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The Fallacy of Club Adjustability

I commend the big brands in finding new ways to pick the pockets of the average golfer.

In 2007, the USGA, decided to establish a new rule on club adjustability It allows for woods and irons to be developed with interchangeable heads, variable shafts and even customizable lengths, lofts and weights. If you read the trade ads you’d think just by buying one of these fancy new adjustable clubs, your score will drop by 10 strokes. Nonsense.

Yet that is basically what the TaylorMades, Nikes and Nickent Golfs are saying: buy this over-priced, over-hyped, adjustable golf club with a patented new connector that lets you pull out one shaft and replace it with another and presto, you’re on your way to becoming a scratch golfer.

On the surface this might seem like a great idea until you check out the price tag for this new fangled technology. It wasn’t enough to make us buy the latest TaylorMade r7 or Callaway FT-i driver for $599. No sir, now, to get this latest technological leap forward into our bags we must cough up $1000 for TaylorMade’s “Tour Van in a Box” that contains a driver head and three graphite shafts.

Yet it doesn’t end there.

To make sure that we’d never put a non-TaylorMade shaft into their fancy head, a proprietary connector is needed. This will assure that you only buy the expensive shafts from the company even though you could buy the same shaft, without the connector, for less. Even if we did end up buying one of these fancy drivers, we still couldn’t swap out the shaft in the middle of a round. No no that would be illegal. That can only occur between rounds.

Every year the equipment manufacturers look for new ways to separate golfers from their money and we oblige them by purchasing billions of dollars of new equipment annually. This year’s technological leap du jour is adjustable shafts. If you remember last year’s flavor it was adjustable weights. Next year maybe they will let us use those laser-guided putters.

Frank Thomas, the inventor of the graphite shaft and the GOLF CHANNEL’s Chief Technical Advisor weighed in a few weeks ago “I don’t think the USGA has thought this out to the extent it should have and instead jumped on something, which in the short term is going to please the manufacturers who are looking for something to stimulate their lagging sales.”

I’ll say this again like I’ve said it so many times in the past: take that $1000 and buy yourself some lessons or get your clubs custom fit. These options are much more likely to lower your score than a fancy adjustable-shafted driver.

Who Wants to Own a Golf Equipment Company?

I wouldn’t.

Golf equipment isn’t a very good investment these days. Look at Callaway. It’s stock has dropped 20% since July ($15.71 vs. $19.49), Golfsmith has faired even worse crash-diving 47% ($5.77 vs $10.95).

Two articles came to my attention on the golf equipment business recently: Cleveland Sale Appears Imminent and Huffy Corporation Sells Tommy Armour. Both appeared in GolfWeek Business. For leveraged buyout groups like the one that is selling Cleveland and the sporting goods conglomerate that is unloading Tommy Armour, golf isn’t fitting into their idea of making a profit.

Quicksilver, the current owner of Cleveland because of its acquisition of Rossignol skis in 2005, wants to dump it because the parent took its first annual loss in 15 years. Huffy, which acquired Tommy Armour, TearDrop, Ram, and Zebra when it purchased extreme sports manufacturer Gen X in 2002, later emerged from bankruptcy in 2005 and no longer thought golf fit into its future plans. Rumors are that Cleveland could be a TaylorMadeAdidas target, but nothing is official.

Last year it was sporting good retailers consolidating. Is 2007 the year for golf equipment manufacturers?

The Idiocy of Movable Weights and Draw Drivers

On the Chinese calendar, 2007 is the Year of the Pig, but in golf, it is the year of the Draw. The first major equipment company to the “Draw-ing” table was TaylorMade with their r7 Draw. Then Callaway added to their FT line and its innovative square head, but couldn’t help themselves and now offers a FT-5 in three flavors: draw, neutral and fade.

In 2004-06, we saw the introduction of moveable weight drivers. Then they expanded the concept to irons, hybrids and putters. Now we can move weight around on everything in our bag except maybe our ball retriever.

Lately, to gain a market edge, TaylorMade and Callaway have been trying to undermine each other’s credibility in the media. Creating a controversy of moveable weights versus square heads. This public fight may be good for equipment sales, but it does nothing for the average golfer. Neither of these product innovations will improve a 15-handicapper’s game.

You have just blasphemed!! May the legal departments of these companies smite you.**

Not hardly. Changing the configuration of your driver by throwing weight around a club is not going to make a difference to any golfer unless we have a REPEATABLE SWING. If we can’t do the same thing two consecutive times, what difference does it make if we can put weight in the toe, heel or anywhere else?

Every golfer wants to improve their game. It’s one of those great truths in the universe. Short of outright cheating (a little rule-bending is okay), we are all looking for the next golf magazine tip or Zen moment when everything is right with the golfing world and we shoot that elusive par round.

