I had an epiphany this past weekend while wandering row after row of closeout and deep discount golf gear at the Michigan Golf Show: If the industry is suffering, it is partly because manufacturers have flooded the market with product. Everywhere I looked, there were bins of last year’s clubs, racks of clothing and piles of shoe boxes. It seems that vast majority of these were left over from last season or two.
So much product. So few buyers.
The industry’s solution was inadvisable. Instead of paring back to meet demand, it seems that manufacturers simply accelerated the product release cycle in hopes of making money off the gullible nincompoops who simply must have the latest and greatest. They’re to the golf industry what the “whales” are to casinos.
It hasn’t worked. TaylorMade, whose CEO was sounding the clarion call of impending golf doom, suffered a 28% drop in sales in 2014. I lost track of the number of new clubs they released that year.
Manufacturers ship, and golf gear piles up. Unsold merchandise has to be sold at discount to avoid a total loss.
I counted at least four large “outlets” at the Michigan Golf Show that I would say have a “national presences.” The shops either have prominent websites, or travel extensively to these golf shows. One sales staffer I spoke to said his company did eight to ten of these shows over the winter and spring months. In addition, there were several more regional shops, and a few local ones.
The business model of these outlets is easy to see. When the new clubs hit the shelves, they buy up as many as they can of the old clubs at a steep discount. Presumably warehouses and course retailers are happy to get rid of them, recouping at least some money while making way for new, higher margin products.
What golfers learn from this cycle is that you don’t need to pay full price—ever. If you are just willing to wait six months—or at worse, a season—you will find the club you wanted at a discount that makes the wait worthwhile. And therein lies the problem for manufacturers and first run retailers. They have large stocks of new clubs, but too many people are waiting for the price to come down.
The overstock and discount cycle has got to be killing manufacturers and retailers.
It occurs to me that golf manufacturers might be better off enforcing a sort of artificial scarcity for their best products. They could both reduce the amount of gear they make and also extend the product release cycle. Players would then be willing to pay more for a new release and have the feeling that they should jump on the purchase because they might not be able to get one in six months.
I caught a glimpse of this when I recently took my Subaru in for a tuneup at the dealership. While waiting, I struck up a conversation with the gentleman who has sold our family several Subaru cars over the years. He told me that if I was thinking about a new one this year, I should put my name on the waiting list NOW because there are not enough new cars to fill all the dealership lots. At that point, he said, the dealership had only two new ones ready to go. Further, he noted, the dealership doesn’t even offer discounts at this point. People are more than willing to pay full price.
Some of that had to be a sales pitch, as he wants to get people lined up for new cars. Our salesman knows, however, that in the past we have bought our cars with a significant Subaru VIP discount that lies outside normal negotiations. We have been immune to negotiating tactics and pressure sales.
Even if it was entirely a sales pitch, however, the perception is still valid. No one worries about being able to find a Ford, so there is lots of room for negotiation. The same thinking does not apply to Subaru.
TaylorMade Drivers (just to pick on the most prominent name) are like a Fords. You don’t have to worry about finding one, and there are so many that you are insane if you pay full price. Worse, Ford generally only releases new products on a yearly basis. Golf manufacturers might release several drivers in the same year.
Based on the amount of overstock I saw at the show, the situation might be even worse in the golf apparel industry. There were literally piles of boxes full of last year’s shirts. Even THIS year’s shirts were at fifty percent off.
The only rationale I can think of for the vast supplies of unsold golf gear is that the margins on new clubs are so high that the sale of a single driver covers the cost of three unsold ones. But if that’s the case, TaylorMade could offset the 28% sales loss by lowering its initial prices across the board. A $150 dollar driver would sell much faster than a $400 one.
Below are more photos of golf show overstock: