Golf’s Online Economy
Tom Cox doesn’t have to look far to see the influence that online retail giants are having on the way consumers buy (and sell) goods. All he has to do is look at his front door.
“We get a shipment a day from Amazon at our house, especially with a 2-year-old,” said Cox, CEO and president of Golfballs.com, which he founded in 1995. “Amazon is eating retail.”
The Internet is changing sales tactics everywhere and as Amazon becomes a bigger force in retail – a place to buy not just books, but household goods, electronics and yes, sporting goods, too – it is affecting nearly every subset of retail in every vertical and category. The shift in consumer behavior and spending habits extends to golf as in other markets. Both brick and mortar and Internet-based retailers fear going the way of Circuit City, Toys ‘R’ Us and The Sports Authority and being eclipsed by bigger and more versatile rivals.
Golf is one of the nation’s leading individual participation sports, which in turn fosters spending on equipment, apparel and accessories. NGF research shows that 37% of golfers bought golf-related merchandise online last year, rising from 35% the previous year, and account for a growing percentage of total golf merchandise sales. And when looking at adult core golfers (those who played eight or more rounds), that number climbs to 49% of core golfers who made a golf-related purchase last year, whether that was clubs, balls, bags, gloves, shoes or apparel.
The market for golf clubs and balls alone was $2.7 billion in 2018, up about 6% from the previous year, according to NGF research.
As the market for golf equipment continues to evolve, Amazon and, to a lesser extent, eBay, are gaining a significant presence in the golf consumer space. A growing number of golfers are following buying habits elsewhere and more frequently turning to such non-endemic online options for many golf-related purchases.
More than half of those who purchased golf merchandise online in the last year did so at a general online merchandiser such as Amazon (57% for golfers and 58% for core golfers). When including auction sites, such as eBay, that figure jumps to 63% for golfers overall and 64% for core golfers. By comparison, 45% of golfers and 47% of core golfers bought golf-related merchandise at an online golf-specialty store.
This data speaks to the incidence in which people shop at a particular channel, not how often they’re shopping there, how much they’re buying or the share the channel represents. It is also important to note that golfers (whether the overall pool or core golfers) who purchase golf merchandise online do so from an average of two different sources or channels. So that suggests that they could be ordering one golf product from Amazon, but also shopping online for something else at a golf-specialty store, whether that’s PGA TOUR Superstore’s website or Golfballs.com.
Direct-to-consumer sales are also on the rise, with 16% of core golfers saying they purchased goods directly from golf equipment manufacturers (Callaway, TaylorMade, Titleist), while 13% said they bought merchandise directly from golf shoe/apparel manufacturers (Adidas, Nike, Under Armour, etc). These represent higher margin sales for OEMs and apparel makers, but in the past had been frowned upon as potentially poaching from their retail network. Some smaller golf ball manufacturers, from OnCore and Cut to Vice and Snell, are focusing predominantly on the direct-to-consumer approach.
Cox noted that over the last several years most of the major equipment and apparel makers have warmed to direct relationships with Amazon, while eBay remains a popular hub for previously-used clubs.
“As the biggest marketplace in the world becomes one of the biggest golf retailers, you have to have a direct relationship with them,” Cox said. “It’s happened very quickly and is unprecedented in any other time.”
Consumers expect their favorite retailers to offer a satisfying cross-channel shopping experience, whether it is to browse and/or research online prior to making store purchases or order goods online followed by in-store pickup. Today, to compete anywhere, you have to be everywhere. This shift in consumer behavior extends to golf as in other markets.
The trend toward more online sales is causing reverberations among golf retailers. It’s been a fascinating evolution to the golf retail sector over the last few decades. The majority of premium products were once sold at green-grass shops by club professionals, prior to the rise of off-course specialty retailers such as Nevada Bob’s and Edwin Watts, and then the emergence of big-box stores such as DICK’s Sporting Goods that bought in bulk and could offer even lower prices. In the Internet age, online specialty golf retailers started chipping away at the market share of those other channels.
It begs the question: Can Amazon steal share from online golf specialty retailers and make them an afterthought?
The majority of online purchases are soft goods – golf balls, shirts, hats, gloves, and so on — items where shoppers typically know their size or can re-order with the click of a button, taking advantage of the online convenience and in many cases free shipping right to your door (Amazon Prime users). Green-grass accounts still should have a significant advantage selling branded apparel with club logos. But Cox says selling regular stock product online is becoming more of a challenge.
“Every year,” Cox said, “more and more product that isn’t customized or proprietary in some way is going to be sold on Amazon.”
Rather than fret, Cox and other endemic golf retailers see opportunity. As the retail giant becomes an ever-expanding force in selling golf merchandise, Amazon hasn’t made much of a dent in golf club sales, which usually require trial. Cox’s business, meanwhile, is one of the industry’s leading providers of custom golf balls and gear. Golfballs.com produces nearly 100,000 personalized golf balls every week along with a variety of other customized products including tees, ball markers, embroidered golf hats, and shirts.
“Amazon’s not going to cut your hair for you, so they aren’t going to hurt the barber business,” Cox said. “The best experience to buy a club is really where you get a chance to feel it, touch it, hold it and get fitted for it for exactly your game. At this stage, that’s not Amazon.”
That’s also why custom fitting should continue to be a difference-maker for brick-and-mortar stores. GOLFTEC, Club Champion, Hot Sticks, Cool Clubs, and True Spec have created a niche with specialty fitting experiences.
Unlike traditional retailers that carry inventory and face significant price pressure, Club Champion fits and builds unique, custom clubs for their customers. Inventory needs are minimal and, because their product is custom fitted, they don’t compete against web-based retailers on price. As a result, the company is one of the fastest growing retailers in golf with 2018 overall revenue growth up almost 60 percent. Expanding from just eight locations five years ago, the company opened 31 stores in the last 12 months and currently has 62 retail studios and is planning to open additional stores in 2019.
“Other people sell golf clubs, we sell improvement,” said Joe Lee, Club Champion’s CEO.
Likewise, PGA TOUR Superstore has created a golf shopping experience. In addition to fitting over 100,000 customers in its stores last year, CEO Dick Sullivan says his company gave 50,000 lessons, changed 750,000 grips, and in 2017 made a multi-million dollar investment to upgrade all in-store simulators.
“All the things we do in our stores is why we exist, why we break records and why we have 500 people waiting in line for a store opening,” Sullivan said. “If we stop doing that, if we don’t do the training inside of our stores, we become just a commodity-type business and we become very vulnerable to the Amazons and others in the space.”
Customization, providing services such as clinics, lessons and repairs and experiential offerings (clubs fittings, launch monitors and simulators) has become a key part of these retailers’ strategy to compete against Amazon’s rapid and extensive home delivery network.
“You don’t see Amazon giving lessons or putting grips on; we’re unique that way,” Sullivan added. “We don’t just sell product. We provide a different level of service.”
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