Pricing Wars – Callaway vs. TaylorMade: Who Blinks First?
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Pricing Wars – Callaway vs. TaylorMade: Who Blinks First?

Pricing Wars – Callaway vs. TaylorMade: Who Blinks First?

Written By: Tony Covey

Over the last several seasons, early discounting has become the norm for industry giants Callaway and TaylorMade. Now that the bulk of 2015 product has been announced (and most is already on shelves), some of you have, no doubt, begun counting the days until you can get a R15 for $249 or a Big Bertha Alpha 815 Double Black Diamond for $369. And yeah…those are probably high-end estimates.

This could be the year it doesn’t happen. Sorry.

Last season TaylorMade held the line (mostly) on SLDR, but you know…that JetSpeed thing happened. Slash prices, toss in a fairway wood, do whatever needs to be done to prop-up those numbers.

Callaway was anything but slow in discounting X2Hot, Big Bertha, and Big Bertha Alpha. Out with the old and in with the new has been the mantra for companies that rely on frequent releases to create volume, and volume to drive revenue.

Can either company make it through May without cutting prices?

While it would certainly be better for the industry if both go full Titleist (no discounting until there’s a new model), I am both a cynic and a jaded realist.

Let’s set the over/under at June 15th.

Why This Year Could Be Different

Should TaylorMade feel compelled to grit it out, it can lean on the adidas and Ashworth apparel lines where margins are much higher than they are on golf clubs. With expectations lowered…or at least reduced to more realistic levels, TaylorMade-adidas Golf might be able to make enough money with cutting prices.

Callaway, for its part, has actually increased the average selling price of its products. If the snow melts quickly, that alone could be enough to sustain the company, despite the lack of a significant alternative revenue stream outside of the hard goods market. While the ball that changed the ball won’t threaten the Pro V1 anytime soon, Callaway’s ball business is on the uptick. That won’t hurt either.

And This Time We Mean It! (For Real)

Lately, both companies have devoted a fair amount of time to discussing their commitments to inventory management, and supporting their retail partners. Presumably that would include both a reduction in the number of units produced and a responsible pricing model that won’t force retailers to go broke buying SALE stickers.

Is this the year that the golf club market regains its dignity? If TaylorMade and Callaway have forecasted correctly, and inventory levels prove to be responsible, I believe this is really the year. The insanity is over.

If winter drags, products start collecting dust, and that retail channel we talk so much about starts to show signs of backing up, all bets are off. Slash and burn…try again next year.

Who Blinks First?

For You

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Tony Covey

Tony Covey

Tony Covey

Tony is the Editor of MyGolfSpy where his job is to bring fresh and innovative content to the site. In addition to his editorial responsibilities, he was instrumental in developing MyGolfSpy's data-driven testing methodologies and continues to sift through our data to find the insights that can help improve your game. Tony believes that golfers deserve to know what's real and what's not, and that means MyGolfSpy's equipment coverage must extend beyond the so-called facts as dictated by the same companies that created them. Most of all Tony believes in performance over hype and #PowerToThePlayer.

Tony Covey

Tony Covey

Tony Covey





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      dcorun

      9 years ago

      Just to begin , I bought the RBX Stage 2 in 2014 and put a real Fuji Fuel (price drop) shaft in it and I hit it just as well as anything new on the market now (compared on the monitor at the local PGA Superstore) and saved a lot of money. I don’t mind spending money if I’m going to see a difference in performance but, that is not the case. I saw the interview with the new CEO of TM on the Golf Channel at the PGA Show and he said he was like a lot of golfers and was always wanting the latest and greatest and it got out of control with TM producing new product it seemed on a weekly basis. He SAID he realized his mistake and TM was going to take a different approach to how they market in the future. He seemed to be sincere about the future plans he has for TM and they sounded good. We’ll just have to wait and see. TM has slowed down some lately and we don’t feel like we’re seeing new product every 3 weeks. I’m not bashing Callaway but, they seem to be staying the line. Big Bertha, Big Bertha Alpha, Big Bertha Black Diamond, V Series, XR and so on, all in a very short time. There is only so much money to go around for golfers these days and they need to focus more on clothes, shoes, balls and other golf products besides drivers and irons to make up the difference in the money they make. Good Luck with WINTER, especially in the North and even here in Georgia where it’s been in the 40’s except for a few 60* days last week and the normal high this time of year is 57*. If it keeps up through the rest of February and March things could look bleak for all the golf companies. .

      Reply

      Nico

      9 years ago

      That Jetspeed thing? What do you mean?

