Dealers Prepare For The Challenges Ahead.
The new business year presents a number of challenges for the industry, with firearms dealers expressing concern about the tentative economy, consumer retention, product saturation, ammunition shortages, legislative threats and technology pressure.
The remarkable level of record-setting firearms sales from late 2012 through May 2013 provided impressive profits at the dealer level. However, by June, sales began to return to “normal,” a level that has yet to be clearly defined for 2014.
“It is clear that sales (in late summer months) were down significantly,” said Miles Hall, founder and president of H&H Shooting Sports Complex in Oklahoma City, Okla. However, Hall noted that inventory levels in October were good, with even some overages.
“Dealers in P-20 (Dealer Peer Group) are sitting well in inventory. There is actually a glut of inventory in some areas. With the drop in sales, there has been some inventory dumping by Internet discount houses,” Hall notes.
The ongoing ammunition shortage is impacting sales, as well as the ability to re-attract new firearm owners, Hall said.
“Ammo shortage is still a major issue. Many dealers are concerned that the new buyers are losing interest due to this, and are moving on. The key I am hearing from dealers all over the country is maintaining relevancy with this new group of gun owners and, of course, having ammo to shoot,” Hall said.
The lack of ammunition is the number one concern of Ed Santos, owner and founder of Center Target Sports Inc., in Post Falls, Idaho.
“As a range, we need ammo to support our range-use patrons and our sporting/educational programs,” Santos said. “We’re leveraging every relationship we can to get ammo. We’re buying bulk packs and repackaging for range use.”
Santos is also trading spent brass from his range for ammo.
“For example, every three weeks we trade four 55-gallon drums of brass for 25,000 rounds of 9mm range ammo. We have separated our ammo back stock into ammo for sale and ammo reserve for training-class use only.”
Despite these creative measures, Santos doesn’t have the inventory for everyday ammo sales.
“Obviously, we have limited quantity for sale, and we’ve limited some calibers for in range-use only, with no sales [in these calibers] for out the door,” Santos said.
The New Normal
While there are plenty of challenges for 2014, there is also a measure of optimism.
“There is some good news,” Hall said. “We have noticed that dealers who are marketing are doing better than the [NICS background check] numbers show. Those ranges that have ammo seem to be holding onto folks. And, the ‘new norm’ is beginning to shape up as being ahead of the ‘old, original norm’ before the major buildup of firearm sales in late 2012 and into 2013.”
In addition, dealers and range operators are expanding their operations, much of it fueled by the increase in profits during 2013.
GAT Guns in East Dundee, Ill., added 39 indoor shooting lanes to its 24 shooting positions after Illinois passed new concealed-carry laws.
The American Sportsman Shooting Center, a wholly-owned subsidiary of Aimpoint Holding, opened in September in Grapevine, Texas. The indoor training center offers “dynamic hunting scenarios inside an air-conditioned, live-fire cinema range.”
In October, The Trop Gun Shop in Elizabethtown, Pa., moved into a new $5.8 million facility, which features 34,000 square feet of floor space, a 12-position indoor range and a fitness center.
In November, The Frisco Gun Club opened in Frisco, Texas. The club is being billed as the “nation’s largest indoor luxury gun range, complete with lavish private restaurant, bar and cigar lounge for VIP Club members.”
A new firearms training academy is opening in Indian Land, S.C., in partnership with the co-owners of The Range at Lake Norman (Cornelius, N.C.), Tricia and Brian Sisson, and newcomers to the firearms range business, Dan and Mike DiMicco. The new facility will feature 18 indoor firing positions, including multiple rifle lanes.
New Buying Standard
Al Hoffmeyer, of Hoffmeyer’s Firearms & Sporting Goods in Grass Valley, Calif., says the major challenge firearm dealers face in 2014 is buying products from gun-friendly states. He has high praise for Kahr Arms; the manufacturer announced it would move out of New York, because of the state’s new anti-gun laws.
“I feel all of New York firearm-based industries should follow the same idea,” Hoffmeyer said. “They should move to a friendly state where they will be appreciated. It’s time we all take sides.”
Hoffmeyer says he has set a buying standard, following the significant number of state anti-gun, anti-business laws that were passed in 2013.
“When it comes to purchases, my business looks very closely to see if vendors or organizations reside in states that are unfriendly to the firearms family,” he said. “Why spend money to help the gun-grabber states when we can help those businesses that reside in a state that is not anti-gun?”
