2005: Business - Tech Transfer
Tired of playing golf with rental sets that are nothing more than a sack of obsolete clubs? Or lugging your own gear through crowded airports?
It can be a miserable experience, one that Jim Williams hopes to make extinct.
Williams, chief executive of startup Styx Capital LLC, based in Austin, Texas, has teamed with retailer Edwin Watts Golf Shops to offer pro shops an alternative to buying rental sets: Leasing state-of-the-art clubs.
Styx has been purchasing equipment from Edwin Watts and is rolling out a club-leasing program to resorts, course management companies and other golf facilities nationwide. The company’s plan is to allow pro shops to enhance their rental experience by offering members or guests use of new equipment. Such “demo” exposure, in turn, may help pro shops generate new club sales. When the lease term expires – typically 12 to 24 months – Styx intends to collect the used equipment and sell it in the secondary market, most likely on Web sites such as eBay. Initially, Styx’s offering will include gear from Callaway, Cleveland, Mizuno, Nike and TaylorMade.
One of Styx’s early clients is Mission Viejo (Calif.) Country Club, where director of golf Brad Shupe said he leased five sets under 12-month agreements, including Callaway and TaylorMade packages. The TaylorMade package included an r7 quad driver, V-Steel 3- and 5-woods, Rac OS irons (3-PW), a sand wedge and a Rossa Monza putter. Shupe pays $57 per month per set for the TaylorMade equipment, and said he will rent the clubs for $40 per day.
“I’m sure I could buy (the equipment), use it, and then sell it on eBay myself,” said Shupe, who noted that purchasing five sets of similar equipment would run around $10,000. “But that’s not what I do for a living. That’s what (Styx does) for a living.”
It was in the computer world where Williams helped develop a business model that he thinks will work just as well in golf. Williams was a founding member of Dell Financial Services, a joint venture launched in 1997 with Dell Computers and CIT Group that focused on the leasing, financing and recovery of technology systems for corporate clients, such as Ford Motor Co. and Ernst & Young.
“During that time (at DFS), we were traveling quite a bit, and as avid golfers, we toted our clubs with us,” Williams said. “But I began dreading taking my clubs. The airlines were tightening up on their restriction and insurance of clubs, and quite often I’d rant.”
That sparked the idea of creating a club-lease program similar to the computer-lease concept Williams helped pioneer with Dell. Williams and his team – comprising several former DFS executives – began contacting various equipment manufacturers. Styx did not strike any deals with the makers directly, but piqued the interest of Edwin Watts after approaching the retailer in October 2003.
“We sat down and started talking about all the opportunities, and if a lease would work in golf equipment,” said John Watts, director of sales at Edwin Watts Golf Shops. “And after hearing how successful (leasing was for) Dell Computers . . . we found that all the same similarities exist in the golf world.”
Those similarities revolve around the principle that modern golf technology becomes obsolete within a year or two, which Watts said is “eerily similar” to the short lifespan of computers.
The short product cycle also lends itself to another revenue opportunity: used equipment sales.
“That’s what intrigued me the most,” Williams said. “There’s a great need for used equipment, especially in the global aftermarket.”
If Styx grows as Williams envisions, he wants to accelerate expansion by developing club-leasing programs directly for equipment companies and major retailers.
“Like we did (for Dell) at DFS, I want to be a partner with the equipment manufacturers,” Williams said. “I would like to . . . let them know that we have a financial alternative for them and their customers (in creating rental programs for pro shops).”
Under this model, DFS purchased $1.2 billion of equipment from Dell in fiscal 2003 – or 3.4 percent of Dell’s total revenue of $35.4 billion – that was then used for corporate lease programs.
Styx already has helped Edwin Watts launch its own lease program – “Technology Refresh,” which offers similar lease options directly to its consumers. The initiative, which the retailer began last March in Texas, has been expanded to all 57 Edwin Watts stores, and includes most of the major manufacturers. Under terms of a 12-month lease agreement, a consumer would pay $7 per month for every $100 worth of retail. Therefore, a $2,000 purchase would cost the consumer $140 per month.
“It’s a great way for consumers to buy equipment, especially the consumer that likes to replace their irons every year or every couple of years but can’t justify spending that kind of money,” Watts said. “The real test for this and the green-grass efforts is going to be 12 to 18 months down the road, though. If the consumer has a good experience and loves the lease opportunity, chances are they’ll enter into another one.”