Discussion in 'Fly Fishing Forum' started by Nathan B, Apr 20, 2013.
Shopping at the Issaquah Costco when something caught my eyes.....
I've heard about this recently... not cool for local shops.
Same deal a couple of years ago at Costco with Simms waders and another premium brand - can't remember what. The story back then was that a middle distribution partner had sold the goods to Costco without Simms knowledge.
I can't help but think this is a test every now and then to get the stuff into Costco. The volumes would be significant compared to the small outlets even with a Cabela's thrown in. I did a calculation for a client a couple of years ago, and the inventory to stock Costco Stores would be about 80% of the annual sales budget for an unnamed vendor. The pressure for revenue gains on the sales forces of these companies must be uncomfortable at best and unbearable at times.
The fly shops don't have anywhere else to go for branded products with high revenue ticket values. Simms decision to sell direct seems to be further evidence of this (IMHO). My sense is there will come a day then the premium brands make slightly different models and products for the big box guys and claim the products are different than the ones in shops. Golf brands did the same thing to pro shops a couple of decades ago.
I can see both sides of the arguments here and I have sat in the conference rooms of both sides a couple of times. Bob Dylan said "the times they are a changing" and they are.
The real problem is the industry isn't growing and the most affluent end is dying off quicker than the growth curves they need to prosper. The premium brands don't do much to grow the "beginners" end of the business because these prospects do not buy $800 waders and $900 fly rods. Most (including me more than I like to admit) are happy about the lack of growth because the shoreline numbers for places to chase trout ain't growing at ALL!
How many years till we see Simms, Sage and Able in Costco? What do you think?
A couple of years ago it was the z-axis being sold in costco....but I believe it was 100.00 cheaper than the fly shops.
That's depressing, I remember when bikes from Trek or some other high end company showed up. For some reason Costco rubs me the wrong way. This is just one example. Beautiful high end US made fly rods tossed into a bin like they were kid's zebco combos.
On the bright side, how any of you have only one rod and one reel? And this is a accessories heavy sport so it may just get people started on the sport and drive them to local shops to fuel their addiction.
Can't say that with bikes, for example.
I bet Sage's reps have been getting an earful from their retailers today! This is so totally unacceptable. Maybe a retailer can correct me on this if I'm wrong, but I assume Sage has pricing guidelines with minimum posted prices for their authorized retailers. And from a quick search, it looks to be $475 for this combo. I bet wholesale on this is somewhere in the $250-300 range, so if retailers want to match it, maybe they can at least do better than breaking even.
Wanna know the silver lining? Someone buys this from Costco, decides to return it in five years, Costco takes it back at a full refund, sends it back to Sage and Sage is on the hook for refunding the wholesale price to Costco.
I've been approached by Costco a few times about selling our product in their stores, and each time it comes down to me asking, "So, what if your customer wants to return it in a couple years?", answer is always, well then you have to take it back and pay us". No thanks.
The only (and I would argue the most important) area where a "small" competitor can go toe to toe with a huge volume seller is servie. Not price. If compared apples to apples, the Costco's of the world will be able to negotiate a better per unit price, but more importantly they will not be dependent on the margins at all. Unless a vendor forbids it, they could even use some premium fly products as loss leaders to get feet in the stores.
But there is hope. There are several less expensive lines of rods and reels available to allow small shops to reach out to the new angler who is not in the market for expensive gear. I will not start a brand argument, but one example in my world is the Echo Ion. Not expensive at all, light, fast and aesthetically pleasing. I've never fished one of the two I own and thought I needed a better rod. My point is there is gear available that the small, service oriented shop, should be able to move into the hands of new anglers.
If there truly are any small fly shops still persisting on high margins associated with premium gear...then your days are indeed numbered. I have no idea if this business strategy actually exists or not. I hope not.
Most businesses that work out the service aspect of customer interaction are successful, and most who do not...well they go away. Shops that offer gear, tying lessons, guiding, destination fishing, sponsor movies, events, etc. are going to have a better chance (IMO) because they can leverage good service to keep customers coming back. Also, they have a better chance of diversifying away from strictly being a gear reseller, which is a hard thing to do successfully in any industry (for the most part).
Make sure your business profits from service, then make sure you are good at it. Then what Costco, Walmart, etc. does will not matter.
I remember there being some story behind this but can't recall the facts. I don't believe costco purchased directly from sage, seems like there was some third party involved. This was with regards to the z-axis. It very well could be the same type of thing, only two -three years later. In any light I think it is a poor business model for both parties. Sage has set retail prices, and to let a big box store discount the retail prices hurts the ones who really promote and support sage. If a fly shop tries to discount sage rods they will find their dealership quickly expired from sage....or so I have been told. Now discontinued rods are another thing.
Wholesale Sports just closed. Maybe they came from there.
I think this report explains fairly well what Porter is referring to: http://www.anglingtrade.com/2011/04...w-prices-on-top-brands-to-lure-fly-fishermen/
Wholesale Sports outlets in the Pacific Northwest got bought out by Sportsman's Warehouse who had previously sold out to Wholesale Sports. Round and round we go, where we stop nobody knows. It appears they decided to close any stores that were near a Cabelas.
There was a story. Some freight forwarder - central American distributor, purportedly sold a couple of containers of goods to Costco. As one said above, Costco is always on the hunt for premium goods at a great price. They will even buy smaller (by this I mean not National) lots and sell them regionally.
I think the last round was Simms for sale in about a dozen stores and when the "fertilizer hit the ventilator", Simms went in and bought the remaining inventory back.
I am not sure the vendors (Mfgs) are the villains here. But their train left the station because their models all need sales growth each season. One only needs to sit in on one of their "preseason" sessions to know the pressure they are under.
Costco models their sales on buying right and selling out the "buy" quickly returning the shelf space to another product that will turn in a hurry. They love stuff like this because its new, viral (just like this posting on this forum) and draws feet to the stores.
Sooner or later these guys will get together with one of the big names (seems like it was Calloway in golf, but I am not a follower so I am not sure). Once the barrier is broken, the other guys will have to follow suit or they will fall behind in revenue.
I can't say its bad for the consumer. It is bad for the shops for sure. They live on the margins from trips and from these big ticket items to carry the tippet, Thing-a-ma-bobbers and the like. You got to sell a lot of flies to make up for the margin dollars on a pair of waders or a NRX sold on a Saturday.
I can tell you that Costco would buy four hundred to six hundred pairs of waders just to stock a region. The CEO of a wader company thinks about that every day he drives to work.
Thanks dipnet....that was it.