New Business Year
Meeting the challenges of 2012!
The firearms industry, in the midst of a busy holiday sales season, is preparing for the new business year. The forecast — in the face of a sour economy and a contentious election year? Companies boldly predict healthy, if not increased, sales.
For the nation, however, the forecast for next year: a continued poor economy. Most industries will struggle to recover during 2012. Unemployment will remain high. Housing, a significant economic segment, is at near-historic lows, impacting incomes throughout the construction industry.
The European debt crisis also is having a negative impact on business, and that will continue into next year. International factors influence the industry more today than at anytime in modern history.
Economists who had predicted a recovery next year are now referring to 2012 as a “transition year” on the way to a recovery for most of the nation’s industries in 2013.
For the firearms industry, however, the economy hasn’t had a significant impact. Yes, certain segments have posted lower sales, but overall, the industry has fared remarkably well during 2011, and most company officials do not see that changing for the new business year.
Much of this optimism is based on healthy sales during 2011 — including 17 straight months of increased background checks by NICS — and historical trends favoring solid sales during a poor economy. In addition, the possibility of a second term for the Obama administration will likely drive increased sales of some firearms.
Yes, there is always some uncertainty in business, especially in a shaky economy. However, most company representatives are avoiding the “cautiously optimistic” position often taken during hard times, and boldly forecasting increased sales in 2012.
New Year Offers Great Opportunity
“I think 2012 presents us with a great opportunity. Based on historical patterns going into an election year, we’re very optimistic. We’re hearing that from distribution, and we’re hearing it from retail,” said Tom Taylor, Mossberg vice president of sales and marketing. “There are some segments that are soft. The hunting market continues to be somewhere between soft and very average. That probably is the one area that presents challenges. By and large, I think everybody can be pretty optimistic going into the year, and certainly as we roll into the election.”
Is the industry immune to the effects of a poor economy?
“I don’t like the word ‘immune,’ because you do see its impact in certain areas with people who need to spend money to go hunting,” Taylor said.
During a weak economy, Taylor says there’s a different motivating factor for purchasing firearms.
“It seems to me that during tough economic times, there is an opposite effect because people may be concerned about negative things happening and, therefore, they feel motivated to invest in self-defense guns. So, I think there’s a different motivation, and it breaks down by category, with hunting being the most affected, while other firearm categories are motivating different segments within the customer base,” Taylor said.
Taylor believes the 2012 national election will have a positive impact on business.
“You can look at it two ways. One, look at historical data; typically, in a normal situation, elections are good for the industry. Two, with so much uncertainly, I see it as an absolutely motivating situation in terms of purchasing,” Taylor said.
Don’t look for much anti-gun rhetoric in the months leading up to the election, Taylor said.
“I think the left side of the political equation has learned it is not a good position to take during an election. While it may not be discussed much during the election cycle, if the anti-gun side wins, then there will be a tremendous amount of discussion about anti-gun legislation,” Taylor said.
Mossberg will continue to be aggressive in 2012, with new products and programs.
“Most importantly, we’re continuing to work hard on our new product cycle,” Taylor said. “We’re also going very hard and fast with self-defense products, a new category for our company. We will continue our Triple Crown Program, with four pretty exciting components for the dealer and sales associates.
“We’re very focused on making sure the consumer knows what we’re about, what Mossberg stands for and that we’re developing a tremendous amount of new products — and there are a lot of good things happening at Mossberg.”
Outside Forces Are Unpredictable
International factors, including financial calamity, have a major impact on the industry, according to Steve Hornady, president of Hornady Ammunition.
“I told some people not too long ago that when my dad was running this business in the ’70s and we were looking at copper costs, we knew what our cost structure was going to be and it wouldn’t change much from year-to-year,” Hornady said. “Now, if you have an oil spike in Libya, it drives copper down in Zaire and as a consequence, the price of raw materials in the United States shoots up.”
This requires companies to pay close attention to international markets and events, Hornady said.
“They can have a totally unpredictable effect on what happens to us in the United States — whether it’s the economy in the form of interest or money rates, whether banks in Europe are struggling because Greece is struggling, which causes banks in the United States to get nervous, which causes capital to dry up, which means people can’t build homes, go to work and so on.
“To top it off, it’s an election year, and with all of the vitriol and baloney that will be spread upon the masses by both parties, who knows what effect that will have on our customers,” Hornady said.
Despite all these factors, “it appears our consumers are continuing to consume,” Hornady said.
“We just see more people shooting and going to shooting events than ever before, and I think we’re going to see that continue. I don’t think the travails of this economy will impact us; I think the effect has already been built into our market, and I don’t see a whole lot of change. But, again, those outside forces are unpredictable,” Hornady said.
For 2012, Hornady predicts the market will be similar to 2011.
