Is Golf Club Component Pricing Getting Out of Hand?

The cornerstones of the component business and the emergence of the cottage industry known as component clubmaking was based upon the average person’s ability to get not only affordable clubs, but also good quality golf clubs as well. There was a huge void at the time between the price and quality of name brand clubs compared to those available in the discount sector. Plus the local clubmaker could service the needs of their local area on a more personal and in many cases a more knowledgeable level. We have the following families to thank for this: Paul’s, Maltby’s, Altomonte’s and Lin’s. You can consider them to be our founding fathers of the component clubmaking industry.

What was a fledging industry in the early 1980’s, component clubmaking quickly grew. This was largely due to the price differential between golf components and assembled OEM clubs. A clubmaker could easily put together a set of custom built components, sell it at half the price of OEM clubs, and still make money!

Year Average OEM Retail Price
For set of 8 irons*
1965 $200
1975 $300
1980 $400
1982 $500
1984 $600

Dynacraft Prophet CNC Irons*Source, Modern Guide to Clubmaking, 1987

For a clubmaker, the cost of the components in the mid 1980’s for a steel-shafted set of 8 investment cast irons was less than $120 including the cost of supplies. The most expensive item was the iron golf club head which the clubmaker could purchase for roughly $9.00 per head. Maybe surprisingly to some, as the foundries increased efficiency at every stage of production, not to mention fierce competition, prices have held steady even to this day, while only the cost of the shafts and grips have risen.

But for clubmakers to put together the components and make a profit is becoming less and less true today. Why? As many component manufacturers matured, they began offering more innovative products, becoming OEMs themselves. Undoubtedly, performance and quality improved, but the pricing has increased exponentially. When you begin to factor in the price compression amongst the OEMs reducing their costs to become more competitive, there is less of a differential in price as there once was.

Consumers need to fairly understand the costs associated with an OEM golf club. About 2/3rd of this cost is marketing and distribution. Marketing costs refer to all the print ads, TV commercials, player endorsements, product giveaways, etc. Distribution costs refer to the cost associated with getting the product to the retailer. Just think about distribution – the more hands a product touches, the higher the price. In the case of many OEMs, there are costs associated with paying sales representatives, distributors and possibly even getting the product onto the retail shelves. Brand name companies typically offer drivers starting in the $299 range. Taking out the marketing and distribution costs, a driver will price out at about $99.

Now let’s look at some component costs. As competitors start releasing their 2008 catalog or publishing their new prices on their internet sites, one can very well see how the pricing by some component companies do not allow the clubmaker to make a profit and compete versus an OEM. Let’s take the driver as an example. One very large component supplier’s average priced titanium driver for 2008 is $99.28. Some boutique component distributors sell their drivers for many times more. In one example, we’ve seen one company offer the clubhead itself for $299, while many others are in the $100 to $199 range.

We also need to include the cost of the other components. OEMs typically put in their own branded shafts, which can vary greatly in quality and price. For the sake of argument, let’s say the OEM shaft is equivalent to a $30 shaft, which should easily cover the majority of OEM stock shafts. And OEMs typically use their own branded grips, but again, for the sake of argument, let’s say they use the equivalent of a $5 grip.

So when you add up a $100 component driver, a $30 shaft and $5 grip the hobbyist orPower Play System Q2 Driver do-it-yourselfer is going to spend $135 for the just the components to make a driver (more with a premium shaft). If a clubmaker sells this club at $199, he or she would make $64 gross profit at 32% margin. Keep in mind, however, he is now competing with a closeout OEM model that might also sell for $199. Alternatively, if the clubmaker tried to sell the club at $150, his profit margin drops substantially to 10% and his profit is now only a mere $15! By the time labor and other overhead is added in, the clubmaker would most likely have lost money.

So are there still values out there that allow the clubmaker to make a profit? Yes, take a look at Hireko’s average component head price for each product category for 2008.

Drivers Fairways Hybrids Irons Wedges Putters

$ 51.95 $ 12.99 $ 12.95 $ 9.06 $ 8.74 $ 16.19

Hireko’s average priced titanium driver head is in the $52 range. Couple this with the same $30 shaft and $5 grip, and the cost is roughly $87. If the clubmaker sold at $199, he would make an incredible 56% margin and a profit of $112. Even if the clubmaker were to sell at $150, he would be making 42% margin and a profit of $63. The clubmaker could even sell at $125 and still make over 30% margin! Alternatively, if clubmaker upgraded to a premium shaft which costs say $60, his cost is now $117, which is still nearly $20 lower than the competing $135 with a mid-end shaft.

