How Will This Trend Impact The Golf Industry?
No matter what industry you are in…it has always been somewhat taboo for your supplier to compete head to head against you for sales by selling direct to the consumer.
Imagine for a second that you own a golf store in your local town that sells golf equipment. Now imagine that one of the companies you buy equipment from which happens to be your #1 selling product in your store calls to inform you that they will be opening up their own store right across the street…selling the exact same thing you do. Your worst nightmare has just come true…you are beyond upset…but don’t know what to do…and it gets worse. Not only is your supplier now your direct competitor right across the street…but they can control price and inventory however they see fit…which will most likely put you out of business and bury everything you have worked so hard to build. Don’t think it can happen? Well it is. And not many people are talking about it.
And taboo or not this seems to be the trend in many industries…look no further then Apple as a prime example. And the golf industry looks like the next one in line to follow suit.
Now…before I get too deep in to this article…I will say that I do NOT think this new trend by the big golf equipment makers spells the end for golf retail stores. But I do think you will begin to see some changes in the near future because of this trend.
Many of you might not have noticed but over the past couple years more and more of the large golf OEM’s have started selling their drivers, irons, etc right on their company websites. Here are a few of the examples: Taylormade, Callaway, Cleveland and Adams. So why are they doing this? Why are more an more jumping on board? And how might it effect the industry?
To find out the impact this trend might have on the industry I questioned some 40 retail store owners from across the globe, had a round table discussion with industry insiders and requested statements from the companies involved…which by the way only one responded (not surprised). I will break down their opinions below:
Industry Insiders – Opinion on How Trend Will Effect The Industry
INDUSTRY INSIDER #1
- “This will take some time to have an impact on the industry but it WILL DEFINITELY have an impact.”
- “The reason they are doing this is simple, to increase their bottom line. You have to continue to show growth in this business and these companies will do whatever they can to do so, even if it means biting the hand that feeds them.”
- “I think this will have an impact similar to a trend you saw in the mid to late 80′s in the golf industry, where golf shops began carrying custom club lines (clubs with their logo in the cavity). They will then fit you for name brand and try to switch you into a store branded club or set that they can make higher profit margins. Similar to what you see at stores like Dick’s but on a smaller scale”
- “The golf industry is the worst ME, TOO industry I have ever seen. Marketing guys within the companies get scared, if company X is doing it then they feel like they have to as well.”
- “I don’t think this will do well for the major golf companies doing this, although companies like Wilson might benefit from this. They could take advantage of this by focusing more on customer service.”
- Golf companies doing this are thinking short term, and not the negative long-term effects this will have on their distribution.”
- “What will happen when they start running special deals that their retailers can’t compete with? And you can bet that it will happen.”
INDUSTRY INSIDER #2
- “The reason this is happening is because they are frustrated with the retailers, and they want to be able to reach the consumer directly to have more control.”
- “They are trying to squeeze 10% sales increases any where they can.”
- “They want to reach the guy without a shop in his town that can feel confident about buying direct from the source.”
- “I do not think this will have a big negative impact on the industry. It is the new way commerce is being done, it is the next unfortunate step in the evolution.”
- “That being said, I do think this change will not benefit the golfer.”
- “One of the reasons the golf industry is struggling is because of the change that has occurred with the ‘relationship the consumer used to have with the guy in the store’. There used to be a personal relationship between the two, unfortunately that has changed.”
Golf Shop Owners – Opinions
Next we contacted “40 Golf Retail Shop Owners” for their opinions. You will tell the comments from the retailers and the industry insiders differ quite a bit. The industry insiders are looking at the core reasons why they think they are doing this and how it might impact the industry, whereas the golf retailer seemed to be more concerned about how they can adapt to the changes. It seems as though they feel they have no choice but to deal with the changes that often get thrown at them from vendors which impact their business.
Golf Shop Owner #1
- “I think it’s a very bad model for them.”
- “But we, as retailers, need to continue to do things that differentiate us from all our competitors. When I talk to other store owners, they seem to sit back and complain instead of being proactive and work towards becoming better and helping people play better golf through fitting.”
- “I am not sure exactly what we could do to stop this type of behavior.”
