Thought Leadership Part 2 – From Hanbury Manor – The evolution of e-commerce

Here is the second part of our coverage from our inaugural Thought Leadership event, which was held at Marriott Hanbury Manor on December 9. Golf’s biggest concern – dropping participation numbers – dominated the first part of our coverage in our January issue, and here our table of senior industry figures discusses e-commerce in golf, and shares its predictions for the trade in 2014
Steve Weston

Steve Weston

Steve Weston (SW):

The golf industry needs to align itself with the rest of the world here, in that ‘e-commerce’ should not be regarded separately. It has become an integral part of trading. If you look at the big retail chains like Tesco and John Lewis, they have mastered the art of selling to some customers online, and offering home deliveries, but also of driving those online customers in-store. That is a critical strategy.

Thankfully for the golf industry, the ‘Click and Collect’ concept can work very well, and it is great to see Foremost Golf introducing this service.

Robin Barwick (RB):

Last year Foremost Golf estimated that 20 percent of UK golf retailing was conducted online.

Nigel Freemantle (NF):

We are trying to drive our business towards golf pros who can offer golfers 40,000 products without having to stock any of them, has their website can link through to our site. As a retail solution it is actually quite simple. A club pro could then sell to their customers everything we stock, order it online, and this is another way of providing a ‘Click and Collect’ service.

SW:

‘Click and Collect’ has become so successful because people don’t want to have to wait for products to be delivered, and take the chance of not being at home when the item is delivered, and then have to go to the local sorting office and queue up to collect it. That’s not immediacy. They want to order online and know they can go and collect it. A golfer could search online for the latest Adams driver and find out that a pro shop three miles away has it in stock. They could buy it online and collect it from the pro shop on the same day. That is one of the things Mappt is all about – being clever about driving golfers into pro shops with concepts like ‘Click and Collect’. Once a pro has the customer in the shop there are add-on sales opportunities.

NF:

Nigel Freemantle

Nigel Freemantle

There are also add-on sales opportunities online. Just look at Amazon, and what they do with the ‘What people also bought’ information. We also do that on our trade website, and we have enjoyed fantastic growth. If the trade grabs the opportunity with e-commerce, the potential is enormous.

With a company like Brand Fusion, e-commerce gives us the ability to show the golfing public what we can supply, because we have such a huge and diverse product range – over 1,000 products – yet we don’t have any retail accounts that are likely to stock more than a very small percentage of that range. Online, we have one or two retailers that stock our entire range, so for us as a company, e-commerce certainly helps. We sell more products because we can show more in the online shop window, even though we don’t sell direct to consumers.

SW: Pros don’t like it when golfers walk into the pro shop with a piece of paper that shows what low prices they can get online.

However, if a sales person in John Lewis sees a customer with a piece of paper in their hand, they see it as gold. If the customer says: “This TV is £999 online whereas your price is £1,049,” the response from John Lewis would be: “Yes, that’s right. We have this TV in stock. We will match that £999 if we find that the online retailer is offering exactly the same model, in the same condition and that it is offered with a five-year guarantee,” and the list goes on. Most of those customers walk out having paid £1,049 to John Lewis for that TV.

This is an educational process club pros need to go through. A lot of them have become too price focused.

Price protection

SW: E-commerce is no longer just computer-based commerce. The growth in mobile commerce from 2012 to 2013 was absolutely huge, and in the US last year, billions of dollars were spent by consumers via mobile commerce.

Simon Homer

Simon Homer

Simon Homer (SH): As Adams Golf remains small in Europe at the moment, we still need the help of the traditional retail chain to achieve growth. We need our customers to go out and try our equipment, and I am a great believer in enabling people to look and hold products.

Big golf manufacturers are going to go direct to the consumer, and all of retailing is moving that way. Think of the number of people who must be buying direct from Apple, and from many of the sports brands. Some people choose to have that online retail experience with a manufacturer, whereas others choose to have the experience through a retailer. The problem manufacturers are faced with comes when that retail experience in a shop is not good enough, and then the manufacturer can say that they have tried their best with their 450 retail outlets, or 1,000 outlets, but that it can’t create the kind of retail experience it wants for the brand, because the retailers are not supporting it, and then there will be a move away from traditional retail.

Bob Smith (BS): At Peter Millar we are selling direct to the consumer, but we have kept the online retail prices high so it sets a standard, and that is what we are trying to maintain.

SH: The RRP supports correct selling prices. If you look at Apple, who probably does it better than anybody, that RRP is not compromised, so when consumers walk into John Lewis they already have an idea of what the RRP is.