While this is but one example, when you compare Hireko’s pricing to our competitors across the board, you will see proportional savings in each category. Your hard earned dollars will go further with a component company that is looking after the best interest of the average golfer.

With gas pricing rising along with food, electricity, health insurance, your child’s education and just about ever other conceivable product or service, we at Hireko are here to carry on the fundamentals of what the component industry was based upon; affordable pricing and good quality you can count on. Of course, each company has its own prerogative to set their own prices as they see fit, but at Hireko, we firmly believe that by keeping prices fair, our customers have the best opportunities to thrive.

13 comments

  1. […] Hireko’s average priced titanium driver head is in the $52 range. Couple this with the same $30 shaft and $5 grip, and the cost is roughly $87. If the clubmaker sold at $199, he would make an incredible 56% margin and a profit of $112. Even if the clubmaker were to sell at $150, he would be making 42% margin and a profit of $63. The clubmaker could even sell at $125 and still make over 30% margin! Alternatively, if clubmaker upgraded to a premium shaft which costs say $60, his cost is now $117, which is still nearly $20 lower than the competing $135 with a mid-end shaft.  Continue Here…. […]

  2. Mark says:

    Except that we clubmakers can’t price drivers higher than Hireko sells the same assembled clubs. We can’t chose a 50% or 42% margin if we want to because our buyer could just google the setup we suggest and buy if from you. I understand your point, and I also understand why you sell assembled clubs, but we don’t have as much profitability potential as you suggest.

    [Hireko’s average priced titanium driver head is in the $52 range. Couple this with the same $30 shaft and $5 grip, and the cost is roughly $87. If the clubmaker sold at $199, he would make an incredible 56% margin and a profit of $112. Even if the clubmaker were to sell at $150, he would be making 42% margin and a profit of $63.]

  3. Myron Smith says:

    The market is changing. The best value that your professional club fitter and offer is his knowledge and advice for the best equipment for your swing.

    As a professional club fitter I am happy to provide what ever services my client is looking for. Advice on equipment, complete fitting services, professional club assembly, assisting the client with do-it-yourself assembly.

    As golf equipment professionals it is our knowledge that sets us apart. And in the end that is why our clients seek us out.

  4. Tom Powell says:

    I have made clubs from Hireko and Golf Smith. Used Golfsmith a lot. Their 2008 hot driver is 200.00 for the components to build the club. I said to hell with them and bought a used TaylorMade R7 460 for 150 and could have got it cheaper is I looked harder!

  5. Chris says:

    At 6’4″ tall, there is no way I could have gotten a used OEM set of the quality and had them custom fit for what I paid for my component set from Hireko. (I waited until the heads I wanted went on sale, just like I would have done with the “name brand,” and saved even more.) Hireko has allowed me to put together a custom fit, high quality set of clubs, irons, woods, and putter, all for less than the price of a name brand Ti driver. Just the fact that they fit me and they feel comfortable to swing makes a great difference in my game.
    My brother, a former golf pro, chuckled a little when I first showed him my set, but after he hit a few of the clubs, he came away impressed. I doubt he’ll trade his clubs in, but he has a new respect for what you guys do. For me, it’s is the differnce between having a “cool” set of clubs that sort of fit, but sit in the closet because I blew all my budget, and having a great set of clubs that fit me and enough left over to pay some greens fees.

  6. Gene Wines says:

    Golf Club components pricing getting out of hand. You bet. What I find around the Venders is they want to make all the profit. As a buyer of lots of components. I find the price of a good driver head is getting too high.

    They forget we are working really for them. We must have their products to keep the doors open. We must have a margin tokeep the doors open. Vendors need to give a clubmaker a price that is secret and price other’s, what they please.Too many customer use the Internet to compete with me. Regardless of my professional experience, fitting and clubmaking expertise.

  7. Dennis Kearns says:

    I concur. The price of components is verging on the ridiculous. As a part time club maker/repairer I cant justify the prices I need to charge to make a profit. I am being priced right out of the business as I suspect many of my compatriots are. Who is going to step up and rectify this?

