2004: Unique challenges define equipment arena
Tuesday, November 1, 2011
By Gene Yasuda
It is a place where distance balls sell for – gasp! – $70 per dozen and tour-caliber models, such as the Titleist Pro V1, play second fiddle, a place where public play still is a novel concept and high-end department stores spur more sales than pro shops.
Welcome to Japan’s golf equipment market, the world’s second largest – and its most competitive.
For decades, U.S. club and ball makers have exported their wares to Japan, but during the past five years, their efforts have intensified greatly. A shrinking world has made international commerce easier – and a necessity – and the PGA Tour’s growing global exposure has whetted Japan’s appetite for American golf brands.
That’s why TaylorMade-Adidas Golf last year reaped $160 million – nearly 25 percent of its total sales – from Japan. TMAG, along with Callaway, now rank among the top six in market share for all club sales. And others are trying to make similar inroads: Nike Golf is aggressively recruiting veteran sales executives from rivals here, and in January, Cleveland Golf and its parent company, Rossignol, created a Tokyo distribution subsidiary with the goal of tripling its Japan sales.
Even though the Japanese market has contracted sharply, it remains a critical territory for these
companies. A nation only the size of California, it boasts 10.4 million golfers – nearly 40 percent of the U.S. total. They’re expected to spend as much as $4 billion in equipment and accessories this year.
Yet companies that move into Japan may find their efforts to become a global player quickly derailed, confounded by an unprecedented level of competition, different consumer tastes and un-familiar business practices.
What makes Japan so distinctive from other overseas markets is the presence of powerful indigenous golf equipment companies. The list includes Bridgestone, Sumitomo (known in Japan as Dunlop), Mizuno, PRGR, S-Yard, Honma, Maruman, Daiwa and Yonex, among others.
To complicate matters, some of these companies, notably Bridgestone and Sumitomo, each market a number of additional sub-brands in their home country. Together, these two players control roughly 70 percent of ball sales and more than 25 percent of club sales.
“Japan has always been competitive because of its domestic brands. But now with American companies stepping up, it’s definitely intensified,” says Todd Harman, Cleveland’s director of product marketing.
Nowhere is this crowded condition more evident than in the golf ball category.
Bridgestone, for example, not long ago marketed eight different ball brands: Altus, Rey Grande, TourStage, Beam, Paradiso, Bridgestone, Pebble Beach and Cute Story (which was targeted for women). In the mid-1990s, the company’s various brands collectively provided consumers with a mind-numbing menu of nearly 40 models.
Though Japanese ball makers have reduced their offerings – in part, to focus their promotional efforts and budgets on their best-sellers – there still are too many models, fragmenting market share and creating obstacles for U.S. competitors.
Just as challenging, newcomers to the Japanese market must understand that the consumer appetite here is quite different than in the United States.
Japanese golfers, generally speaking, are cognizant of the limitations of their smaller physical stature, and as a result, are spellbound by the promise of what technology can do for their games.
Translation: They dig the long ball.
That combination has created something of an oxymoron: the premium distance ball. Distance products are inexpensive, low-tech fare in the United States, but in Japan they are works of complex engineering, featuring double cover, three-piece technology and whopping price tags – as much as 700 yen or $70 per dozen. Mostly because of its high costs, the premium distance category accounts for 45 percent of all ball sales (measured in yen).
While American golfers, regardless of their skill level, often try to emulate tour professionals by using the same equipment, many Japanese golfers think “they are not worthy” to use pro-caliber gear. That helps explain the popularity of these premium distance balls and why top U.S. models, such as Titleist’s Pro V1, Callaway HX Tour and Nike One, command only second-tier prices, $45-$55. (These balls account for roughly 15 percent of all ball sales. The balance, about 40 percent, is comprised of a small portion of mid-priced balls and a hefty dose of recreational balls that sell for less than $30.)
