If I had a crystal ball, I’d have won the lottery a few times and would be sitting on my own island trying to work out how to take out Amazon. However, since I now have your attention, the least I can do is give you a few thoughts on what could happen.
Well, 2018 will have to go down as a pretty interesting year. England did well in a football tournament; Europe thrashed the US in the Ryder cup; the Beast from the East caused total havoc, only to be followed by a heatwave that got us all in a sweat. Then the political system imploded, as the Parties forgot about voters amidst the Brexit maelstrom: leaving the general public in a spin, and delivering the worst Christmas sales for 10 years.
So, what does any of this mean for 2019 and what can we expect for the golf industry in the New Year?
2018 – How Did it Pan Out?
Let’s take a quick look back at 2018’s numbers to see if they’ll give us any clues for the coming season.
The start of the year was terrible, and the industry was down double digits by the end of Q1. Recovery during the summer helped deliver a better second quarter, with the market ending 2.5% down, in value terms. This proved that slow starts can be followed by big months, but that isn’t something you can to plan for.
“Unfortunately, most of what affects Golf Retail really is out of our control.”
If we hadn’t had a mad April/May/June, the numbers could have fallen 5-7% year on year. However, if we look at the longer term, although 2018 wasn’t great, it still shows solid improvements on previous years, with almost a 17% increase on 2014.
A Strange Year with Weather and the World Cup
Unfortunately, most of what affects Golf Retail really is out of our control, such as the weather, which has a bigger effect on Golf than most other retail categories (it’s an outside sport!).
Much of the rot of 2018 actually set in during a poor Q4 2017, which was very wet. Thankfully, Q4 2018 was pretty good, with rounds played up, year on year. Fingers crossed for a better start to 2019.
With drier courses, and hopefully better weather, there’s a strong chance of an uptick in Q1, compared to last year. Looking later in the year, we’re unlikely to see another heatwave to the same extent, (the last one was a record), and we won’t have the World cup to contend with.
The World Cup is always a key distraction at the wrong time of year. We usually see a 5% hit on sales during the tournament, and that’s when England get kicked out early… So, while I wouldn’t bank on beating May 2018’s numbers, (the biggest month we’ve ever seen), there’s a strong chance that the elements we can’t control, might give us some respite in 2019.
Trouble with the Economy
These days, the economy is on everyone’s mind. The uncertainty around Brexit, and the multitude of directions it can take, is a huge concern for everyone. Unfortunately, there’s no man on a white charger to come and rescue us, and no one knows what’s going to happen. This is bad for spending. People like to have a plan and some faith in what’s going on. However, life continues and I’ve a feeling that, unless there’s a complete disaster, (no deal, or social breakdown due to the total failure of politicians), Brexit will have less of an effect on golf retail than we might fear.
While big purchases, (clubs and trolleys), might be put off while consumers wait for an outcome, I expect less impact overall. Ultimately, everyone will need to adjust to the new position and push on.
Most people will still go to the golf course, play to forget their troubles and complain about politicians. The ‘Leave’ date is currently 29th March so, by the end of Q1, we should have a better idea about what’s going to happen. Hopefully, golfers will get back in the swing of spending, once they know what the future holds.
Retail is Changing
The biggest challenge for the Golf retailer is perhaps the shake-up in general retail. 2018 was a pretty desperate year for many retailers and we witnessed the closure of a record number of high street stores.
Established names such as Toys R Us, Maplins and Poundworld disappeared completely. Homebase, Mothercare, House of Fraser and Evans Cycles all went through restructures or buy-outs. Even American Golf , our biggest high-street retailer, ran into troubles and changed hands.
So, what’s the problem?
One of the core issues for most struggling retailers is their biggest expense – retail space. Many retailers, who tried to expand in the 90’s and the early 2000’s, adopted the “more shops = more sales” approach. To be fair this had worked for decades, however, when the retail landscape started to change considerably, they didn’t change their program.
Online took off and sales could be achieved without having any high street stores. Subsequently, as nearly 20% of sales have moved to online, the high street is now facing the task of competing for a smaller share of the retail pot. All of a sudden, a retailer with large stores and 20- or 30-year leases, had the problem of fewer sales, but the same outgoings.
“It’s been reported that the 2017 business rates bill for the House of Fraser’s Oxford Street store was the same as Amazon’s total Corporation Tax bill in the UK for 2017”.
Most recent restructuring has led to store closures. The cost isn’t just the rent, it’s also the business rates. Unfortunately, the current system is not reflective of how the modern retailer operates. The antiquated system, dating back to 1991, is based on perceived historical property value, which is bonkers.
As an example of just how big a problem this is for the high street, it’s been reported that the 2017 business rates bill for the House of Fraser Oxford Street store was the same as Amazon’s total corporation tax bill in the UK for 2017. The UK government will have to look at how retailers operate to redress this balance – for both the health of Britain’s towns and the UK tax receipts. Jeff Bezos is getting rich because our tax system lets him pay virtually nothing to kill off his competition.
With these changes it will inevitably mean the closure of some Off Course golf stores – American Golf closed quite a few last year. While this will have a short term impact on numbers, golfers should still want to spend money and I’d expect the remaining retailers to eventually recapture this business.
