Mass merchants increase premium golf product sales, availability
Tuesday, November 29, 2011
It was nearly two years ago when Spalding began selling its top-of-the-line Strata golf balls to mass merchants such as Wal-Mart and Target. And for a good while after that, the Chicopee, Mass., equipment maker faced intense criticism about peddling its premium products through that distribution channel. It would damage the brand, industry watchers claimed, and it would anger the pro shops and off-course retailers that traditionally sold the company’s wares.
But James Craigie, Spalding’s chief executive officer, felt he was doing the right thing and argued that the move would increase sales without harming the Strata name. He also said the move would provide much-needed revenues that could be used for advertising and promotion, an area in which the company was overspent by its biggest competitors.
He also was sure that despite all the flak Spalding was taking, other ball companies soon would follow suit.
“Golf is one of the very few sectors in the entire consumer products world that feels this sort of prejudice for the mass merchants, which are very strong places of sales for so many businesses in this country,” Craigie said in spring 2000. “But I think the clock will change on that pretty quickly.”
Change it did, and as 2001 winds down, mass merchants – and price clubs such as Sam’s and Costco – are looking pretty good to ball manufacturers everywhere. Some, like Titleist, officially have begun selling some models in those channels after shunning them for years. And others are seriously considering doing the same.
But the main reason companies such as Titleist took the plunge is that more consumers, primarily those who are fairly new to golf and don’t have the channel bias of more veteran players, started buying their balls through mass merchants and price clubs, especially as the outlets began stocking more premium products. In addition, the advent of new competitors such as Callaway and Nike and the success of balls such as Precept’s MC Lady made it even more essential for established ball makers to find new places to sell their goods. As a result, the mass merchant/price club channel has become larger on a unit basis than any other in the game. That’s larger than green grass, larger than off-course retailing and larger than sporting goods.
“Ball shipment numbers from the National Golf Foundation show the domestic ball market to be at 50 million dozen,” said George Sine, vice president of golf ball marketing and strategic planning for the Acushnet Co., maker of Titleist products. “Of that, 10 million dozen are sold through on-course stores, another 11 million dozen off-course, 9.5 million in corporate custom and 6.5 million though sporting goods. That leaves 13.5 million through mass merchants and price clubs, which is 27 percent of the total market.”
That development made it imperative for companies like Titleist, which recently began selling its HVC line in that channel, to go there, especially considering that the three primary mass merchant chains – Wal-Mart, Kmart and Target – have approximately 6,000 outlets nationwide while the two main price clubs have 800.
That’s a lot of shelf space, and the increasing importance of that shelf space has had a significant impact on the ball business. For one thing, it has fueled a nice bump in sales. “Two years ago the domestic ball market was about 45 million dozen,” Sine said. “So, the market has grown by some 10 percent at a time when rounds played and participation were flat.”
The increase had to come from somewhere, and that somewhere was primarily mass merchants and price clubs.
Sine is quick to caution, however, that the mass-merchant/price club channel has become the largest on a unit basis only.
“It is a much smaller piece of the pie in terms of dollars, and generates only $130 million out of a total market of $740 million, which is roughly 18 percent,” he said. “Most of the growth in sales has been with nontop- grade product, and we cannot lose sight of the fact that it is dollars, and not units, that provide the profits.”
That may be so, but the dollar size of that channel should increase as more premium brands, such as Titleist and Strata, are sold there because they cost more. For example, Sine said the average retail price for a dozen balls in a mass merchant is $13 and only two bucks higher in a price club.
“But we are selling HVC at $21 or $22 per dozen, so it is clearly not a value play,” he said.
So far, the growth of the mass merchant and price club channel does not appear to have hurt other distribution areas, as numbers from research firm Golf Datatech show that their sales have risen, however slightly, the last several years. But there could be a longer term effect.
“I think the changes we are seeing will eventually up the ante for every retailer in golf to take better care of the consumer,” said Eddie Binder, the former executive vice president of marketing for Spalding and one of the architects of its move to sell Strata through the mass merchants. “It is hard to beat the price clubs and mass merchants on pricing, so the other channels are going to have to out-experience and out-customer service them.”
Another issue, Binder added, is that the Wal-Marts and Targets have not really gotten serious about merchandising golf yet. “But they will once they reach a saturation point like McDonald’s has,” he said. “Then, they will have to stop expanding the number of stores they have and start increasing sales from their existing stores. And at that point, they will start merchandising, and we could see little golf boutiques in those outlets as well as a lot more competition for the other channels.”