- “As long as the vendors play “fair” and don’t make us play by a different set of rules and provide us with the tools necessary to compete, we should be fine.”
Golf Shop Owner #2
- “If this trend continues, it will eventually spell the end of smaller retail shops. The Big Box stores will have all of the power (think WalMart), and golf Pro Shops and smaller mom and pop shops will have to shutter.”
- “Vendors need to decide if they are retailers or manufacturing clubs for sale.”
Golf Shop Owner #3
- “I think that it’s one more arrow being fired at the brick and mortar golf shops. As it is, people come into stores, “steal” fittings and then buy stuff on ebay/other online retailers. Golf stores are turning into places to buy balls, tees, maybe clothes, and to touch lots of clubs but not buy them.”
- “Ultimately, I think this is another example of something that does a disservice to the consumer but it probably “good business” because it’s profitable. Obviously, any OEM selling their clubs at retail prices is making unbelievable margins.”
- “This cycle is: more frustrated golfers playing less golf and the industry as a whole continuing to shrink. More emphasis needs to be placed on brick and mortar stores because we are the ones doing the fitting and helping people to play a bit better.”
Golf Shop Owner #4
- “We have already dropped one line that has chosen to walk down that path and are monitoring the others very closely.”
- “I believe the Callaway guy said that 43% of club costs goes directly into advertising for them, and now they are selling direct? So in essence, we are paying 43% for them to take business away from us.”
Company Statements
Like I previously stated, I reached out to those companies that are selling equipment directly to consumers on their websites. Unfortunately only one responded to my request.
Taylormade Golf
- “Our top priority is to service our customers, which is why we opened our e-commerce site,” said David Abeles, TaylorMade’s executive vice president and general manager. “It’s strengthened our bond with avid golfers while also helping us support our trade partners through shared revenue.”
What’s Your Opinion?
Now that you have had some time and input from others in the industr y I would love to hear your thoughts on the topic. How do you think this might effect the golf industry? Do you think this is a good business model for them to compete with their own distribution channel? Do you think retail store owners should be upset…or do you simply think this is just part of the evolution of retail sales?
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{ 23 comments… read them below or add one }
let’s be real, across the board in most industries, the big companies are selling direct, and/or companies are being built that are strictly online based that are giving a HUGE run for their money to the small brick and mortars…
And/or places like GolfSmith are coming in and dominating because they can buy in bulk on a national level.
What it comes down to though is customer service. Why would you shop at a brick and mortar store if they don’t provide something extra? If they ONLY sell you stuff and don’t provide value, then don’t shop with them.
Offer fittings (sure, they can take those numbers elsewhere, whatever, provide a service and give them a reason to come to you…) let’s say that customers are coming just for the fittings, well, then your business is no longer selling clubs, it’s now selling services and other pieces of the pie, clothes, shoes, tees, books, dvds, whatever. That’s great, now you know where your real business is and you can focus all the more on that side of things, and if you happen to sell some clubs, great.
The world changes, every company wants to make money, and as smaller business owners, adjustments always need to be made to stay current.
Not saying it’s right, just saying it’s the reality of what is happening and is going to continue to happen in the “digital” age.
Just my opinion having watched this kinda stuff happen in the bicycle, backpacking and rock climbing industries.
First off, lets get real. The golf manufacturers like Taylor Made and Callaway and Cleveland are all about money. If they think they can do something to screw over the little guy they will. For example. Cleveland golf is obviously doing something for tgw that they are not for the store I work at. We are not huge, about 2.2 million per year, but we do a good amount of business with Cleveland. TGW has a 100 tgw gift card when you purchase cg16 irons. I know what we pay for the irons and there is no way we could give a 100 dollar gift card away and stay in business. Cleveland says they aren’t doing anything special. But I know better. IT has happened with other companies. Ping is the only one that is strict with price controls, and view us as partners and not competitors.
Many companies make you chaise after the discounts. They make you fill your store with so much stuff that you have a major inventory problem. They want to do incentives based on growth. Well when you grow one quarter then you don’t the next, you basically are even. You can’t grow every quarter. Ping doesn’t do that. You don’t have to overload yourself with clubs. You can have one display iron set on the wall and do special orders all day long. Taylor Made wants you to stock 30 sets to hit goals.
