The “Amazonization” of Golf, Part II: Golf Apparel

In Part I we explored a general overview of how Amazon is impacting golf retail, in Part II we dig deeper into how Amazon is impacting the sale of golf apparel, and in Part III (coming soon), we will analyze Amazon and golf equipment.  

Golf Apparel is a difficult product to easily define and measure, because a polo shirt sold at Target, Nordstrom’s or PGATSS could all be worn to play golf.  Or to the office.  Or to mow the lawn.  Where the product is sold is as important as what the product is when defining “golf” apparel.  There are many brands that specifically focus on golf apparel, and in the process use design and/or material differences to create products that work best for golf, however in reality that same product could have multiple uses, and once it leaves the shop, store, or warehouse no one knows what it will be used for.  Whereas in golf equipment, there aren’t a lot of alternate uses for that new driver you just bought…it’s pretty much going to be used to play golf, or be made into the worlds most expensive tomato stake.

For the sake of our discussion, we are assuming “golf apparel” consists of clothing designed and sold primarily to be used for playing the game, and most frequently sold by those that focus on golf.  However, that is clearly not a hard and fast definition, as the page below demonstrates…Amazon is a major factor in golf apparel, and golf is but a tiny fraction of their total sales.  And for context, according to many experts that track general retail sales in America, Amazon passed Macy’s to become America’s largest apparel seller in 2016, and without a doubt it has only increased their leadership position since.

How Amazon Sells its Own Product…First

Screen Shot 2018-02-11 at 8.54.31 AM

On a recent day I went to the Amazon website and entered “Golf Apparel” in the search box, and what you see above was how the site delivered possible matches to my inquiry.  It will  surprise no one that works with or follows Amazon that the first product delivered to was their own “Essentials” line, at extremely competitive pricing. In 2016 Amazon made a significant investment in broadly expanding their private label business in several product categories, and the Essentials line is a representation of how they compete in golf apparel.

It’s no surprise that Amazon’s highly proprietary and closely held search engine (known as A9) placed its own product first, followed by other brands determined via algorithm, which no one outside of Amazon comprehends.  There are hundreds of online articles and consultants hoping to guide individual brands thru the steps toward improving their standing inside Amazon searches, so this post will let those experts take the lead, and instead we’ll focus on the bigger picture of perceptions of Amazon and golf apparel.

Macro Level Golf Apparel

Golf Datatech estimates the On/Off Course channels sold over $1.1 billion in golf apparel in 2017, an increase of nearly 6% vs. 2016.  Of that, well over 3/4 of those sales are made in a Green Grass golf shop.

Prior consumer research by Golf Datatech suggests over one half of all golf shirts being worn today feature a golf club/course logo, making a large part of the golf apparel market impregnable to anything Amazon can do to make itself a viable competitor to a local golf shop.  Instead, Online sellers (including but not limited to Amazon) as well as Off Course Specialty stores, are left to battle for more basic apparel items that do not have logos, and are often entrenched in a price battle.  And pricing is an area where Amazon often, but not always, has a step up over the competition.

Buying Golf Apparel From Amazon

In “The Amazon Effect” we specifically probed consumers about what products they have purchased from Amazon in the past, as well as those they are likely to buy in the future, and Golf Shirts topped the future list, along with Shorts/Skorts, Jackets, Rainwear and Sweaters all among the top 10 products in golf.  While most golfers likely won’t buy all their golf apparel thru Amazon, they are very likely to view it as a place to buy some items, particularly those which typically don’t feature a club logo, such as bottoms.

And to keep matters in perspective, while Amazon is definitely a player in selling online golf apparel, in the big picture it still remains worth mentioning that only about 20% of total respondents to the Amazon Effect survey have ever purchased a single piece of golf apparel from the site.

Impact of Amazon Prime

Prime members are significantly more loyal to the platform, and it is no different when it comes time to purchase golf apparel.  Those who are members of Amazon Prime are far more likely to be looking toward buying golf apparel on Amazon.  Once Amazon can convince a consumer to agree to pay them to be a “member”, their loyalty to the platform increases exponentially.

Brand Strength and Product Differentiation Matters

The objective of Amazon’s search engine is simply to optimize the customer experience for the buyer while maximizing revenue per visitor for Amazon.  The opaque nature of the search engine, along with the knowledge that Amazon’s own product will likely be featured at the budget price points, makes the platform very challenging for any manufacturer attempting to sell basic golf apparel.  However, if the manufacturer has a well-developed consumer brand, is well designed, has a technology story or material difference built into their product, they stand a good chance to break thru and sell a lot of product on the platform.