      Reply

      Regis

      9 years ago

      I think both TMAG and Callaway will be slowing things down. As other posters have noted the average consumer (as opposed to we blog hos) is keeping his driver longer and probably living on an informal budget (this season I’m buying new wedges or a new 3 wood or….) To me SLDR was a major introduction for TMAG . The R-15 not so much but I think that was by design. Manufacturers will always get a certain percentage of golfers to replace a club but to move the masses to hysteria (Man I’d like to demo that) takes a unique introduction and that takes time. Slower release cycles and that means slower discount cycles

      Reply

      thomas murphy

      9 years ago

      To go full Titleist you slow down new product launch cycle to two years. Tmade and Cway are creating fatigue rather than excitement. Ping has a huge line but they are on at least a year schedule for major updates, same for Mizuno Will be interesting with Nike Vapor new series 3 levels all at once. I would rather spend the money playing than shopping.

      Reply

      Tom

      9 years ago

      With the quality of products that Taylormade has been producing, I’d say they will cut prices first. Some of their product made not too long ago, golf shops can’t give away.

      Reply

      Deansv

      9 years ago

      I just had to comment when I saw your “ball that changed the ball” reference, obviously to the Callaway Chrome soft. (Feel free to delete that name if you need to)
      Last year when the Speed Regime balls came out they were the “greatest thing” for the slow swinger ever – so I promptly went out and bought some SR-1’s, played them for a while, and decided “EH!” Back to the ProV-1’s. Then this year, out comes the “ball that changed the ball” – the new Chrome Soft, so I decided okay, I’ll give them a try, especially since Phil says they’re the greatest thing he’s ever hit. Once again, absolutely no favorable impression. But, I have learned one thing: I am no longer interested in drinking Callaway Kool-Aid. I am sticking with the best ball all around that I’ve personally found, ProV-1’s. Just my two cents for what it’s worth.

      Reply

      Fozcycle

      9 years ago

      I run a 40+ player weekly league in Florida where we play year around. so far, I have not seen or heard anyone wanting to game the new 2015 equipment. I have seen a couple guys that have traded in for “new” 2014 equipment such as: Mizuno JPX EZ & TMAG SLDR. Most guys are gaming 2013 or older equipment. Very few have the 2014 stuff, like me (Cobra Bio Cell woods & irons). These guys play every week but are very slow to equipment change.

      Reply

      steve

      9 years ago

      TMAG blinks first – they can’t help themselves – it’s what they do.

      Reply

      kenny K

      9 years ago

      Tony, great reading ! agree with you on most points and understand the analysis !
      Nice discussions on the comments as well.
      one comment/question on my side would be slightly off topic.
      The root cause of the change towards margin-based strategy is they are not enough players right ? since not enough sales volume
      so we arrive at the issue on the number of participants dropping.
      On my side, i lived in France and now in south east asia (singapore), and in my entourage – mostly from non golfers – their comment on why not joining golf is always on ‘you have to invest in not so cheap equipment’ (and on ‘green fee/driving range/lessons is not cheap’ – true in Singapore for course and lessons and in Europe for all). So when they see a driver at 400$ i can understand their surprise !
      and i had the same remarks before i start golfing.
      Here and in France, the second market is not that good (and not that cheap).
      In my view, if the prices starts somehow to continue going up, the amount of players will continue to drop.
      I join Nor on the cheap club market. you can maybe justify a higher price for players really into the game. But it will not bring more players and potentially increase your customer base.
      Not saying that manufacturers are to blame, but common efforts to bring more players will help every industry involved in the game

      Reply

      James

      9 years ago

      Tony, great article and I really enjoyed your comments. Do you believe large companys (TM, Cally, etc.) will being embracing non-conforming clubs to make up for these lost profits? Demand is there for these products (or the potential to create this demand), and supply by manufacturers for them is rather low. Recently, I saw articles stating that Japanese manufactures will begin to product non-conforming clubs to service this market. Do you think state side there will be a push?

      Reply

      VofR

      9 years ago

      It’s always funny to me to read the comments section of MGS. Doesn’t everyone realize that Tony is entrenched in the golf business and is pretty much spot on in his assessment? The other commenters are obviously passionate about golf but are selfish in their views in regards to the industry. One thing that Tony left out and the other commenters don’t care about is the fact that while the OEMs were probably fat in infrastructure they are for the most part becoming wildly thin. Those working in the industry are being asked to do more than ever for less money. What that means is that the talent will continue to leave and the service and the quality will go down. Tony is right. No one is making any money and they will continue to cut costs to survive. Titleist has the golf ball and FJ glove, Nike has apparel, Ping has contracts outside of golf. Callaway is expanding their investment in Top Golf. They are looking for anything to make money. Callaway just made money for the first time since 2008!! So I doubt they are going to change strategy too much. They have cut costs as much as they can. As far as these small startups filling the gap, are you kidding me? Component companies? Please. The real question is how long will the parent companies keep subsidizing losing money in golf?

      Reply

      Rex

      9 years ago

      Demand will no longer be the cart driving net-downs. It is now about replacement cycle.

