Class AA PGA professional John Andrew established Direct Golf 20 years ago, when he borrowed £2,000 from his father to rent a shop in Huddersfield. Then he branched into mail-order, which left him wrapping up deliveries through the night. Now Direct Golf has 20 stores, internet sales throughout Europe and an annual gross turnover of £28 million. Andrew spoke to Robin Barwick…
How has 2013 fared for Direct Golf?
The start of the season was horrific, as there was so much snow in March in April. There has been a hangover from the weather, and a lot of people have got out of the habit of playing golf. The summer has only just clawed back our figures, compared to 2012. My 2013 financial year ends at the end of September, and we were down by a single-figure digit in turnover, but significantly up in profit. Direct Golf has been a growing business every year since I started out, until 2013.
What measures have you taken to stay in profit?
I had built my workforce up to around 300 people, and we have 20 stores, but as well as being able to scale up a business, you need to have the skills to scale down too. We have had to reduce staff numbers, which is hard to do, but as my dad always said, “you hire slow, fire quick”. It’s not personal, it’s business. You’ve got to react quickly if market conditions change, and if you look at Edwin Watts in the United Sates, which has just filed for bankruptcy, their stores were dated and they did not react quick enough. If you snooze, you lose. Act with speed. That is what I am like in business – I just want to get on with it. I’m nothing special, but I am enthusiastic! We have a board meeting every Monday night, and every Tuesday morning we are acting on what we agreed the night before.
I’m big and ugly enough to cut my cloth accordingly. If business is tight, you have got to act accordingly. When turnover goes down – our turnover was just under £28 million for 2012/13 – overheads need to be in line with turnover to make sure you make a profit. We have reduced our overhead costs massively, and so we made significantly more profit.
Apart from staff losses, how did you reduce overheads?
In 2012, we went to the Open and handed out free hats and fliers, and the promotion cost me £89,000, but in 2013 I didn’t do it. Branding costs have to be cut – costs which don’t have an immediate return on investment. We also reduced the pagination of our catalogue from 156 pages – which it had been for a number of years – to 82 pages, and in fact our customers preferred it. It cost half the money; an annual saving of £170,000, just by reducing the pagination. Add that to the £89,000 saved from the Open, and that is already over a quarter of a million pounds. Then we saved another £60,000 by out-sourcing our product deliveries. We have knocked off over £1.5 million annualised overheads.
I keep a very close eye on the ratio between turnover and costs – on a weekly basis. You can’t wait for the end-of-year figures. In a tough market you need to be all over your numbers, like a sniffer dog. There are a lot of people operating in the golf trade who do not know what their gross margin is. Trimming overheads is not difficult; you just need to get into the detail and get on with it.
In slow trade, does it surprise you manufacturer product cycles seem to speed up?
As a retailer I am all up for innovation from manufacturers – and the technology in the trade over the past two or three years is overwhelmingly good – but especially in hardware, products are being pumped out at an alarming rate in order to try and hit shareholders’ targets. Consumers can get frustrated at buying a driver one minute, and then six months later seeing it is already out of date.
A lot of manufacturers have also tried to bring the UK retail season forwards to keep in line with global launch policies that are dictated by the United States. Suppliers deliver equipment in January and February, and retailers are expected to pay for it within 30, 60 or sometimes 90 days. They might be able to sell new clubs in Florida in January, but you can’t in Huddersfield, or in Kent! Last winter, with the weather we had, the season hardly even started in April – it was a car crash. If the start of the season is weather effected, then it’s like the manufacturers are trying to push water uphill.
Does Direct Golf’s online business continue to grow?
It has grown, and from the information we can gather, we can see that Direct Golf is the UK’s number one online golf retailer in terms of turnover and web traffic. Sales in continental Europe now represent about 10% of our online business, and we are in over 20 European countries now.
In the trade we all know the best thing for the consumer is to be custom-fit for clubs, but there are an awful lot of golfers out there who don’t want to bother with being fitted. They just want to make two clicks and receive the club the next day.
Sales on tablets and smart phones are rocketing, and so we have a really good app, and we are looking at website compatibility with smartphones.
Are you finding that competition online is getting tougher?
If you think of a pint glass filled with orange juice, five years ago there would have been four or five straws sucking from the glass – the likes of Direct Golf, American Golf, Online Golf and County Golf. Today though, there are a million straws trying to fit into that one glass. Every Tom, Dick and Harry is trying to sell golf products online. You don’t need a bricks and mortar business, and there are online businesses out there with virtually zero overheads.
However, I have pulled the books on quite a few online retailers in golf, and hardly any of them are making any money whatsoever, because they are selling product with virtually no margin. The margins now are razor thin. The consumer wins, but the rest of the trade loses – all of us.
We are all selling the same stuff and the same brands, so the deciding factor with online sales comes down to price. That’s dangerous; we have a declining market but loads more people selling the product. But at Direct Golf we offer two-year extended guarantees, next-day delivery, and we have built up a loyal customer base of over one million. That’s a big database.
So my internet business is growing, but not at the pace I would like it to, because there are so many websites out there now. 60% of Direct Golf sales remain in store – the ratio has not changed over the last couple of years.
What’s next for Direct Golf?
Last year we opened two new stores in Scotland and they have gone brilliantly – right to the top of our list of performing stores – so future growth for Direct Golf will be in the north, in Scotland and in major cities, like Glasgow and Manchester, and Southampton is another city where we think we can succeed. But we won’t press the button until the time is right. What’s next is slow and considered growth. I have got funding from RBS for expansion, but we will do it with an eye on T.V.P.S. – turnover for vanity, profit for sanity.