We are being taken for an expensive ride my friends. Buying that $499 driver isn’t going to mean a hill of beans to your game if you can’t do the same thing twice. Save your money and buy some lessons. That and your old trusty 360cc driver will help lower your score faster than any of the fancy new drivers on the market today.

**Insert “cover-your-ass” legal babble here.

What is 2nd Swing Up to Now!!!

Like the Phoenix rising from the ashes, 2nd Swing is back in business. According to a feature story in my local paper Star Tribune, the new 2nd Swing has got one store open in Minneapolis and a second is slated to open in Minnetonka on April 2nd.

Before the internet, eBay and sites like www.callawaypreowned.com, 2nd Swing had a lock on the used golf equipment market. But it didn’t last long. To keep ahead, 2nd Swing added new equipment to it offerings and expanded like mad until it had opened more than 50 stores. As quickly as it grew, it also added debt at an alarming rate. By the summer of 2006, the chain was gone. A victim of overzealous expansion and $10 million in debt.

According to the article, founder Simon Kallal is back in the saddle again as well as much of his original management “Kallal and a group of five other investors stepped in earlier this year and bought 2nd Swing’s intellectual rights for $50,000. The purchase gave them the right to use 2nd Swing’s name, logo, website, software and customer database consisting of more than 250,000 names.”

As well as wash its hands of any misdeeds, missteps or screw ups by previous management.

I wrote a posting in early September that the company had been liquidated and 17,700 customers with credit balances got screwed. Well, things haven’t changed. If you check the website www.2ndswing.com, they already have a disclaimer that says “If you are seeking information regarding the old 2nd Swing, including credit or gift card balance redemption, please seek claims through the bankruptcy court. All balances were handled through the closing of the company. Zero balances were transferred to the new 2nd Swing.”

Let’s do some math. If we make the assumption that the average credit balance was only $50, then 2nd Swing was able to dump $885,000 worth of credits for only $50K ($50/customer X 17,700/customers = $885,000).

Meaning, tough luck Mr. Former Customer.

Although they have modest goals this time around, I don’t believe that the new 2nd Swing has any more chance of being successful as did the old one. The company is going back into the used golf equipment market when the market stinks. Real growth in golf equipment hasn’t occurred for six years and doesn’t look to do so very soon.

One of the chain’s former rivals, Golf Galaxy, was quoted in the Star Tribune article as saying “the pie isn’t any bigger than it was a year ago,” said Randy Zanatta, chief executive of Golf Galaxy. “It’s all a market-share game, now. It’s about how big of a slice you can get.” Now owned by Dick’s Sporting Goods, in 2003 Golf Galaxy sold almost no used clubs. Now they represent 7 to 8 percent of the chain’s overall business.

In addition, the threat of used equipment showing up on eBay and all over the Internet is very real. One online retailer I spoke with said that he buys directly from Titleist, TaylorMade and others and sees new equipment show up on eBay at retail for less than he pays for it at wholesale. Also, online websites like those operated by Callaway and others sell used or refurbished equipment, thereby competing with companies like 2nd Swing. When they first opened in 1996, none of these competitive factors existed. Today, all of them combine to make this a much different market than before.

For a paltry $50K, 2nd Swing gets to rise again and hopefully, not get themselves into the same mess as before. I remain a big skeptic.

Equipment Spy Finds Nike’s Sumo2 Driver Illegal

Nike calls it a “voluntary product return”, I’d call it overstepping, pushing the envelope, or a violation of the sacred rules of the USGA. No matter how you want to describe it, Nike Golf has gotten itself into, as the Brits would say, a sticky wicket.

How could this happen in the dog eat dog world of golf equipment?

They were ratted out by a competitor. Who? TaylorMade? Titleist? Cobra? I’m guessing Callaway. Not that I have any evidence to pin it on them, but who better to put the fear of “non-conformity” into the hearts of equipment buyers but the company that could gain the most from this year’s square driver competition but Callaway.

And how would they gain by this bit of corporate espionage? Take the wind out of a competitor’s sales (nice play on words there I’d say) by tipping off the USGA that their competitor is trying to gain a market advantage by selling (unofficially mind you) a NON-CONFORMING driver. Callaway can look like the good guy by reporting Nike to the authorities, increase its sales at the expense of its competitor in the meantime, and cause Nike to spend money and time recalling thousands of bad drivers. Ouch!!

Based on what I hear and read, Callaway’s FT-i Square Driver is kicking the Nike Sumo2’s butt where it counts: retail sales. Reference the latest Golf Magazine and you’ll see that they rate the TaylorMade r7 SuperQuad higher than the square drivers (Nike finished third). For whatever reason, even before this golf manufacturing “spy” committed corporate espionage, Nike’s product hasn’t been getting the same respect or publicity as Callaway. Even Tiger Woods doesn’t have the new Sumo2 in his bag. How bad is it when your top spokesplayer snubs your product?