“In the U.S., we talk about the pyramid of influence and how the best players dictate what everyone else wants to buy,” says Maki Shinoda, Nike’s Asia Pacific golf ball business manager. “But in Japan, you basically need to flip the pyramid upside down.”
This populist consumer mindset also demands that U.S. equipment makers develop products exclusively for Japanese golfers.
“Many American competitors are just concentrated on global sales and try to sell the same products everywhere,” says Nobuo Hishinuma, vice president and general manager of TMAG Japan. “We are very Japan-ized.”
The company’s subsidiary employs more than 100 workers dedicated to golf products, and all assembly is done in Japan “to provide more flexibility to better localize the product,” says Keisuke Yamane, TaylorMade’s Asia product marketing manager.
Such efforts go far beyond cosmetic and marketing differences. For instance, TaylorMade’s XR-05
driver – an exclusive Japan model – was created simultaneously with its U.S. cousin, the 500 Series metalwoods, but the two have little in common.
“It’s a different shape, different weight, different lie angle (adjusted for average Japanese golfer height) . . . everything is different,” Yamane says. So is the price: The most expensive version of the XR-05 sells for $1,400.
Japanese golfers may not mimic the equipment choices of their favorite tour professionals, but they still covet brand validation from the best players. In recent years, TaylorMade has gained immense popularity in Japan by recruiting as endorsers more than a dozen players on Japan’s top men’s tour, including stars such as Hidemichi Tanaka.
Likewise, Nike Golf recently signed Shingo Katayama – best known by Americans for his signature cowboy hat and stellar play in the 2001 PGA Championship. The Beaverton, Ore., sports company wooed the popular Japanese player from XXIO, one of the country’s top-selling brands and part of the Sumitomo golf portfolio.
But getting the proper product and marketing mix in Japan is a tricky proposition.
Some retailers say Nike – regarded as an athlete’s brand and endorsed by Tiger Woods, whom the Japanese consider a golf god – has struggled in Japan thus far because consumers view the company as one that caters only to elite players.
Nike officials hope user-friendly clubs, such as the Slingshot irons, help dispel such perceptions, but some retail managers, including those at Mitsukoshi, remain skeptical. They say some customers are “intimidated” by Nike equipment.
Mitsukoshi, incidentally, is not a golf shop. It is a department store, which reflects yet another oddity of doing business in Japan.
Imagine walking into a Saks Fifth Avenue or a Nordstrom and finding an entire section devoted
to golf – not just apparel, but clubs, balls, shoes and many other products. In Japan, high-end department stores serve as a major distribution channel, second only to off-course specialty stores. (Pro shops have yet to generate substantial sales because they are located at clubs, which historically have been private with limited traffic.)
Securing ample floor space at retail is a frustrating, and sometimes insurmountable, task for U.S. vendors.
The primary reason: Carefully nurtured, long-standing business relationships reign supreme. Japanese culture frowns upon fickle changes, which explains why retailers are reluctant to dump existing partners for new ones.
Historically, Japanese manufacturers also have supplied retailers on a consignment basis, and have taken back inventory that didn’t sell. Spoiled by such no-risk business practices, Japanese retailers aren’t anxious to do business with American companies that preach more equitable partnerships.
“It’s really an educational process,” says Steve Adams, who left Callaway to become Nike Golf’s Japan sales director. “But times are changing, and even the Japanese (manufacturers) are realizing they don’t have the luxury of doing business the way they did in the past.”
As challenging as the Japanese market may be, U.S. companies, more determined than ever to succeed here, are making a dent. Their continuing charge, coupled with any significant missteps by Japanese companies, surely will influence the balance of power. Even Mizuno, one of Japan’s most venerable brands, isn’t immune.
Though still respected for its high-quality equipment, the company has “struck out” lately in producing game-improvement products for the Japanese masses, and some retailers say, it has cost the company considerable market share.
“Japan is a difficult market to navigate,” says Cleveland’s Harman. “But there’s really little choice. We need to be there.”