Overstocking and Clearance
The weather and World Cup caused a problem for most of retailers in 2018. The net result was that most shops had too much stock. In an attempt to clear this, promotions and price cutting have been rife, even through the Christmas period.
Shops clearing stock to chase sales brought down the total value. It just shows that overstocking is a real problem – on many levels. Something that golf has been working on the last few years. More on that later.
Share of the Wallet
Another factor that’s coming to light, is that retail, overall, is receiving a smaller share of the consumer wallet. People are starting to favor what they do, and not what they buy. Experience is becoming more and more important, as our Facebook-dominated egos lust after photos of fantastic holidays, eating expensive meals and enjoying wild moments with our friends.
It’s less acceptable to show off our expensive possessions, but bragging about our good times is fine!
Opportunities for the Golf Industry
While retail is undergoing much change, retailers must make sure they listen to their customers. Consumers are prioritising value, experience and convenience, as the key drivers in their buying decisions. Fortunately, most golf retailers have the opportunity to satisfy all three demands.
Convenience: Delivering at the Point of Sale
Many On Course retailers and driving range operators have a huge advantage: they are based at the point of delivery of the activity. Customers coming through the door are all that a retailer wants. For many shops, attracting customers is their second largest expense as they have to advertise to promote themselves. If customers are coming to you anyway, it’s a great head-start over everyone else.
“Consumers are prioritising value, experience and convenience, as the key drivers in their buying decisions. Fortunately, most golf retailers have the opportunity to satisfy all 3 demands.”
At a golf course or driving range the retail and service opportunities are right where the customer is going to do their thing! Consumers can’t get any greater convenience than being able to buy what they need, where they need to use it. Sadly many golf retailers don’t realise how good this opportunity is, and don’t take full advantage.
Experience: Great Stores with Expert Advice from Professionals
Golf retail can be a unique experience, and we need to make sure that we make the most of it. The majority of stores are in the perfect location – where the game is played. Some of these locations deliver a great “boutique” experience. Unfortunately, others are still very shoddy.
“Smarter, better-merchandised shops often deliver stronger pricing and margins. Don’t make it look like a boot sale – unless you want to get boot sale prices.”
If Golf Pro’s don’t invest in the retail experience for their customers, they could well see a decline in sales during 2019. Alternatively, those that work on delivering a nice environment to help the customer spend their money, will succeed. It’s critical that stores look good and display their products well. Better to spend a bit less on stock and more on making it look good, and getting full value from it. Smarter, better-merchandised shops often deliver stronger pricing and margins.
Don’t make it look like a boot sale – unless you want to get boot sale prices.
"As retail gets more complex, consumers will look for good “professional” advice and service. Golf Professionals have the added opportunity to deliver coaching and advice, and get paid for it."
The other amazing thing about golf is that most retailers are professionals, (or aspiring), in their sport. How often are you sold football boots by professionals … or clothing by designers? Pro’s must leverage this unique position and make a strong case for their brand.
As retail gets more complex, consumers will look for good “professional” advice and service. Golf Professionals have the added opportunity to deliver coaching and advice, and get paid for it.
Every lesson should be seen as an opportunity to deliver value to customers: helping them improve and enjoy their leisure time more. All the while having the opportunity to influence their buying, with good advice and recommendations.
Value: Healthier Market, Less Clearance with Competitive Pricing
In the last couple of years, the golf market has de-stocked. There’s now less product in store rooms around the country, getting dusty and worrying retailers and brands. This is a good thing. The result has been a good shot in the arm for the sector, with less clearance, less promotion and less price destruction.
Brands, retailers and consumers have all benefited from this.
Margins have become more sustainable; brands are making more money but having to ship less product; and golfers are now more inclined to invest in a product, confident it won’t be on sale the following week at a greatly reduced price. Longer product life cycles have contributed to more stable pricing and greater profitability.
It’s not just the pricing that’s improved. Golfers are getting better value from club purchases, thanks to custom fit. This delivers a better product and a great experience. The golfer can get a club that’s specific to his, or her, requirements and they can see the benefits. Swing monitors and shot tracking software are delivering clear analysis on how the new clubs work. And customers can now see for themselves, in real numbers, the benefit of purchasing new clubs over their old ones. Far less smoke and mirrors.
“Longer product life cycles have contributed to more stable pricing and greater profitability.”
Finally, there’s one major advantage for both On Course and driving range operators. Retailers can operate with significantly lower property costs. Being based at a club or driving range is a huge advantage. The High Street’s biggest cost does not burden the majority of On Course stores. This should allow them to be very competitive in their pricing often matching, or bettering, the high-street.
What Does all This Mean?
The key thing is to focus on what you can control. Much of what is going on could harm the Golf business – weather and economy. However, we can’t do anything about that – other than account for some of it in our planning. In the end we have to focus on what we can control and do the best job possible.
We must focus on the customer, listen to what they want and then deliver good value, convenience and great experiences. Doing that should ensure they come back for more.
So, it might not be all sunshine and flowers in the world around but most golf retailers have lots of opportunities to be optimistic in 2019. They just need to deliver!
Phil Barnard is Chairman of Crossover Technologies and European Partner of Golf Datatech. For advice, opinion, market sales data and regular insights into the world of golf retail, follow Phil on this blog, or Twitter @philbarnard and LinkedIn