      In this regard, Callaway appears to be the odds on favorite as they have re-calibrated their quarterly income and corresponding product lines accordingly.

      TM is too busy replacing executives while simultaneously trying to catch a falling sword (their brand).

      Reply

      Ryan

      9 years ago

      My guess is that it will be callaway. They have four drivers on the market and the V series will be the first significant drop we see.

      Reply

      William Beal

      9 years ago

      My thoughts are in line with my earlier comments about Taylormade’s presence at the PGA Merchandise show this year.

      I think Taylormade may just “hold the line” this year. As you mentioned, they’re more diversified that Callaway, with some higher margin product to help support their equipment line and, at the show it was Taylormade that cut the “glamour” to focus on product this year.

      Callaway will cut prices first.

      Reply

      Michael H

      9 years ago

      The discounts will still be there just a year or 2 later. The resell market will surge with this so could be time to buy stock in Global Golf.

      Reply

      Dave S

      9 years ago

      Is Global Golf a publically traded company?

      Reply

      Dave S

      9 years ago

      Everyone has been whining (for some reason) about these short product cycles for some time on this and other golf sites. Well here you go. This is a classic case of be careful what you wish for. People will find out real quick how “bad” the short product life-cycle really was for them when they’re paying full price for a club in September that was released in January. For the consumers’ sake, I HOPE one (or both) of them blink.

      Reply

      Tony Covey

      9 years ago

      We’ve covered this Dave…short product cycles (at least the way it’s been done in the past) hurts nearly everyone.

      In the short term it has been great for the consumer. The problem is, when prices are cut, golf companies stop making money and retailers stop making money. If that trend continues it leads to fewer retailers, fewer golf companies, and ultimately fewer choices for consumers.

      Would you rather have your choice of several drivers in the $300-$500 range from a dozen companies, or would you prefer a limited selection at $449+ from a handful of companies?

      The discounting also hurts companies who don’t discount (at least not as rapidly). Consumers aren’t buying full price anything when they can get a 6 month old model for 50% off. That dramatically impacts guys like Cobra, and even PING. They sell less, and even when the sell well, re-order rates are low because there’s so much excess inventory from the other guys still sitting around.

      There’s a tremendously misleading stat the big media and those charged with blowing sunshine up your backside are throwing around…something along the lines of last season being one of the best years (retail dollars) in the last 5 (again…rough detail on the actual stat), but when you dig aground what you find is that a tremendously disproportionate amount came from steeply discounted goods. Consumers spent money, but golf companies and retailers didn’t actually make any money.

      Just as we’ve seen consequences for the golf companies, if the trend continues, it will eventually have consequences for the consumer – not the least of which is higher topline prices (that’s already happening), fewer choices, and far less discounts.

      Reply

      Dave S

      9 years ago

      Not discounting what you’re saying, but I have trouble buying into the theory that we’ll end up with very little product choice, coupled with higher prices. I think it’s possible that the number of companies that make golf equipment will dwindle, but for a different reason. Only the largest companies can stay afloat with the inevitable lower margins that cost cutting will result in. The low-hanging fruit argument then is, from an economic standpoint, that supply will be reduced driving up demand and in consequence, prices. But I don’t believe this situation is as simple as a linear supply/demand chart. Demand will exponentially decrease as prices reach a certain threshold – in this vein, price is somewhat inelastic. The average Joe golfer will not buy at $500+ driver with enough repetition to support a price that high, even when supply is reduced. OEMs will have to keep prices relatively steady to maintain cashflow, which means they’ll have to be able to stomach smaller margins. That might mean fewer product per cycle, but price hikes are doubtful.

      Tony Covey

      9 years ago

      You’re not totally off-base, I don’t think. I think further contraction of the market is inevitable as the current situation is worse than anybody is willing to be truly upfront about. I recently had an accidental conversation with somebody who works for a small to mid-level golf company (a company that many see as poised to make an impact). He told me he’s had to absorb two forced pay cuts this year. 2…in one year. He’s done…getting out of the industry.

      So yeah…you’ll have contraction. You’re going to see prices go up, and even with higher margins, companies will need to offset that decrease in sales. Where does it come from…higher prices on shoes, apparel, balls, and other disposable (and often high-margin products).

      In turn, more fringe golfers get turned off to the sport, volume decreases, the industry contracts, and the cycle continues until the proverbial water finds its level. Unfortunately, I think there’s still some ugliness to come before things stabilize.

      Nor

      9 years ago

      Tony, why should i care if companies like Ping will be able to sell less ?
      Golf equipment market is almost a monopolistic competitive market, which is probably the best we consumers could hope for in the real world. The manufacturers can adapt or die, you can hypothesise that the price of the clubs will increase due to less sellers, but the demand is there, and my prediction is that there will be new companies (either startups or smaller companies such as Wishon expanding) seeing the gap and rise up to fulfil the demand of the cheaper clubs.
      Price of clubs also hasn’t changed much IIRC in the last decade. My 983k was retailed for $400, and in real price, things actually have gotten cheaper!