More evidence of getting caught red-handed is Nike’s own website www.nike.com/nikegolf. Upon entry, a video pops up of president Bob Wood explaining that Nike is voluntarily complying with the USGA by removing and replacing these NON-CONFORMING drivers. If they weren’t guilty, my guess is a corporation as large and as savvy as Nike would drag out this thing in court, do like the White House and “out” the spy, then stall until the selling season for this driver is past (about six months). Also, Nike is only instituting this recall for 34 days (from March 26 to April 30) so they are not being very generous when it comes to returns for customers affected by this situation.

In the dog eat dog world of golf equipment, being the “hot” product for the season is golden and can mean a make or break year. It is also accepted that pushing the technological envelope is de rigueur. Being caught with the goods just might trash this year’s sales of the Nike Sumo2, as well as sully their hard fought reputation. An “unauthorized manufacturing variance” that Nike hoped wouldn’t be noticed looks like its going to cost them big time.

Golfsmith Expands its Virtual Footprint

Golfsmith, the leading golf equipment retailer is now providing the underpinnings of the EPSN.com website. They will be the official golf and tennis supplier of EPSN.com and will provide all the marketing, sales, fulfillment and administrative support as well as 30,000 golf and tennis products to the site’s 18 million monthly visitors. This is part of an ongoing effort by EPSN.com to capture more of their site visitors’ retail spending.

What I found interesting was that Golfsmith, without the need to open a new bricks and mortar store, can expand its online footprint. Like Amazon.com, which provides content and infrastructure and fulfillment to other websites like Borders.com and Target.com, Golfsmith is re-purposing its entire inventory to another audience, thus growing its incremental sales without having to make a huge investment. Likewise, ESPN.com can offer more “value”, in this case an online retail store, to its site visitors with little financial investment.

According to Alexa.com, the site ranking website, ESPN.com is the 38th most visited site on the web, while Golfsmith.com is at 15,559th. In comparison, GolfGalaxy.com is 96,559th and Dick’s Sporting Goods leads the pack at 7,127th.

Generally, online deals of this nature have a payout to a site like ESPN.com of 10-20% of gross sales. This seems like a win-win for both players in a slow growth market and another arena that a Golf Galaxy or a Dick’s Sporting Good should be playing in.

Turning Back the Clock to Hickory Shafted Golf Clubs

Modern golf equipment has experienced a constant technological march forward. More distance, more power, more accuracy. With 460cc titanium drivers, cavity back irons, space age graphite shafts and high tech putters, golfers are constantly searching for the Holy Grail of equipment.

At the same time, there seems to be a movement away from scoring low with the latest equipment, to the more ethereal 1920s when mashies, guttta-percha balls and cool clothes were all the rage. Players are donning knickers, finding hickory shafted collectibles and entering tournaments like the 3rd Annual World Hickory Open at Craigielaw Golf Club in Aberlady, Scotland and the 10th Annual National Hickory Championship at Oakhurst Links in West Virginia.

Yet, finding authentic 1920s-era equipment and using it on the course requires scouring antique shops, flea markets and grandpa’s attic and that doesn’t guarantee you’ll find anything worth playing with. For those ready to go all out for a complete set of “retro” clubs you can pick up a circa 1930 Bobby Jones Replica Set offered by Golf Links for a mere $3995.

A new company, hoping to take advantage of the surge in “retro” golf is Sweet Wood Golf Company based in Maryland. They have introduced their first hickory shafted putters called “Brunette”, “Red Head” and “Blonde”, not because they have pictures of women on the soleplate, but because of the stain color on the hickory used in their shafts. They expect this line to retail for $135. A bargain in comparison to some of the fancy high tech putters currently on the market.

Since 1974 there has really only been one company that dominates the “semi-retro” space in golf equipment and that is Louisville Golf. They have been making persimmon drivers and putters all that time and have seen the ups and downs of being a unique golf club manufacturer, but they only take the “retro” movement so far. Their heads are wood, but their shafts are modern steel and graphite. Their prices are modern too.

Another option might be playing with irons fitted with hickory shafts. Sweet Wood Golf Company expects to introduce their Modern-Day Hickory Irons that will have 8210 soft carbon steel iron heads, modern loft/lie angles, USA turned hickory shafts and PGA Tour certified slip on leather grips for the expected market price of around $1800.

It remains to be seen if hickory-shafted golf clubs take off, but if you are a “retro” fan and think that the authenticity of the equipment you play is as important as the game, then modern day golf equipment has nothing over niblicks, brassies and hickory shafts.