This is lacking in golf; people don’t know what the price for a certain product is supposed to be. People don’t know what the price is for the latest driver from TaylorMade, Callaway or Ping. The prices are so fragmented because there are so many people selling the same product, and because no-one is putting their stake in the ground and committing to a price.

NF: This is key, because if a customer is not sure of the price of the product, he is more likely to shop around.

The online experience

SH: If you go back five or six years ago, the only USP with online retailers was price, but that has shifted now. There are probably half the number of online golf retailers now than there were five years ago, because of the infrastructure that is required to provide the necessary customer service, for when the wrong product gets ordered or delivered. A retailer can’t just say to a customer that it’s their problem. So what we are left with today are a smaller number of online retailers that are professionally run.

The top online retailers in golf have to offer added value and a good retail experience, by running product videos for example, and there is some great technology coming into the market, and this is where the retailers and manufacturers can align. Instead of just having an image of the driver online, which might not have been taken professionally, manufacturers can now embed digital materials into a retail website, which improves the whole experience for the consumer. Online retailing is not about a picture and a price any more, it is about providing a complete experience.

SW: Look at what Burberry did online. Three years ago, Burberry sales had plateaued online, so they made a massive investment to the tune of £20 million, to make their website much more lifestyle orientated, complete with 3D catwalks, and then their online sales were ramped up dramatically. It is about offering your customers what they want in a website, and looking at the whole online customer journey. A lot of people think consumers don’t spend a long time on a retail website, but there is a lot more to it than finding a product and clicking to buy. Sometimes customers will visit a website up to 13 times before they buy a product.

SH: There are two online retail models: the warehouse model with companies like Amazon, with lots of products for sale, and they want to get customers to check-out with minimum fuss. They are very good at that, but they are not good at delivering a brand ethos. The other end of the spectrum is companies like Apple or Rolex, who have an online engagement with their customers, and they deliver an online experience. There are two distinct models and I think it can cause a problem if a company tries to combine the two.

SW: Halfords do a very good job of encouraging customers into their shops through their website: ‘You can buy a boxed up bike if you like, but why not come in-store where one of our experts can help you to find the right seat for you, and peddles, and adjust the handlebars?’

SH: People also need to understand that most of the growth in e-commerce in golf is coming from Continental Europe, and this is because of the disparity in pricing across markets. In some product categories, the price is 40% more expensive just 25 miles across the Channel than it is in the UK. E-commerce is bringing down territory borders and people are shopping in countries where the exchange rate favours them. In the future, it is going to be increasingly difficult to sustain traditional distributor channels.

NF: Because products are easily available in these European territories, the markets are growing as a result.

SH: UK online retailers are investing more money into their Continental business, and engaging more with their European customers, and even if manufacturers are not marketing in Europe, the online retailers are doing it for them. This is what is driving European growth, whereas before, golfers would have to find out if a product they wanted was available via a distributor – that is now a very old fashioned model. E-commerce is breaking down barriers and Europe is becoming one place.

SW: Further growth of e-commerce is through customer insights. One company that has captured my attention more than any other online is Gamola Golf, because they have a profile on me as a customer and they know the type of golf products I am interested in. When Gamola Golf email me, they only send me offers on products that marry up with my profile. That is good marketing. They know that I am single-digit handicapper and that I have bought this, that and the other in the past. I have spent a lot of money with them, and all because they have sent me relevant messages at the right time, and they have not over done it.

The year ahead
Bob Smith

Bob Smith

BS: A lot of retailers were concentrating on running down their stock as much as possible in 2013, because there was a lot of stock clutter out there. Now, the retailers who have their finger on the pulse have found some equilibrium with stock levels again.

So 2014 looks to be a totally different situation and the prospects for Peter Millar are very good, but then we produce classic products and we are catering for that 40-60 age group that is still playing golf and has disposable income. On the apparel side of the trade, Peter Millar is not a typical brand and it is hard to measure the whole category against us.

The tourist element to the apparel trade, for crested clothing, is also looking pretty healthy. We do a lot of business in Scotland, and Scotland is expecting a lot of visiting golfers this year, with the Commonwealth Games and Ryder Cup coming up. We have a Ryder Cup license so that is good for us, so I can see us enjoying a peak later in 2014, and then it might level out again in 2015. If there are a lot of visiting golfers to Scotland, that bounces over into Ireland as well, because a lot of American visitors will tie the two in together.

SH: 2014 is another challenge for Adams Golf, because we have built our base now, and next year we need to build on that again, which will be purely by growing our distribution in the UK and in Continental Europe. We have not really scratched the surface in Europe yet.