“There will be some ups and downs, and you’ll see little shifts here and there, but we think we’re doing okay, and we’re obviously doing some things to grow our side of the business. When I talk to our customers, they’re still doing well, selling ammo, selling guns; they’re selling. One product area may dry out, but then another gets better. New products come out, and customers come in and they’ve ‘gotta have that,’” Hornady said.
Shift In Buying Trends
Mark Kresser, the new president and CEO of Taurus International, sees 2012 as a good year, despite the weak economy, with challenges only affecting certain segments of the market.
“The buying trends of most people have shifted quite dramatically over the past four or five years. The products that are selling throughout the year have shifted. For instance, the cycles for sales of hunting products have been shortened dramatically, which requires a tremendous amount of planning and research to make sure you hit it right. However, in home security and concealed carry, it’s a year-round business,” Kresser said.
Kresser said the weak economy has created opportunities in segments of the industry.
“The economy is certainly something we have been lucky to escape, especially in the areas of home security and concealed carry. I do see a trend that is strongly geared toward rimfire, and I think that’s a piece many manufacturers have sensed and embraced, and we will do the same. There are also some shifts into the airgun market, which will continue to get better. That’s a segment of the industry we should keep our eye on,” Kresser said.
The national elections could impact the industry, according to Kresser.
“During an election year, there is always the possibility of some volatility in the industry. I think you will see discussions of guns, gun control and concealed carry as we get closer to the election,” Kresser said.
Taurus is changing the way it introduces new products, Kresser said.
“As we launch new products for 2012, for lack of a better word, we’ll sneak up on our customers — we’re going to have products in the warehouse before we talk about them. It’s a new approach for us, but it’s time for us to coordinate our marketing and sales efforts so that we ship, sell and market product all at the same time, when it’s ready,” Kresser said.
Taurus will launch new products quarterly, Kresser said, with a lot of advance planning.
“It’s critical that we no longer spend dollars advertising and promoting items that aren’t quite ready,” Kresser said.
The Sweet Spot In The Market
The industry must keep a close watch on the economy, said Lane Tobiassen, president of Crimson Trace.
“At some point, you have to believe the overall economic conditions will affect our industry. It has affected the hunting side and some of the more discretionary segments. It has had less impact on personal and home defense,” Tobiassen said.
Crimson Trace’s segment of the market is driven by attitude, Tobiassen said.
“Most people who own a personal defense firearm never use it to protect themselves, but they have an attitude that goes into their decisions on whether to buy, or what to buy. So, we watch that pretty closely, because when the attitude changes, the behavior is going to change,” Tobiassen said.
The impact the election will have on the industry is “anybody’s guess,” he said.
“If the current administration stays in the White House, that will have a certain effect; I think it will maintain some of the industry’s momentum. But, it’s obviously not good for the industry long-term to have the current administration in place. If a different administration takes office, the dynamic will change,” Tobiassen said.
For 2012, Crimson Trace is releasing its LightGuard, the company’s first tactical weapon light, and its first rail-mounted laser. Tobiassen said Crimson Trace is in a position for “tremendous” growth.
“We feel we’re at the sweet spot of the market — in the personal defense business, handguns in particular, concealed carry areas. Those are the active segments for us in the market. We’re going to run as fast as we can to keep up with that demand,” Tobiassen said.
Countering Anti-Gun Issues, Promoting Industry
The industry’s challenges in 2012 lead off with the presidential and congressional elections, according to Steve Sanetti, president and CEO of NSSF.
“We find that few shooters realize that when they vote for a president, they are actually casting their vote for the entire executive branch of our government in Washington. Combine that awesome power with the fact that all of Congress is up for election next year, one in which the control of the Senate could well switch to a different party, and you can see how important the sportsmen’s vote will be,” Sanetti said.
The anti-gun movement will continue its campaigns in 2012, Sanetti said.
“Attacks on our right to own and use firearms for legitimate purposes will continue, though a very recent Gallup Poll shows that support for gun control has never been lower among the general population (see page 10). The UN will vote on a global Arms Trade Treaty next year. This and other international arms control efforts will be closely watched,” Sanetti said.
NSSF continues to counter outdated laws and attacks on the industry.
“In those few states that still prohibit Sunday hunting as a legacy of 19th-century ‘blue laws,’ many groups are working to overturn these outdated statutes and allow families to hunt together on what is often the only day of the week when they are together. Extreme ‘green’ groups will be pushing to totally ban traditional ammunition containing lead components,” Sanetti said.
Sanetti points to the 17 consecutive months of increased NICS background checks during a severe recession as “a pretty good problem for our industry.
“The challenge will be to continue this salutary trend by providing consumers with the kinds of firearms, ammunition and accessories they demand. And it is especially gratifying to see violent crime and accidents have continued to decrease nationwide during this period of increased sales, hopefully putting to bed that old nostrum that ‘more guns equal more crime,’” Sanetti said.
For more information on these and other issues, visit www.nssf.com/industry.
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