Looking Forward

Amazon is ideally suited to sell their own “Essentials”  line of price point golf apparel, however their inability to compete with golf course logos means a significant piece of the category will never be within their reach.  Additionally, branded non-logoed golf apparel will always be available thru Amazon, either direct from the manufacturer, or thru secondary sellers, however that same product could also be purchased thru competing websites, or in person at a traditional brick and mortar retailer.

As Amazon continues to expand, grow and become even more fully integrated into the retail fabric of America, their impact on golf apparel will be substantial, however many golfers still enjoy the experience of personal engagement that only occurs in an actual retail environment, either in the Pro Shop, their nearby Golf Specialty Store, a Sporting Goods store, or a major retailer.

For anyone interested in purchasing the full “Amazon Impact” consumer report, focused specifically upon the apparel category, please email info@golfdatatech.com or click on the link below for more information and pricing. 

The “Amazonization” of Golf-Part 1

The following are some thoughts on how Amazon is impacting the business of golf, most based upon results from “The Amazon Impact”, a study of how Serious Golfers view the #1 Online Retailer in America, conducted by Golf Datatech and released early in 2018.  Part I is a big picture view of Amazon’s impact, while Part II and Part III will be released in the upcoming weeks and address specific product categories like Golf Apparel and Golf Equipment.

Few topics create more passionate discourse in the golf business than bringing up the 8,000 pound gorilla (ten times bigger than the 800 pound one) that’s in the room.

Amazon

To some Amazon is the devil.  To others a savior. To American consumers it’s a habit that would be hard to kick, if you wanted to kick it, and most do not.  Amazon is a complex layered selling machine designed to make the buying process simple and seamless to the ultimate consumer.

Point, click, and within a few hours or a few days your product of choice appears on your front doorstep, with the Amazon smiley face adorning the exterior of the package.  From the consumer’s perspective it could hardly be easier to order and receive delivery.  And Amazon is certainly not done pushing the envelope when it comes to making the purchase and delivery process as easy and timely as humanly possible.  In fact, they even forgo humans and employ automated processes whenever possible, such as robotic driven pickers in warehouses, cashier-less grocery stores, and delivery drones.  Amazon is always testing the outer limits of making the process simpler, faster, and more efficient, seemingly all the while investing in the future, eschewing short-term profits while always looking toward the far horizon.

While it’s hard to argue with all the benefits accruing to the consumer from using the Amazon platform, these improvements do not come without a cost to the broader fabric of America.  After several years of relatively unfettered expansion and upward scaling of the business, Amazon has started to receive pushback from small segments of society that are concerned over one entity having too much power.  While many doctoral thesis’ will likely be written about the impact of Amazon on society as a whole, our immediate concerns are with how it is impacting the golf business.

Amazon & Golf

First and foremost, Amazon’s model for engaging with the golfer works well, as golfers tend to be well educated with higher than average incomes, a good match for the Amazon selling platform.  Golf Datatech just completed study on the Attitudes and Usage of Amazon by Serious Golfers,  called “The Amazon Impact”, and determined that golf balls, gloves, shoes, distance devices and apparel are all well positioned to be purchased from the largest US online retailer, however those products that require engagement, interaction, trial and fitting (golf clubs in particular), are poorly suited for effective selling.  It’s not to say Amazon may not look to find ways to overcome those obstacles, they’ve certainly done it before (think Whole Foods acquisition), but at the moment the lack of personal interaction have been too significant to overcome.

And to set the record straight, while Amazon has gained significant traction over the past year in consumables and packaged golf goods, it remains but a piece of the overall marketplace, not the dominant player.  In golf balls and golf apparel the Green Grass channel is far larger than Amazon and in clubs the Off Course Specialty channel controls the bulk of the sales.

When Part II of this blog exploring Amazon and the golf business comes out, we’ll focus on Golf Apparel, followed by Part III which will address equipment in more detail.

Details about purchasing the full Amazon Impact study are available from Golf Datatech at info@golfdatatech.com.

 

Better Times Ahead? Recap of 2017 & Looking Toward 2018

As the 2018 PGA Show recedes into the rear view mirror, here are some insights into where the golf equipment and apparel industries find themselves moving toward Spring.  And we all know that Spring is when the fun really begins in the golf biz:

2017 Recap

*Golf Equipment:  In virtually every category of golf equipment, unit sales were lower and Average Selling Prices were up, in many cases substantially.