The thought of stand alone stores by the manufacturers is a scary one. When I was running a golf store in Roseville, CA, I had my Nike rep approach me with an idea to manage a Nike golf only store that they were kicking around making. Basically it would be a privately owned store that was Nike Golf exclusive. He promised me that the margins would be huge and we would get first dibs on product. Problem was, it was Nike, and I don’t think it would make it. But the thoughts are definitely thinking about it. Just like the rumors of Dicks buying titleist, a stand alone TaylorMade golf store is terrible for the industry.
I’m with Tim. Selling direct to customers is normal in a lot of cases. Take all the outlet stores you have in the states. Take Nike, Brooks, Asics and others in the sporting goods industry. Selling direct raises your margin. Selling direct in an Outletstore gives you opportunities, that you don’t have when only selling to distributors or retailers.
Regards,
Michael
This is a good thing for the people that dont have a store need to them or for international costumers
I have to say that I bought my last set direct from the company website. The experience was great for me as I knew what I wanted and I got the whole deal done sitting at home. There was a small problem with credit card – they called me right back and got it sorted in a flash. I’d like to buy from my local pro shop but they were interested in pushing a particular brand and the price was about 15% – 20% higher than what I was getting from the company direct. Its a tough call but in my case I really did feel a lot better buying direct from the company.
First off, this is a well written piece by the gentleman at mygolfspy. I have projected this day would come for years now… During the founding years of Carnahan Golf; a boutique golf brand that sells the C. Carnahan line exclusively to on course pro shops. We made a strategic branding decision to create our own path into the marketplace by going “green grass”.
Mark makes a great point about certain OEM’s offering exclusive marketing deals to hand chosen superstore accounts to push their new product’s sales. When your in the high volume business it seems like price is everything and service is nothing.
Best of luck to all the small shops out there offering excellent service to their customers. Your customers should understand the additional 10% price increase on products allows you to keep the lights on!
For every job lost because of this, another one is created. The OEM’s can’t just have some accountant whip up an online store for them. They hire a web designer to do the work. Then they have to hire people to be in charge of distribution, etc.
They aren’t cutting out the middleman, they are employing their own middleman to make more money.
My problem with this is that the OEMs cannot provide any service in terms of fitting. Any service they could theoretically provide through demo days or such events is fine, but you lose the service that a good shop provides: comparing different OEMs. If you go to a TM demo day will they tell you that you might get better ballspeed from a PING? This lack of service will lead to more badly fit equipment, which helps no one. To suggest that people should pay brick and mortar stores for the service and then buy direct is unrealistic. A) Very few people will pay for the service at any price. B) Almost no one would pay for the service at the price it would cost if brick and mortar stores knew they weren’t going to sell any clubs. Hence C) Brick and mortar stores, devoid of profits from selling clubs, go out of business taking with them the opportunity for fittings.
I think this whole thing is enormously short sighted on the part of the OEMs, which is not surprising, only disappointing.
My local shop did such a great job of fitting I bought from them even though I paid more. It has to be about service for the little guys.
Gone are the days of the pro shop making 40 points on golf clubs. They are lucky if they get 15 these days. Its tought for them unless they are moving large volumes of product. The store where I worked at had to discount clothing up to 3 times before it would sell. So you would sell some at 50 points some at 25 points and some at 5 points. Golf clubs profits where made on deck line clubs not the big name brand boys. The main retail shops would match prices on clubs. Its a different world out there with E-bay and the likes. Its good to hear that service still counts for something.
I’m a junkie and I buy and trade all the time. OEMs start their own store, how likely are they to have a good if any trade-in policy. I doubt they’ll want to get into selling used equipment as well. Sounds bad for me and sends me more to ebay.
Bought an Adams driver at Golf Galaxy – on sale for 259.00. Played it a few weeks, didn’t really like it. Trade value after 5 rounds – $46.00. Callaway, Taylor Made, Tour Edge all sell used equipment now. They have trade-ins as well and give fair prices. Golf Galaxy trade in values are a joke. Sold the driver on E-bay – still take a hit, but sld it for 3 times what gg offered.
Internet marketing is a growth industry whether we like it or not but there will still be golfers who prefer to buy from people rather than websites.
