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.”
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.
- “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?