By Tim Barker
If you’re reading this, you already know this has been a rather interesting year for the men and women who operate gun stores across the nation. Of course, this is one of those instances where “interesting” isn’t necessarily a good thing.
Most of the changes inflicted upon the industry can be traced to the unexpected victory of Donald Trump over Hillary Clinton in the 2016 presidential election. Trump’s win immediately alleviated the public’s fears about any new gun laws and restrictions under another Clinton administration. Unfortunately for the firearms industry, having a pro-Second Amendment president doesn’t necessarily do much for the bottom line — at least not in the short term. Trump’s election may have launched the wave of change that washed over the industry in 2017, but there’s more to it. Let’s look at seven ways the industry has changed this year.
1: The President
Many of the difficulties faced by dealers today can be traced back to Election Day 2016. Heading into it, gun buyers were scrambling to grab everything they could get their hands on — particularly anything with the potential to be targeted in a gun ban, such as MSR-style rifles, for instance.
At H&H Shooting Sports in Oklahoma City, General Manager Mike Rust remembers fear was driving so many purchases.
“We saw it right up to the election. People were still afraid of what might happen,” Rust recalled. “Now, it’s almost like someone pulled the garage door down.”
Overnight, the lines died. Dealers tend to think most shoppers were using tomorrow’s money to pay for today’s purchases. As a result, it’s going to take a while for many of those buyers to recover financially.
The abrupt change, of course, wouldn’t have happened if Trump had been considered a favorite to win the job. These types of changes in gun-buying habits aren’t necessarily unusual when the White House changes parties, said Richard Sprague, longtime owner of Sprague’s Sports, in Yuma, Ariz. He remembers similar drop-offs when George W. Bush replaced Bill Clinton. This is one advantage older businesses have over many of the new shops that opened during the hectic Barack Obama years. For those newer businesses, these next few years may be a challenge.
“There’s going to be some attrition,” Sprague predicted. “But those of us strong enough to weather it will be better for it.”
2: Market Saturation
The worry here is everyone who wanted a gun bought one before Election Day. Obviously, this is an oversimplification of the situation. But the reality is a lot of people took care of their immediate shopping lists, making it difficult to find new customers.
“We filled a lot of the demand,” shared Ben Romanoff, general manager of family-owned Ace Sporting Goods, in Washington, Pa. “If you aren’t aware of us, you’ve had your head buried in the sand.”
The key, dealers say, is figuring how to turn some of the novice gun buyers into enthusiasts. Those buyers — some of them grabbed guns simply to buy them before they were banned — represent the potential for market growth, Sprague offered.
“A lot of them have decided this stuff is pretty cool. We’ve got to continue to give them reasons to get excited,” he said.
And it’s not as if there’s no demand at all. Sprague shared optics, for example, are still selling strongly (particularly Vortex and Burris) along with knives and long-range precision rifles at his store.
3: Pricing Integrity
What happens when everyone is sitting on a lot of idle inventory? Prices start falling — particularly on auction sites like GunBroker.com, where many of the dealers aren’t facing the same overhead expenses encumbering brick-and-mortar stores.
And this presents a problem.
“If we all give it away, nobody’s going to make any money,” expressed Romanoff. “We can’t make $20 a gun. We’re not going to be in business for very long if we do it this way.”
While it may boost interest among consumers, it also doesn’t help some manufacturers have rolled back prices on their firearms. It’s great for dealers making purchases now. But what about the stocking dealers who maintain strong inventories?
“When you paid the old prices, it kind of hurts. We’ve had to sell some guns at prices below what we paid for them,” said Rust.
In the face of falling prices online, local shops must find a way to bridge the gap between the prices they offer and what shoppers are finding online. Both Romanoff and Rust talk about the importance of customer service and extras — gunsmithing, education, etc. — online buyers won’t get.
“What we’ve got to concentrate on is what we can offer besides just a gun,” Rust stated.
4: Deals Galore
To understand how the buyer/seller equation has flipped over the past year, we need only look at the placards advertising any number of manufacturer incentives aimed at buyers. Just a year ago, customers were lucky to find the guns they wanted in stock. Today, they get the gun — and more.
