Come down to the quirky Deus ex Machina showroom in Sydney's low-rent Camperdown and have lunch or just a coffee among the customised old motorcycles and branded apparel that owner Dare Jennings has on display. Most come away with a T-shirt or a pair of pants with the Deus logo and leave the dream purchase of a 1970s twin-cylinder Norton Commando for another day.
Jennings, founder of irreverent clothing line Mambo, is one of the grand old men of the 1980s surfwear boom, is going gangbusters with his new Deus business. But the labels that started it all - Billabong, Quiksilver and Rip Curl - are struggling. Billabong is hoping the private equity firms looking over its books will go ahead with their take-over bids. The company lost 536 million Australian dollars (552 million US dollars) in its first-half reporting period - a sum greater than its market capitalisation.
Quiksilver, which listed in the New York stock exchange rather than back home in Australia, has racked up losses since 2007 and has brought in new managers. Privately owned Rip Curl put itself up for sale for 400 million Australian dollars last year but has not received offers near that price tag. It posted a 3.6-million-Australian-dollar loss during the last financial year.
University of New England economist Andrew Warren said the big surfing brands have proved to be victims of their own success. "You get grass roots support and then growth and expansion follows," he said. "You go into department stores and then you find you're detached from the surfing culture." Billabong used to be a how-to-do-it story in business school textbooks.
Set up by Queensland surfer and board maker Gordon Merchant in his garage in 1973, it has seen shares once worth 18 Australian dollars tumble to 85 Australian cents. Up to 100 retail outlets are set to close. Money-spinning brand Nixon has been sold to reduce debt. Companies have ups and downs. Apple has proved that old management can repair a damaged enterprise and Michael Dell might do that again for his eponymous computer company.
But redemption is hardest for youth-oriented rag traders like Billabong, Quiksilver and Rip Curl. Chris Gibson, an economic geographer at Wollongong University, said crossing over into the market for apparel beyond surfing got the big labels into difficulty. "They were looking to mainstream their market," he said. "But their credibility comes from active surfers and you lose that sense of sub-cultural distinction that comes with that authentic base in surfing when you go mainstream."
Just how button-down Billabong was willing to go was evident last year when it installed former Target executive Laura Inman as its new boss. No sand between her toes: retailers do not get any more mainstream than Target. The surf labels hoped to hang on to their credibility as counter-culture brands by sponsoring surfing events and getting their logos on the chests of champions in edgy sports like skateboarding.
As more youngsters took up surfing, mainstream advertisers came in and drowned out those who actually made the gear. But Warren questions the argument that brands have a shelf-life and do not cross generations. "I don't buy into the idea that if parents are wearing one brand their kids aren't going to," he said. A big challenge for of the big labels was shifting from a private enterprise to a publicly listed company.
Keeping your cachet with young customers is hard when shareholders demand dividends regardless of the dignity of the brand suffers from a whatever-it-take approach. "In the short term, brand extension might help with cash flow but in the long term whether that's sustainable is another matter," he said.