How the Hoverboard Fad Blew Up

Scott Cendrowski for Fortune overviews the hoverboard phenomenon, with a big focus on Chinese manufacturing.

 

"When knockoff manufacturing goes wrong, however, everybody gets egg on his face. Copycats turned hoverboards into one of the fastest global boom-to-bust cycles in modern business... After Amazon pulled most boards from its site before the holidays, other retailers followed suit—though only after many shoppers had already put one under the tree. Patent-infringement lawsuits among the pop-up brands selling them, meanwhile, have just added to the reputational smog surrounding the product."

 

Personally, the hoverboard and everything about it is interesting in many different ways. The product itself, of course, is incredible, picking up where the Segway left off. The popularity of the product is undeniable - just a couple of weeks ago I saw a fleet of school children on these hoverboards in a local park. This is notably in spite of the high prices of these things around here, which I've seen as high as 17,000 PHP (around 360 USD).

What I find most interesting though has to do with how Cendrowski describes the situation, “one of the fastest global boom-to-bust cycles in modern business”. While still at its cultural peak, its easy to see that the costs of over-eagerness of manufacturers to cash in on the idea had taken its toll.

Cendrowski goes on to document its origin story:

 

"Chic [a manufacturer in Hangzhou, China] moved fast, submitting design patents [for the hoverboards] in China, Europe, and the U.S. and unveiling its hoverboard to thousands of potential customers at China’s biggest trade expo, the Canton Fair. Rapturous responses followed, and Chic set aside factory space to build boards especially for Soibatian’s U.S.-based company, IO Hawk, which sold them for up to $1,800 each. Chic also started making boards that it sold for less under its own brand, S1."

 

Considering that they were trying to sell such a great idea that was dying for public access at such high a price - while seeking exposure in China, no less - you could tell that it was doomed to undergo the knockoff effect from the start.

 

"Demand quickly grew in China and abroad, and Chic couldn’t produce enough. It soon licensed its design to 30 other Chinese factories. The factories agreed to build boards according to Chic’s safety and quality standards; in return they got detailed blueprints.

The expansion plan, however, poured fuel on an already raging copycat fire. Unlicensed manufacturers had begun copying Chic’s board immediately after it appeared at the Canton trade show. By the summer of 2015, more than a thousand factories - up to 10,000, by some estimates - were making boards for distributors who sold them abroad online."

 

By then I’d imagine that the safety and quality standards set by Chic, along with any worries of potential lawsuits, were thrown out the window and disregarded entirely, leading to what we have today.

The hoverboard seems to me the story of what happens when faceless manufacturers take an idea and make their own business decisions as opposed to simply taking orders like they normally do. Then again, this might be something that could've only happened with the hoverboard, by principle of it being an insanely great idea - perhaps a perfect storm of an idea - that they would’ve had to be stupid to turn down.

It’ll be interesting where this goes. My bet is that when manufacturers eventually make safe hoverboards to sufficient scale, there’ll be a price war since consumers are already accustomed to the lower prices we have today. (In other words, yet another race to the bottom.)

(Via Fortune, David Pierce on Twitter)