*While equipment sales in total were off a little over 2% in dollars, apparel sales were up 6%, and combined the equipment and apparel categories improved by 1%.  After a very slow start +1% seems like a very big win.  For comparison sake, total US GDP was +2.3% so we were not far from the norm while facing significant shifts in distribution channels.

*We have tracked and projected apparel sales since 2010 and they have been up in six of the past seven years.  Clearly apparel has been the best performing segment, however it has not been immune to unit declines of late, which were offset by increasing prices.

*The Green Grass and Online channels both gained significant market share while the Off Course Specialty channel contracted, the primary culprit being the bankruptcy of one of the industry’s leading retailers, Golfsmith.  Even though Dick’s picked up a chunk of the Golfsmith stores and re-branded them as Golf Galaxy, the majority of doors closed and wreaked havoc in the channel as a whole.

2018 Direction

*Signs point toward a better macro economic environment: with GDP up, asset values at all time highs due to stock market prices, and additional funds available in many American’s paychecks come February, as tax reform lessens withholding and most people have more cash in the pocket every pay-day.

*Consumer research by Golf Datatech late in 2017 suggested the US Golfer is finally adjusting to higher prices for new equipment, adjusting to the reduced new product cadence by the major manufacturers (which means fewer close outs/price point offerings), as well as higher launch pricing, all of which have driven ASP’s to record levels in most categories of golf products across both hard and soft goods.

*Golf Datatech believes the declines in units sold in many categories will bottom out this upcoming year, and we might even see the beginnings of an uptick.  For 2018 to be an “up year”we will likely need improvements in units, as we believe there will be limited upside in ASP’s coming off the substantial increases enjoyed over the past two years.

2018 PGA Show, Kicks Off the Season

While we’re always careful not to read too much into enthusiastic opinions at the PGA Show, this was the first time in many years there was a near unanimous positive vibe rumbling throughout the Orlando Convention Center.  Lots of new products, launching into relatively clean channels with minimal old inventory, combined with a consumer who is starting to feel good about their financial position and has been very conservative the last few years when buying new golf product…and all felt right with the world…even if it was just for a few days in January.

As we said earlier, the fun in golf begins this spring, but all the ducks appear to be in a row for a good start, now if only the weather cooperates!

 

Q3 in the Books

US Golf equipment sales thru the 3rd Quarter of 2017 are in the books, and many of the trends that developed earlier in the year have continued:

-Unit sales generally remain weak and Average Selling Prices continue at very elevated levels.

-Dollar sales in several high profile categories (balls, drivers, fairways and hybrids) improved vs. prior year, and several of the other segments which had been lagging, have started to slowly rebound.

-Higher ASP’s might have dampened the Golfer’s appetite for buying as many new products as often, however those higher prices have been beneficial to many manufacturers who for over a decade endured virtually no pricing power and suffered lower margins while seeing their costs rise.

-2017 Sales thru the Green Grass channel have been excellent, with the On Course segment up nearly 12% Year to Date, with most product categories up.  As the Off Course channel contracted substantially, the Golf Shops On Course were ready, willing, and very able to fill some of the void and meet the consumer’s needs to see, demo, and buy new clubs.

*Woods=  +29% YTD

*Irons=     +20% YTD

*Putters=  +11% YTD

*Balls=      +10% YTD

*Bags=      +  9% YTD

*Wedges= + 5% YTD

*Gloves:    +  5% YTD

-The Off Course channel in total contracted significantly in the first three quarters of 2017 (down 12%), heavily impacted by a substantial drop in the number of Off Course shops available for consumers to visit.  Many Off Course operators who remain in business have had a solid year as some of their largest competitors in specific markets disappeared, however the total channel could not offset the closure of nearly 100 outlets.

Looking Forward

Golf Datatech’s Golf Product Attitude & Usage (GPAU) study for the summer of 2017 suggests there could be some upside momentum building in equipment as we move toward the end of this year and into the next.  Indications suggest some of golf’s most influential consumers are ready to start buying…for more information on purchasing the GPAU please contact Suzie Phillips at info@agolfdatatech.com.

 

 

 

Where Have All the Golf Stores Gone? (Part 1)

Over the past decade the golf equipment business, not unlike most of the US Retail environment, has undergone a radical transformation, with consolidation replacing expansion as the industry’s watchword.  Whereas the US golf market once had more than 1,600 Off Course Specialty stores, today only +/-750 remain.  While the Off Course channel remains the heart and soul of golf club sales and sells more than its fair share of bags, balls, shoes and apparel, its overall reach declined substantially with the closures of nearly 100 outlets in 2016, the bulk of which were formerly Golfsmith stores.  Even though roughly three dozen Golfsmith’s were recommissioned as Golf Galaxy outlets, there are wide swaths of prime US golf markets that are currently operating with few, if any, Off Course Specialty stores available to look at new product, to try new product, or to be fit prior to buying.

