The retail world of golf

The golf retail marketplace has seen big changes recently

As any new or seasoned golfer knows, there seems to be a dizzying array of different brands of golf items available at many different retail outlets—all for the sport of golf. Today, you can purchase both soft and hard goods related to golf at pro shops, independent retail chains or big box stores, and let’s not forget the new beast: online stores.

Through attractive demographics, income levels and the increased popularity of televised PGA tournament play, the business of golf over the years has certainly grown.

In the mining industry, the people who tend to make the most consistent money are not the miners themselves but the companies that sell the picks and shovels. The same can be said with the golf business, with overall sales of golfing equipment being big business. However, despite these past trends, there have been market forces at play over the past few years that have dramatically shifted the golf retail landscape.

At some point in their life cycle, industries often experience the market forces of consolidation. As market share is competed for, leaders eventually emerge from a field of competitors. Naturally, the leaders look to protect and grow their annual earnings and improve both operational and financial efficiency.

When product innovation becomes stagnant, prudent business strategy to achieve these goals is through acquisition (consolidation). Consider how many North American vehicle manufacturers, personal computer companies and major movie studios there are today compared to several decades ago, and the answer speaks for itself. This type of consolidation has occurred and is still occurring in golf equipment retail throughout the Canadian market because it is a maturing (if not already matured) industry.

For seasoned golfers, ever wonder where the once popular Ram golf clubs went? How about MacGregor? While some brands have faded, others—such as Adidas, Titleist, and Calloway—dominate the market today.

In terms of golf equipment retail companies, golf course pro shops used to be the primary outlet. However, stores such as Nevada Bob’s and Golf Town arrived soon thereafter to offer a wider array of products at more competitive prices. In response to off-course retail competition, pro shops managed to capture a niche with course-branded soft goods that further differentiated their products on offer. Nike golf shirts with the iconic swoosh logo are great, but by adding, for example, the iconic Banff Springs Golf Club logo, the customer all of a sudden was given one more reason to buy the course-branded shirt over the other Nike shirt without the golf course logo.

Ultimately though, the lion’s share of golf retail went the way of the stand-alone retail shop. In Canada, Golf Town, through savvy business tactics, eventually wound up as the industry leader with over 40 per cent market share of the entire business of golf retail.

Steve Dyer has spent an entire career in the distribution of golf equipment as a manufacturer representative, and throughout the years he has represented a variety of different manufacturers.

Throughout the years, he has also seen a sharp decline in the number of independent manufacturer representatives like himself. Currently, he represents, on behalf of Waterloo-based Tournament Sports Marketing Inc., both the Bridgestone and Antigua brands.

These brands are in golf retail parlance "second-tier" and so have managed to carve out a niche in the face of reduced suppliers to the market. "First-tier" brands such as Nike and Adidas, instead tend to hire in-house company agents to market their product throughout Canada.

The reason for this is that independent brand reps such as Dyer traditionally are compensated through a commission structure. If a brand does several million dollars of sales in a single territory, the independent agent can make more money than if the first-tier brand were to bring the rep in-house and pay the going market rate for a typical salesperson’s salary. Does this compromise worker incentive? Maybe so, but the strength of first-tier brand equity usually compensates for any such reduced productivity.

The change to the golf retail marketplace has occurred rapidly. By looking at the Southern Alberta market and Dyer’s experiences within it, this becomes clear. “In Alberta, 10 years ago there were 20 independent off-course retail accounts and now there are only two," said Dyer.

Despite the challenges facing professionals such as Dyer, a saving grace in the Alberta market especially has been the trend towards selling corporate-branded golf equipment for promotional purposes. In this distribution channel, promotional marketing companies buy soft goods from individual agents such as Dyer, slap on corporate logos and then sell the products to corporations with a markup between wholesale and retail prices. Although this phenomenon is for the most part unique to Alberta, it nonetheless provides an encouraging growth opportunity.

The golf retail industry’s recent consolidation ultimately has altered the marketplace. However, as is the case for many people in other industries going through a similar shift, catharsis ultimately lies in savouring the adventure and enjoying new opportunities. After all, opportunities are everywhere, given the right mindset.