“It seems like everyone has a ‘buy something, get something free’ promotion,” Rust said.
Dealers are getting deals. Customers are getting deals. It sounds great, but those giveaways come at a cost — particularly when the freebies are accessories. The 15 to 18 percent markup on firearms isn’t what keeps the lights on. It’s often accessories, with much higher margins, making the difference between success and failure, Sprague shared.
“It might get some customers in the door, but it doesn’t help your bottom line as much as you’d think,” he added.
A better solution, Sprague advised, would be for manufacturers to simply lower their prices. Of course, then we get back to the problem of pricing integrity covered above. It’s not an easy problem to solve — and it’s unlikely to go away anytime soon.
“I don’t think we’ve seen the bottom yet,” Sprague offered. “If they’ve got product already built, they’ll do what they have to do to move it.”
5: Options Overload
In recent years, the constant influx of new models and variants of popular guns has been easy to digest for shops dealing with constant demand. But what happens when the old guns aren’t moving, and the manufacturers are continuing to churn out new products?
Dealers are being forced to make decisions on which guns to feature in their display cases. Manufacturers who fail to innovate make some of those decisions easy, Romanoff said.
“The manufacturers are looking to expand their lines, but they’re just changing the colors,” he observed. “Just because you make a gun in blazing orange, it doesn’t mean we’re going to buy it and put it on our shelves.”
The problem becomes a little more pronounced, and financially painful, when the new models are true upgrades.
“New models can actually be a hindrance. It’s just something else we have to buy,” Rust said. “If it creates buzz, it’s a win. But if it doesn’t, all I’ve done is increase my investment in inventory.”
And even if the new gun does create a buzz it can also cause problems. The best example of this may be the new fifth generation GLOCK pistols. The guns are a strong draw for handgun buyers, but it’s not necessarily good news for shops with a strong inventory of older models.
“It’s a big fear. I’ve got hundreds of Gen4 GLOCKs in the gun room,” Rust shared. “If everybody wants Gen5s, I’m going to be sitting on these a long time.”
6: NFA Sales
Declining sales of suppressors and short-barrel rifles (SBRs) are a bit more complex. SBRs have been significantly impacted by a surge in pistols equipped with arm braces. Customers aren’t eager to pay $200 for a tax stamp involving months of waiting for a BATF approval — not when they can buy a SIG SAUER MPX, CZ Scorpion or AR platform pistol with a brace, and start shooting right away.
Suppressor sales, on the other hand, were essentially in a holding pattern for most of 2017 — with would-be buyers hoping for the passage of the Hearing Protection Act (H.R.367, S.59), which had been incorporated into the SHARE Act (H.R.3668). Following the horrific shooting in Las Vegas, House Speaker Paul Ryan said he did not know when a vote on this bill would be scheduled.
Since October, Romanoff has noticed a recent uptick in suppressor sales; but could not definitely say if this was caused by the shelving of the SHARE Act or consumers’ end-of-year shopping.
“We went through the slow season, and things in general are picking up. Turnaround time for stamps has been as quick as six months. We’ll pass all of this info on to the customer, and it helps move them,” he shared.
7: Supply Returns
Long gone are the days when shops had to scramble and fight to keep shelves stocked. If you want to carry something, there’s a good chance you can get it.
This makes inventory management considerably easier, Rust shared. Where they once bought 50 of something, they might only buy 10 now.
“I’ve never seen so many different things in stock as I have now. In the last eight years, there were a lot of shortages. You were waiting a month here or there to get stuff,” he recalled. “Now I can get just about anything I want, and I can get it pretty quickly.”
Interestingly, one of the areas yet to rebound is the supply of cheap .22 ammo. Those days, dealers say, may simply never return. Not as long as customers continue to show a willingness to pay current prices for it, Rust said.
“I think the manufacturers are going to take advantage of the opportunity and keep the price where it is,” he noted. “I suppose when people get sick of buying it, they’ll drop the prices to get them to buy it again.”
What will the 2018 New Business Year have in store? Let us know your predictions – they might be featured here in Shooting Industry.
Contact us at email@example.com