      Tony Covey

      9 years ago

      The demand is not there.

      Demand is decreasing, and supply is now decreasing along with it (Callaway and TaylorMade in particular are producing fewer units of each skew). We’re seeing that part of the industry shift from a volume-based model to a margin-based model. You’ll note that over the last two seasons TaylorMade has raised prices (look at pricing on what used to be $300 drivers), Callaway has raised prices (across the board), PING and Titleist has raised prices (915 is $449), and Nike is introducing a $500 driver (Vapor Flex) as well (raising their average ask). Adjusted for inflation, prices are arguably down, but measured by actual dollars you can’t tell me prices won’t go up. They already have.

      You may see some guys make runs in niche areas (Ben Hogan Irons, Renegar Wedges and Putters, etc.), but these won’t be impact players. You’re also not going to see the component guys expanding. The component market has never been worse (I speak frequently with a well-known component guy). Pricing is similar, and at many places the quality of OEM fittings rival that of mom and pop component fitters (have you seen the inside of Cool Clubs or Modern Golf?). As OEMs have offered head-only, build-on-site accounts to independent fitters, they’ve eroded much of what component guys argue was their advantage. The expansion won’t come from the component space, it will come from fitters offering OEM product.

      To offset the dwindling demand for equipment, you’re going to see companies move to direct to consumer models. For some that will be dedicated brick and mortar, for others it will be a larger online push. The idea here is to eliminate the middleman to whatever extent possible (keep that extra 30% for yourself). Titleist and PING can hold out a bit longer than the others because they’re so strong at Green Grass, but I suspect that eventually those models will change as well. What you’re not going to see is rapid and steep discounts. The volume-based model for golf is dead. That means margins must be higher, and the only way that happens is to raise prices or cut quality…or both.

      The real money…maybe the only money in golf is in apparel. It’s why Nike will thrive (I’m told it’s 3 years away from being a 1 BILLION dollar golf company on its own), adidas will hold its own. Titleist has the ball (high volume/high margin) and FootJoy. PING has a separate manufacturing business. Callaway’s ceiling is limited (it’s making a push with the ball (and we hear planning for an even bigger push), but it doesn’t t currently have the high margin products offerings that many of their competitors do), which is why they’ve been the most aggressive about raising prices.

      Low margins on golf hardgoods is also why Dick’s is clearing out square footage where they previously made 30-40% on golf clubs to make room for more Yoga where participation is growing and margins are in the 70% ballpark.

      Nor

      9 years ago

      There will always be demand, it may have dried up momentarily because OEMs and retailers oversell their stuff lately, but it’s there. People are going to have to purchase new clubs eventually.
      And not that i disagree with you, but i see this from economics’ perspective (and i think Dave S. above does as well). If there is a demand in the market for cheap clubs unserved by traditional OEMs, there is going to be a new entrant, assuming that the goods can be sold at a higher price point that its cost of production. And worse case scenario, if the actual cost of production is really that high, and companies has got to charge more to stay afloat, then we, consumers are screwed either way, number of players in the market won’t have that much effect.

      If OEMs wants to add value to their products via fitting, good for them, there is a market for that too, but off the rack value sales will not easily disappear, and very likely that it never will.

      And about the raised price, let’s wait and see, i don’t think the Flex was intended to be a volume seller. For other companies, i don’t have access to their balance sheet and income statements, but i suspected the costs has increased from inflation and wages rate increase in China considerably, and they raised the price accordingly.

      And yes, the real money makers, I live in SouthEast Asia, so i knew for a fact how cheaply those stuff can be made. Recently, i walked into Ping shop and saw a price of one of their head covers at an equvalent of $ 80. I almost puke at the price, knowing that the labours who made that one headcover got paid 1/8 of its price for their entire day worth of work producing god knows how many covers ! So yes, they companies will be fine for a while yet.

      Hunter

      9 years ago

      Tony…….good article and great insight. Only time will tell as to how this all plays out. I know with certainty that things are changing and will continue to do so. Every time a club gets netted own down or has a promotion to drive sales, it comes out of the pocket of everyone up and down the line. The direct to consumer sales model will become increasingly important. The companies keep it on the down low but that channel eliminates the retailers and the reps alike. Don’t be surprised if T & P follow suit. I cannot think of another industry that has gone down such a convoluted path. Now back to business………when will the Alpha 815 go on sale?

      Nor

      9 years ago

      Callaway still need to catchup with TM, so my bet is they are going to do it first.

      Btw, i hope neither (and everyone else) go full on Titleist/Ping , i need those deep discounts : P

      Reply

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