By Prianka Sharma, Assistant Chief Counsel
Alaska is known for its cold climate and large quantities of snow. It is home to outdoor enthusiasts of all varieties from hunters, anglers, and fishermen, to snowboarders, skiers, snowshoe trekkers, and wakeboarders. While visiting Anchorage and Fairbanks, Advocacy staff spoke with the owners of two shops that specialize in renting and selling sporting equipment.
Blue & Gold Board Shop is a relatively new retail shop that sells snow- and skateboard equipment and apparel. It has been in business for four years and operates out of a small storefront near downtown Anchorage. Owner Jason Borgstede stated one of his primary concerns was accessibility in local banks. He stated that one of his banks limits cash deposits to$7,500 per month, or it imposes a penalty. This can really hinder a small business who does cash sales, forcing it to maintain multiple bank accounts with their associated monthly or annual fees. Mr. Borgstede also mentioned issues with shipping costs within Alaska, stating that the costs have nearly doubled since he first opened. He stated that he tries as much as possible to use local distributors because of the costs for receiving products from the lower 48 states and other countries. Finally, Mr. Borgstede spoke about business loans. He stated that he had not pursued an SBA 504 loan because the process and wait times were too lengthy to justify putting the business on hold only to later find out the loan was denied. Instead, he was forced to sell his home to raise capital. He has observed a gap in the market for private lenders, who do not appear to be interested in financing small business loans of less than $100,000.
Trax Outdoor, located in Fairbanks, is a small family-owned sports equipment and retail store, but it also offers much more. Trax is home to a large hot yoga studio which hosts regular classes. In addition, it has a coffee shop on-site; it plans and hosts sports-related social events, and it offers ski packages with rentals. The company was started in owner Mike Hajdukovich’s garage. He leased his current site for six years before buying it. He explained that the company started as a hobby and now offers many different services including ski lessons, and Northern Lights tours. They have also started a strategic partnership selling Lululemon products in their stores, as they’ve found the brand to be very popular with tourists and locals alike. He stated that customer service is key, especially in a market that is volatile and relies heavily on tourists to drive revenue. If a company has poor customer service, tourists simply won’t return and will not recommend it to others. For this reason, he has also ramped up his online presence and social media efforts because more and more travelers rely on this medium to plan their trips.
One issue that affects many Alaska small businesses is the Jones Act. The Jones Act, also known as the Merchant Marine Act of 1920, requires that goods shipped between U.S. ports be transported on ships that are built, owned, and operated by U.S. citizens. This potentially adds to shipping costs for Alaskan merchants as their goods coming from a U.S. port in the lower 48 states must be moved to a U.S. vessel before it can be sent to Alaska. This Act has been modified to allow Canadian vessels to transport passengers and merchandise, but it may still pose problems for ship from other countries.
The main takeaway from these visits was that both owners are highly motivated and interested in maintain their businesses long-term; however, in order to do so they must be highly adaptable to the consumer climate and the needs of the ever-growing and changing tourist groups that frequent their establishments. Versatility, customer service, and marketability are key to remaining in business in the retail outdoor sports industry.
Advocacy was in Alaska for Regional Regulatory Reform Roundtables July
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Prianka Sharma is an Assistant Chief Counsel for Advocacy whose portfolio includes agriculture, energy, and natural resources. Sharma can be reached at Prianka.sharma@sba.gov.