To survive in the retailer market, whether you are large like Edwin Watts or small like an independent clubmaking, fitting and repair shop, the key to success will be excellent customer service.
State of the Golf Industry
Recently I saw a press release that long time retailer Edwin Watts is filing for bankruptcy. That caught me off guard as that was one company if you wanted your products to be in it would be Edwin Watts. I began to ask why such a well-established company is going through this ordeal and here are some of my thoughts which may or may not surprise you.
Brick and mortar trend
Let backtrack first. Sadly, the first victims in the retail golf sector were the independent or Ma and Pa retail stores, who have long since vanished. Those were the kind of places you went for the personalized service, were convenient as you could walk out with a brand new club(s) right then and there. With the increasing popularity of internet shopping, the convenience factor was no longer the lure to draw people into their store when purchasing was only a mouse click away.
One of the other lures that a store has to draw people in is price. Several years ago manufacturers began implementing MAP (Minimum Advertised Pricing) and more importantly strongly enforcing it. The penalty for a manufacturer selling below MAP is being cut off what potentially could be that one product or line that generates the bulk of their business. Who wants to take that chance these days?
I have been on both sides of the fence. Without MAP, you could be aggressive and negotiate price for better customers or throw in some free balls, hat or whatever. Margins sucked though and you hoped to make it up on volume. However, those practices are long gone as MAP pricing evened out the playing field and commoditized golf equipment.
There is a double-edged sword with a retail location. The positive is a customer can look at, touch and feel the product and gain first-hand experience they cannot in a catalog or online. The downside is brick and mortar stores have the problem with potential customers utilizing their services and then buying elsewhere where they didn’t have to pay shipping or state taxes. Yes, people will do this and spend 45 minutes with a sales rep (possibly tying up their launch monitor) figuring out what performed best out of a host of manufacturer’s clubs. When it comes time for the salesperson to seal the deal, the customer says, “Let me think about it, I might be back tomorrow.” At that point, the sales rep knows that is the kiss of death. The customer is going online where they can save 7 to 9% on a $300 driver or $900 set of irons. That same customer doesn’t realize that $25 or $75 doesn’t go back into their local economy and wonders why there is always a tax levy on their ballot each year.
The only way this practice will stop is if laws go into the books with uniform Internet sales tax reform. Just don’t let our so called “representatives” in Washington DC to get their hands on one red cent of it; it should go to lower the national debt.
Limited product life cycles
Another deterrent nowadays for brick and mortar stores is the necessary evil of carrying a large assortment of inventory. Let’s say company A releases a new model. It takes a little time for the store to get proper stock of the most popular flexes, lofts, etc. Edwin Watts stores were primarily in warmer weather places, but for areas north a hot new product may already be discounted by the time the peak of the season occurs. It used to be a retailer had a couple of years that a product would be current. Now the prices get slashed after 6 months and the retailer’s cost of goods is higher than the reduced going rate on the internet. The manufacturer might help the retailer by giving the store free merchandise to offset their losses, but now they got more of the product people don’t want – they want the newest product. It creates a vicious cycle for retailers.
Who is really to blame?
To a certain degree, the average consumer is because they demand newer products at a more rapid pace and the manufacturers oblige. Believe me it is not hard to design new clubs. You could tweak a model, change graphics and bingo you have a brand new model. However, it is not going to be revolutionary or leaps and bounds much better than the generation or two before. However, the biggest blame goes to shareholders of some of the major manufacturers who have flooded the market trying to gain market share. I am afraid that is an unsustainable path in the long term. This will force more retailers to go out of business and leave only a few strong or well financed companies to act as distributors for them. Maybe that is their end goal.
To survive in the retailer market, whether you are large like Edwin Watts or small like an independent clubmaking, fitting and repair shop, the key to success will be excellent customer service. Golf clubs or equipment (like grips and shafts) may be commodities, but that cannot be said for customer service. Maintaining efficient inventory levels and cash flow are two other keys. Lastly, if you are selling on price alone, you will not survive – someone will always be willing to go lower.