Customers like choice the stand alone retailers selling one brand do not have that luxury.
Our customers like to hit and compare brands and usually the wholesaler with the best technology will always win.
Suppliers will quickly realise their return upon investment is minimal for the outlay necessary and customers will always shop where the best bargain and range is.
Been there, done that… 75 year old family business (electronics retail) now down the tubes due to internet and big box stores. Our local sales tax (9.1%) kills us when internet guys do not have to pay it. At one time we had 45 employees (pre internet). All gone due to the power of the public & institutions buying on the internet. Mom and pop shops be warned, get out while you still have some money left.
My opinion….
I think a small pro shop will be better off than a big one that tries to keep a large inventory. A small custom fitter with a variety of demos and a good custom fitter is what we need more of. They give lessons, fittings, advice, carry some starter-hacker sets, along with shoes, balls, bags, and then order straight from the manufacturer what their customer needs, that way they aren’t covered up with inventory that they will loose money on when the next newer better model comes out. BUT the only way it would work is if the manufacturer fills their orders in a timely manner. Our small golf shop didn’t make it because the suppliers required them to buy a bunch of crap that didn’t sell along with 10 sets of the same thing, then right after the order got filled they came out with the new stuff and discounted all the stuff they just bought. The shop couldn’t keep up and went under. They would have been fine if the suppliers allowed them to order 1-2 sets at a time, and supplied them in a timely manner.
Markets change constantly so must business owners. This is an opportunity for smaller retailers to differentiate thru customer service. Throw in a service the manufacturers can’t provide; regrip clubs at cost, or maybe an annual maint program to regrip and clean. Something that the manufacturers won’t provide.
I think everyone has made great contributions to this debate. For me, I buy my equipment from my pro shop for a couple of reasons. #1, I’d like to see the shop, pros, etc., stay in business. They’ve always gone the extra mile for me as it regards fittings, try and buy, working with me on what’s best for me, and, #2 because I’m inherently against the propagation of “no service” industry. Wal-Mart, Callaway, Dicks, whoever else, never did a doggone thing for me – I’m not planning to do anything for them. We talk about thinking globally and acting locally but loyalty apparently dies in front of the dollar. Go figure …
As a “Mom and Pop” shop owner, we have have survied nicely by buying and selling used OEM equipment, reshafting,gripping and fitting. I look forward to OEMs going into the 1 on 1 retail business…. as golf “representives” in those OEM stores weither in person or on the web will surely develope a reputation as good as “used car or insurance salesman” …the average golfer will always seek the best equipment to try as well as the best deal, but will soon know if they have been had!.Good used golf clubs (newer to the customer) well priced will also be on their minds and this is where the small reputable small golf shops fit in nicely – our business should boom……I remember when Sears, JC Pennys, started selling clubs — o’boy what an uproar from the Pro shops — then box stores came into being — now, OEM direct selling!! Remember the grass hopper…..us ants will just have to keep our heads and work smarter and a little harder …as I see it …..hard work never hurt anyone.
I see no problem in the OEM’s selling on their web sites. Thye golfer looking for service will come into the shops and buy. We just cut the OEM by $20 and make the sale. They are selling at MSRP or MAP.. If a mom and pop are to damn dumb to under cut teh OEM.. then go out of business. We/ve been competting against the big boys from the start and we do quite well against them. Strong survive.. the weak go out of biz. American capitalism at its finest!
I know Adams sells through shopatron. the sales go to participating retailers from consumers that order on Adams’ website.
SHOULD HAVE SEEN IT COMING, when Calloway & Nike (I think) won the court case that allows them to set the price for their clubs regardless of where they are sold.
Steve P, as I see it, you are right. I did some research on this subject, and Adams does sell through Shopatron. Shopatron is a genius concept that is structured to handle Brands selling direct but still supporting their retailers. Every sale on Adams Golf site is put into an order exchange that allows local mom and pop shops to request the order. The closest stocking retailer to the shopper is awarded the sale. This is a win win solution. No wonder you look at Shopatron, and they are experiencing exceptional growth. This type of intelligent direct selling is the wave of the future!
Although, I just saw that Adams was sold to Taylor Made. Hmmm, wonder if they keep their honest strategy or jump ship and sell direct.