These rapid changes in distribution channels leave golf companies and retailers asking a lot of questions:

*With fewer Off Course Specialty Stores available, where are golfers going to purchase their new golf clubs?  To be fit?  To be exposed to new concepts and products?

*Where are golfer buying their golf balls?  Golf Shoes?  Apparel?  Online from their couch or from a bricks and mortar outlet?

*How much impact have Online Retailers had on the traditional brick and mortar golf retail business?

*What golf products are selling well thru Online Retailers?  Which are relatively “slow”?  What kind of golfers buy online?

*Every product category in American retail is concerned over the potential impact of Amazon…what has Amazon’s impact been in sale of golf equipment and apparel?

*How has the Green Grass channel fared in 2017 as their Off Course competitors have faded away? (Spoiler Alert:  Very well as a channel thru the first half of the year)

*And what of the remaining Off Course Specialty stores?  Is their business booming with fewer competitors?  Or are they being impacted like the rest of American brick and mortar retail by declining store visits and lower sales volumes?

*Sporting Goods, once the fastest growing golf channel, is also undergoing consolidation as Sports Authority went bankrupt in 2016, and Dick’s Sporting Goods grew even stronger in their role as the dominant player in the channel.  What kind golfers are going to Sporting Goods stores? What are they buying?

*What new channels are emerging?  While companies frequently cite the impact of Online Retail, what about the newly emerging category of Club Fitting Specialists?  Using the latest in high tech equipment this channel has become significant as more and more golfers decide to get their clubs fit to their particular swing and playing ability.

Golf Datatech attempts to answer these questions and many more with the recent release of the  the “2017 Serious Golfer Buying and Shopping Study”, a deep dive into how the golfing public goes about the shopping and purchasing process, understanding their attitudes about the various channels, and their likes and dislikes down to the individual retailer level.  Over 2,500 respondents form the basis of the analysis that covers a wide range of challenges facing the golf industry in 2017 and beyond.

To inquire re: purchasing the Study please contact Suzie Phillips at info@golfdatatech.com.

 

 

 

 

 

Mid Year 2017 Update on US Equipment Sales, The “Grass is Greener” On Course

US Golf Equipment sales in the first half of 2017 are in the books, and while the results in total are less than ideal, there are some bright spots and trends underway which suggest the business remains soundly grounded, including soaring Average Selling Prices on new product and the rebirth of the traditional Green Grass channel.

As the Off Course Specialty channel continues to find its footing in the post Golfsmith world, the grass is definitely greener in Green Grass Shops as golfers seek out new equipment in a channel many had previously abandoned.  Without easy access to demo clubs and custom fitting opportunities due to Off Course “Deserts” (large geographic areas without appropriate Off Course Specialty coverage once existed but is now lost), golfers are heading back to the pro shop and buying more frequently from their long-lost friend, the Golf Professional.

In total, three of ten product categories showed improved sales in dollars, led by drivers (+3.3% YTD) and golf balls (+3.2%) which are two of the largest categories, with fairway woods (+0.3%) just barely above prior year levels.  At the same time, all except golf balls (+1.1%) were down in units.

On the flip side, in the Green Grass, sales of all product categories except for golf shoes are up, and in total On Course Golf Shop sales of equipment are up over 11%, with drivers up 28% and irons up 15%.  Clearly the consumer, seeing far fewer traditional Off Course options available to shop and buy, has headed back into their local golf shop to make equipment purchases.

It’s true that many of the Off Course Specialty stores which remain are having a decent year in 2017, as they make inroads in the wake of one of their largest competitors closing.  However, the channel in total remains weak as golfers seek to find their rhythm and develop new means to purchase golf equipment. And Online sales continue to grow, though many are done thru sites which are owned/operated by traditional Brick and Mortar operators so isolating online sales is trickier than in many other consumer categories.

Where else are former Golfsmith customers going to buy golf equipment?  How has Sporting Goods fared?  What product categories are selling best online?  For those answers and more, look for future posts re: Golf Datatech’s newest market defining study, “2017 Shopping and Buying Habits of the Serious Golfer”, which was recently released.  Or email info@golfdatatech.com to purchase a copy for yourself.