Why Do I Care What Bag the Pros Play?

I got my daily e-mail from Golf Press Association. It is basically a regurgitation of the press releases they receive from equipment, apparel and marketing companies. I accept that. Sometimes these e-mails even contain some interesting announcements.

What I don’t get is why I would care that in the recent AT&T Pebble Beach National Pro-Am, “6 of the 20 finishers at the AT&T Pebble Beach National Pro-Am, including the runner up relied on Izzo to carry their bags”. Izzo is a great golf bag. They come up with innovative designs, cool colors and have bags that are easy on the back. That’s not my issue. Aside from the fact that it was a caddie that actually carried an Izzo bag for his pro, I wasn’t aware that the bag that I put my clubs in is going to make me successful.

Is this a case of “the clothes make the man” or maybe a Venn diagram problem that we learned in math class: if everyone in my group has an Izzo bag, Izzo bags are cool, then that must mean that I’m cool because I carry an Izzo bag. I think this is a not so veiled attempted to generate publicity about a product that has absolutely nothing to do with success on the golf course.

Just another example at trying to garner some press exposure when you really don’t have something worthwhile to say.

Is TaylorMade Losing It’s Edge to the Square Driver?

The “hottest” marketing trend in the driver world today is the square-headed driver. Both Callaway and Nike officially hit the market with their entries at the recent PGA Show. Yet, TaylorMade appears to be sticking with their moveable weight concept they introduced in 2004. Does this mean that TaylorMade is losing its edge in the driver market that it’s owned for years?

According to president and CEO of TaylorMade-Adidas Golf who was quoted at the PGA Show, “the square-headed driver phenomenon will be over in about 90 days.” Wow! That’s a big time shot over the bow of Callaway and Nike who are relying on their “squares” to help push driver sales in 2007.

What seems to be really occurring is the creation of two retail pricing levels. The first at $300 and a second at $500. Mr. King at TaylorMade is probably right in that the square driver phenonmenon will quickly fade and be replaced by something new in 3-6 months. Look at the last three Ping gererations with the G2, the G5 and now the Rapture all coming out in the last eighteen months.

TaylorMade’s entries for 2007 are a throwback to their earlier Burner (retail price $359) which is targeted to price-conscious “bomb and gouge” player that focuses on speed to satisfy their need for added distance and the r7 SuperQuad (retail price $499) which should attract bigger budgeted golfers more concerned about course management and accuracy versus power.

In comparison, Callaway’s entries are the Big Bertha 460cc (Retail Price $299) and the FT-i Series (retail price $499). Even Nike gives you two pricing options with its SasQuatch Sumo Square Driver (retail price $499) and the SasQuatch Sumo Driver (retail price $299).

If square drivers take the market by storm, expect to see new iterations of the concept extending into fairway woods and perhaps hybrids. If not, you’ll see those hot “squares” in the discount rack for $299 by May 1st.

Dick’s Buys Golf Galaxy. Let the Consolidation Begin.

I had written in April that Dick’s had opened a prototype concept store called simply The Golf Shop. Now, it appears that Dick’s didn’t want to wait to see how it would perform. Instead they went out and bought Golf Galaxy for $225 million.

According to Edward W. Stack, chairman and CEO of Dick’s, he believes that the industry is ripe for consolidation, that’s why they swooped in and grabbed Golf Galaxy. With a sluggish industry firmly in a recession, some analysts wonder why Dick’s is willing to invest so much in the golf retailing space.

Dick’s Sporting Goods, with 300 stores and over $2.5 billion in sales, can afford to pick up Golf Galaxy and add its $250 million in sales to the balance sheet. They also will have more leverage with suppliers than Golf Galaxy did. Dick’s also has its own private label products and the Ben Hogan golf line that they can add to Golf Galaxy’s offerings.

What this is going to mean to the industry is that smaller retailers like GolfUSA, Golf, Etc., Nevada Bobs and others will continue to struggle and that franchised shop in your town might close. A small chain made up of independent franchised stores cannot compete with the better funded big box players. A Golf Galaxy or Golfsmith might have a 20-30,000 square foot store while a GolfUSA might have 2500 square feet.

Yet, these companies are not the competitors that Dick’s is worried about. It’s Golfsmith. With 62 stores and a strong balance sheet coming off an IPO, Golfsmith is the only pure golf retailer that Dick’s has to worry about.

As odd as this might sound, I believe that Golfsmith is a candidate for a takeover by one of the bigger fish in the sporting goods arena. With less than $400 million in sales, it might make a nice addition to The Sports Authority and their head-to-head, dog-eat-dog competition with Dick’s Sporting Goods.

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