Our pre-books for 2014 are great, but if the weather is poor in spring then we won’t get the replenishment orders. Our concentration is on getting stockists, but then not stocking them up to the hilt, and hopefully receiving re-orders, rather than trying to shove the product out there in volume and hoping for the best.

Brands are starting to wake up to this formula. They are realising that they can no longer throw £20,000 of stock into a retailer. 2013 was a prime example of why that can’t work any more, as the sun did not start shining until the end of April, and retailers literally had three months’ of stock just sitting there. Retailers need the cash, which leads to price discounting, and the margins fall apart before the season has even started. We are very mindful of that.

Caroline Griffiths (CG): The concept of pre-booking is becoming a bit old fashioned for us as retailers. What has happened over the last few years is that manufacturers have told us we need to book six months in advance to make sure you get your stock, but it has now almost reached the point that by the time you receive your new stock, it is already being cleared out by someone else, so then you think that, actually, I think I will take a chance and wait to make my order. That protects the retailer’s margin to a degree, because waiting to order until nearer to the beginning of a season means that you can begin to see what is likely to be a fast seller. Taking longer to make buying decisions helps us to make better decisions. All pre-booking really does is help manufacturers to forecast what is going to sell well.

BS: Premium brands will do fine this year, and most of them did during the recession too, and if 2013 ended up being okay, I think 2014 will remain stable, and I think there is going to be growth in the market. Peter Millar’s pre-bookings for 2014 are very good.

SH: If you are influential in the industry, as the top four or five brands are, they can turn a flat year into a good year by launching two extra products. Weather is still going to be a big factor. We can sit here and say 2014 is going to be better than 2013, but then we did that last year, and then we were sitting here in April wondering if the sun was ever going to shine.

We have got a World Cup in 2014, but England will probably get knocked out early so it will only effect golfing for two weeks!

SW: We have more social golfers now, whose participation is dictated by weather conditions, so the weather has a much greater effect on participation than it used to. The UK had one and a half million golf club members 20 years ago, but now we are down to about 950,000. 33% of the industry’s core market has now shifted into this ‘social golfer’ category.

Caroline Griffiths

Caroline Griffiths

CG: At Crown Golf our membership numbers have dropped and it is a concern and so we are focusing quite heavily in 2014 on ladies’ golf and getting more women into the game. We are also launching a starter campaign aimed at people who have not played golf before. Sometimes it seems that we are recycling marketing ideas to the same people all the time, so what we need are some new people. We have a starter offer that is very competitively priced and which includes a free iron, and it engages our professionals too, because you can’t keep giving their time away.

If you keep asking pros to give their lessons away they will disengage with the idea and that is the worst thing that can happen, because we don’t want a potential new golfer turning up for their first lesson, and being put off the whole sport because their first impression has come from a pro whose heart is not in it.

Early starters

SH: There might actually be less new hardware launched in spring 2014 than there has been in the past year, because some brands have launched early. Callaway and TaylorMade launched new lines in the last quarter of 2013.

We can forget about traditional launch periods in the trade now, and I am a believer that if you have new product that is good and ready, then launch it. The PGA Show in Orlando used to be the place for new launches, but why wait until then? At Adams we launched the new Tight Lies range in September – a new version of an old favourite – and it has sold phenomenally well.

Next year for us is about growing our distribution, so more people are seeing our product in more places, and pinching some sales off the other brands. The top four brands take up 40% of the hardware business, which means there is another 60% made up by all the other brands. Adams has a real opportunity in 2014.

CG: I can see there being at least one nasty casualty in the trade in 2014, whether it be a manufacturer or retailer, which will have a big effect on the whole industry. There are people sitting back thinking things will probably get better, but unless they are very proactive to make things better, their business will only get worse. Overall, I think 2014 will be better for the industry, because we are being forced to squeeze every last bit out of what we have, to drive more people to golf courses.

Companies have a choice: they can either market through their retailers and partners, or go direct to the public. If the weather is good, brands might miss out if they go direct to the public, but if they work with partners and spend more money to encourage them to sell their products, I think that could work better.

NF: Brands are key, as there is too much product on the market. It might be nice for retailers if they had less choice in brands. At Brand Fusion we know we supply the best waterproof golf bags out there, from Sun Mountain, but we have got to shout from the highest turrets to make sure people realise that. We will achieve that through a mix of going direct to the public and by working with our retailers.

SW: The brands that support and invest in their grass roots partnerships are going to protect themselves better.