For 2014, Hoffmeyer says he intends to “follow my rules” in doing business only with manufacturers in “gun-friendly states.”
While some dealers point to the competition of Internet-based sales as a major challenge to their businesses, others are embracing online sales to compliment their storefront business.
“If your brick and mortar store is having troubles keeping up with the Internet prices, you obviously need to invest some of your time and capital into a website,” said Travis Fletcher of The Holster Store Inc., in Saint Cloud, Fla.
“Internet sales have been a large part of our business. Not only do we run a brick-and-mortar store, but we also have an online-based company. I completely disagree with Internet tax. It will never level the playing field for brick-and-mortar stores.”
“As long as storeowners continue to buy from manufacturers that sell to Internet-only establishments, they are contributing to their own demise,” said Reinhard Seipp, Meopta U.S.A. general manager. “Dealers should lobby that Internet sales are subjected to the same taxes as brick-and-mortar sales, and that firearm and ammo sales are only allowed from licensed dealers with a brick-and-mortar presence.
“I do have a web store, but unless you also have a brick-and-mortar operation, it is more difficult to get web sales,” said Scott A. Brantley, of North Texas Armament in Carrollton, Texas. “The big competitors with a credit line and large store have more available to sell, even moreso than any of us in the NFDN (National Firearms Dealer Network). The Internet taxes would help level the playing field, but since there are different tax rates, it would be unmanageable.”
Of all the “Internet issues,” the topic of dealers handling firearm transfers for Internet-discount houses is most likely to create a firestorm of dialogue. Dave Jones of Self Defense Firearms & Hobbies in Palmetto, Fla., is very pointed in his view of such sales.
“To me, it’s simple: I encourage the mom-and-pops — industry-wide — to stop doing transfers for the bottom feeders,” Jones said. “When the mom-and-pops are out of business, who will the firearms industry/manufactures turn to to sell their products? And who will do the transfers for the bottom feeders? In the long run, it will be the firearms industry that will suffer the most.”
Jones points out that while a dealer doing transfers believes he’s making money, “he is making less money for the same work.”
“He has all of the risk, all of the liability and all of the responsibility doing the NICS background check, and for maintaining and storing the paperwork for 20 years. He has none of the profit and all of the liabilities. I will do some transfers, but not for the bottom feeders,” Jones said.
Firearm dealers are also facing a growing trend in the marketplace: “showrooming” — where deal-seekers visit a retail store to examine products and note pricing, only to make their purchases online.
“I had a guy come in the store to look at red dot sights. After pawing over them, he then took one of our business cards, asked for a pen and wrote down the make and model number of the sight he liked best, said thanks and out the door he went,” said Jones.
For the Florida dealer, the visit was easily translated.
“Once again, we are ‘Self Defense Firearms & Hobbies — the Palmetto Florida showroom of amazon.com!’ I went on amazon.com; the same red dot sight was listed at $10 less that the one we have in stock,” Jones said.
By Russ Thurman
Editor’s Note: Next month we’ll present our second look at the New Business Year,
featuring 2014 business predictions by industry leaders.
Honest Evaluation A Must!
Use SWOT To Build A Success Plan For 2014
Editor’s note: Ron Buschmann, a former banker, has focused his financial expertise, planning skills and business savvy to build one of the nation’s most successful firearms dealerships.
What do I see as the major challenges for 2014, from a dealer’s perspective? What am I, really “we,” doing to meet those challenges?
Considering these questions is an exercise I am going through for Shooter’s Supply — as well as for our buy group committee meetings at the NASGW Expo. Honestly, I’m usually a great deal more comfortable with my upcoming year’s planning by now. The one thing I am certain about is a state of absolute uncertainty.
This has led me to consider the key factors, challenges and opportunities the New Business Year will provide.
Market Growth: The consumer market expansion has resulted in hundreds of thousands of new firearm owners in less than 12 months, and several million since 2008. How do we reach them?
Sale Opportunities: Determine potential levels of product saturation in the market, resulting from the considerable consumer purchasing in the first part of the 2013. As a result, how significant is the secondary market of consumer-to-consumer firearms transactions? To maximize sales opportunities, have we sufficiently reviewed and supported our accessory offerings that complement the past year’s firearms purchases?