  8. I also agree with both Mr. Wines & Mr. Kearns about prices. With people going on Hireko’s website, they see what we pay for components. If they order the club built they still pay less than what I need to charge to pay my bills! My store has been selling Hireko products for the last 15 years. I’d like to see Hireko help out the retailer more by putting our names on their website so potential customers know where they can buy their product. As Mr. Wines said, we are working for Hireko

  9. Jim Burden says:

    If you are selling widgets, and widgets only, you likely have to be the best price to succeed. Clubfitting is a personal business. You are selling your skills as a problem solver. People are more sophisticated in price shopping via the internet. However, the internet is not going to meet them at the driving range, conduct a clubhead speed check, conduct critical measurements, assess launch and other issues important to custom fitting and allowing the people the opportunity of more completely enjoying the game. Like many other businesses, you have to sell yourself. Concentrate on the skill of marketing yourself and your clientèle will grow.

  10. Bert says:

    I have to agree with many of the responses above. Unfortunately we cannot make these HUGE margins (at least I can’t) on clubs. One reason is the competition – there seems to be more and more “clubmakers” out there all the time. Another thorn in our sides to a certain extent is eBay. I must admit, I’ve bought/sold certain things on eBay myself. However, it really irks me when I see someone selling a complete built set of irons on eBay (some of them are even some of the exact same iron heads I sell myself) for $129.00….. complete – of course I’m SURE they will have the best shafts that $2.00/each can buy, and I’m SURE they are swingweighted, spined, FLO’d, frequency matched, etc. – oh yeah, and the best grip you can get (for under a buck) will top it all off!! When I quote someone on a custom fitted, well-built, detailed, and complete (in my eyes) set of clubs, they are getting not only quality components (ALL components), they are built with pride and care, and they will be the best damn club I can make – PERIOD. Mine are substantially more than $129.00 for the complete set. The odd time someone will come back with “I saw the exact same ones on eBay for $129.00″ – when you explain all of the differences, some people take the information to heart and will get me to build them a set, while others think I’m handing them a load of bull trying to rip them off. One last thing about eBay – I was going to build myself a nice, new, swanky driver – I priced out all the components I wanted, it just so happened that a nice brand new (still in the plastic) TaylorMade R-5 was just closing on eBay – I picked it up for $52.00, threw one of my favorite shafts in (which I already had), and I have myself one hell of a whammer stick to smack the ball with. It’s a bit of a dogfight out there. All in all, I think component prices are getting a bit out of hand – especially with eBay out there, where you can snap up some big name brand stuff for cheap. Unfortunately I don’t think there is a magic answer to this dilema. Thanks for listening.

    Bert

  11. Ted M. says:

    The prices are getting out of hand, but the fact is club fitting was and is a personal business. You are selling a service. If a golfer wants to go with a cheaper set, give them your card and info and make money adjusting that cheapo set for them. or when they realize 6 months later that they made a mistake.

    Develop your selling skills.

    The internet is going to make it hard to compete on price so you need to make people more aware of the benefit of your services. This may mean carting your stuff to a local range and getting permission to demo your clubs. Frankly I’ve never had trouble making a sale once someone has hit their big name driver bought off the rack anda club I have even just fitted to the basic measurements of someone similarly sized.

    People need to feel the difference before you can capitalize on it.

  12. Bob S. says:

    My efforts in the clubmaking and fitting are a very personal. I don’t have a storefront and I basically get my work through verbal references. This is a hobby business for me because I really enjoy the whole fitting and building experience. I have been doing this for a number of years. However, I have to agree that the rising prices of components have risen to a problem level. While I use Hireko and some others but, I find myself looking for bargains online and in places like a Golf Galaxy trade in department for OEM I can upgrade or rebuild to personal specs. The other issue is getting enough information on the clubheads to be able to make good comparisons with the OEM manufactured heads materials and performance. I have several customers. mostly tall, low handicap players that will bring me a set of irons they have purchased at some outlet or golf show for me to customize to the fitting that I have on file for them. This solves my parts problem and usually ends getting me more work based on referrals. I would still like to see improvement in the components and pricing area that would let me improve on the OEM parts and be competitive.

  13. Steve D. says:

    Is component quality getting better?
    I don’t think so. Recenty I purchased a set of iron heads with weightings that were “in tolerance”, but off the scale relative to the other heads in the set. With components now being made off shore, the quality of even forged heads is being deserted as the “tolerances” are wider than they should be. At 3 gms tolerance, iron heads are unfit in the midst of today’s technology where production equipment can produce far better exact weighting. Distributors should at least try to provide sets that are reasonably distributed in terms of head weight in order to allow clubmakers a reasonable chance of building a set to spec without having the overhead of purchasing another set in order to find well matched component sets. This raises the cost and lowers their margins while he distributors margins remain the same. This results in “less” custom clubmaking, and thus lower sales for both distributor and clubmakers alike.

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