Budget for success

    Too many in the golf industry still don’t understand the principles behind open-to-buy, writes Alan Fisher.

    Alan-Fisher-2014By my best recollections, this was my 28th PGA Show. And I still love it! How the industry and show have changed. When I started back in 1985, the show was in a tremendous growth spurt. Golf participation was rising steadily, but not the way it did later when Tiger Woods hit the scene. Unfortunately, too many organisations rode his coattails to a temporary increase in interest which, ultimately, led to the disaster of overbuilding courses.

    I was sales director for a golf and club software company back then. Our typical customer was a golf pro who owned the shop. Probably 90 per cent of the US shops were pro-owned, but now it’s maybe less than five per cent. The primary change factor was that the pro was losing money. Golf specialty stores had not yet grown to today’s point, but pros were earning about 25-30 per cent gross profit on merchandise. They were in credit binds though because they brought in a year’s worth of merchandise just prior to the season. Paying those invoices required lines of credit.

    Unfortunately, many created a financial statement that included merchandise sales, retainer and lesson income. The cost of goods sold was then subtracted to show a much higher gross profit than reality. The shop, on its own, was losing money and income for expertise was subsidising the losses. As pros became better business people, it lead to shop ownership changes.

    Around 1999, there was a consolidation of the software technology companies by large players determined to control the tee time market. The son of one wealthy owner somehow managed to blow $60M in just nine months and they were gone! He made such smart moves as to lease a jet to fly 20 staff members from Arizona to South Carolina on a feel-good trip for a customer that was going nowhere. He hired the late Glenn Frey to play a concert at the Hard Rock in Las Vegas in typical one-upmanship fashion. Crash and burn happened to every one of these companies.

    Which brings us to today’s technology update: it is still true that not one of these companies ‘gets it’ when it comes to inventory management. I have been at retail consulting and open-to-buy for many years and, blessed with a great mathematical aptitude, I have an advantage over these tech companies. As I sought to discuss various business options with them, I loved the bravado of a couple of them…then I got to zing them! Professionally, of course.

    Screen Shot 2016-03-15 at 09.46.42One CEO was telling me about all the Mensa expertise and development that went into his product. As I watched a signboard sing the praises of their ability to manage multiple shop facilities, I asked (fairly sure of his response), “So you also handle the retail method of accounting for inventory?” His eyes grew large and his face went ashen. His active statements turned to questions as he realised that maybe they were lacking some important knowledge.

    My favorite answer is when I ask, “Do you offer an open-to-buy?” The answer is often “No one asks for it.” Of course they don’t. Only three companies in the golf industry have offered it and never at the same time. Golf course owners and shop buyers have been trained to know the answer after 31 years. Of course they don’t ask for it! Stock turn rate gets a similar response.

    But, as all of you know, it is a process that you, or someone at your shop, perform every year at least once. So their answer means, “We don’t have it, we don’t understand it and since shop management is down the list of priorities, we’re not going to worry about it.”

    One of the more interesting technology battles occurs for tee time dominance between GolfNow and EZLinks, which has partnered with the PGA Tour. There have been other players in this as well, many operating as marketing services. What some marketing companies have done is use a course’s email list to solicit tee times for local competing courses. Unbelievable!

    Alan Fisher is a US-based retail consultant focusing on open-to-buy, inventory analysis and profitability strategies. He works with golf shops, retail apparel and gift shops. He can be contacted at:
    alan@otbguy.com or by calling: 020 3289 4653.