-digits, as opposed to huge leaps earlier in the decade (such as 51 percent from 1991 to 1992 and 49 percent from 1993 to 1994, according to Rollerblade's web site), there was still growth. Sales were also subject to weather restrictions, except in fair weather states such as California and Texas (which led the market in sales), but spring and summer always brought a surge in sales.
Inline Skating in the 21st Century and Beyond
The future of inline skating was anyone's guess in the 21st century, but the sport demonstrated serious staying power. For fitness, strapping on a pair of Rollerblade skates was an excellent workout. For skaters both young and old, inline skating was fast fun that burned calories, strengthened muscles, and was less stressful to the body than running. Even Prevention magazine had begun recommending inline skating to its readership as a good, low-impact form of exercise and recreation (with proper protective equipment). More and more cities built inline skating trails and paths, and in case anyone was forgetting its name, Rollerblade had donated millions of dollars to be the official inline skate of New York City's parks. With increased emphasis on safety, injuries had fallen nationwide and some parks even favored inline skating patrols to police recreational areas. Rollerblade, meanwhile, eyed continued comfort and flexibility as a key to its market share. Newer innovations included convertible skates (removable shoe-boots on plastic wheel frames, called 'Nature' skates), models with shock absorbers for rougher terrains (such as the 'Coyote' and 'Outback X'), and even 'Xtenblade' skates with adjustable framing for the constantly growing feet of children.
Principal Competitors: First Team Sports, Inc.; K2 Inc.; Variflex, Inc.