Inventory & Cash Flow Management: Carefully consider what we need to meet demand, but not more than can be financially managed.
Increased Competition: This has come in the form of new independents, online-only retailers and the expansion of the box stores.
Changes In Technology & Internet: How do these changes affect our business?
Ammunition Shortages: How do we handle the possibility of continued limits on ammunition availability, and the related impact on firearms and accessory sales?
Influx Of New Manufacturers & Products: Who and what has staying power? (Is there anyone out there not sticking their toes into the MSR manufacturing market? New 1911 players are not running far behind.)
Gun Control Measures: Keeping up on areas of vulnerability that could result in immediate and/or severe impact to product access, market demand and inventory costs.
Political Changes: What impact will the 2014 national Senate and House elections have on my business?
Ron Buschmann, a former banker, is carefully planning to meet the challenges of 2014.
With these benchmarks, how do we proceed?
Let’s take something as simple as the ammunition issue. We can debate all day long about the reasons for ammunition shortages — from the strain of high production demand to conspiracies of government ammo purchases. After all is said and done, we have two certainties: one, limited ammunition is a problem, and two, we don’t know when or how fast the situation will improve.
What I also know is, I can’t make ammo and I can’t ship ammo from the factory to my store. All I can do is order, receive and sell. Certainly, good working relationships with vendors are a plus and have helped allocations, but I don’t believe any dealer has received sufficient quantities of ammunition over the last year to meet their needs.
So, these are the ammunition-related facts that contribute to our planning.
The question, “why are there limitations?” at this point, is immaterial, although it remains the topic everyone wants to discuss. I am not aware of any dealer making the first ammunition-related dollar by burning time debating DHS (Department of Homeland Security) purchase orders.
It is certainly not my intent to dismiss an eventual understanding of the source of supply issues. There is a time and place for these conversations, but for now, I must focus on what the consequences of limited supply mean, not why the conditions exist. Unless the understanding of the “why’s?” materially alter current expectations, the clock is ticking and we risk remaining stuck in a state of assessing blame, and not moving forward.
Importance Of SWOT
The ammunition shortage, and its related challenges, led me to step back and return to a basic planning method that has been around for 50 years — SWOT Analysis: Strengths, Weaknesses, Opportunities and Threats.
Using these key waypoints, I am led to assess, first: What do we do well? How can we leverage or improve our strengths to address and overcome issues such as limited ammunition or increased competition?
From this point, we need to ask ourselves, honestly, what areas of our operation need improvement? Are there product or market niches that we are currently not serving? Are we taking full advantage of technology and other resources?
And finally, we need to take a look at our own susceptibility. Where are we most vulnerable — legislative changes or Congressional elections; excess inventory, with limited cash flows; competition, etc.?
The best tip I can offer other dealers is to step back and break down your business with a focus on key categories. Using SWOT is just one way of doing it. However, I have found using its key points — as opposed to scattered-shot approaches to the planning process — really focuses me in on important objectives and core competencies.
Consider this example: Beginning in late 2012 to early 2013 — with the dramatic increase in firearm sales — an owner of a rural hunting store, who had never before ordered an MSR, could sell all he could get for at least the following four months. Does that mean the same dealer should change his pre-bubble business model? The consumer rush certainly provided a short-term “opportunity,” but the dealer must determine carefully if the MSR market fits his strengths or offers continued opportunity.
This process demands honest assessment of the external and internal factors and influences on your business — only then should you formulate plans.
But be flexible.
Keep in mind the famous quote attributed to German Field Marshal Helmuth von Moltke: “No battle plan survives contact with the enemy.”
The actual quote is a bit more hopeful: “No plan of operations extends with any certainty beyond the first contact with the main hostile force.”
I’m not suggesting that planning is a wasted exercise. It is an important part of our overall strategy for success — but we must remain ready to make adjustments.
None of us planned for last December’s tragedy or the current state of ammunition shortages. However, we must deal with it, and gain new insights about consumer behavior and changes in the marketplace. Then, we can decide where it all fits into the self-evaluation of our strengths and weaknesses and external analysis of opportunities and threats.
Make It Successful
If nothing else, 2013 has been a real test, and to be honest, I’m still working through all of what I’ve shared as we begin 2014 — with all its challenges and opportunities. My hope is this time next year, I can share what we did in 2014 to make it very successful.
By Ron Bushmann
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