Online Retailers, Election Year Loom Large.
Over the last couple years, dealers have grown increasingly cautious of the shifting trends in the industry — balancing between reacting to the market and anticipating what will increase sales at their store. The 2016 New Business Year is just weeks away and several dealers provided insight on the challenges they’re facing today and how they plan on successfully navigating 2016.
The “New Normal” developed as a popular catchphrase in 2014 — used to describe the industry’s experience with a significant decrease in demand after several consecutive years of record sales — and dealers are continuing to adjust to today’s corrected marketplace.
“The biggest challenge facing firearm retailers is adjusting to the ‘new normal,’” said David Wilson, founder and owner of Lebanon Gun Shop in Lebanon, Tenn. “I describe the ‘new normal’ as smaller incremental increases in annual sales. I think too many stores became accustomed to the sales spikes of 2008 and 2012 and a lot of new players entered the business seeing an opportunity to make a ‘quick buck.’ As a result, there has been a lot of inventory dumping as the ‘quick buck’ guys are getting out of the business and many established shops are discounting out overstocked items, e.g. MSRs.”
A surge of new customers has fueled the industry’s recent growth, but it also provided its own set of challenges because many of the new customers come from a “non-traditional” background — they’re younger, urban and female. At Shoot Smart, a range and retail establishment with two locations near the Dallas-Fort Worth area, Stategic Operations Manager Jared Sloane says his biggest challenge is searching for new products to provide an “entertainment experience” to these new customers.
“In the retail segment of our business, the biggest challenge we face is product selection for a new audience. We’re looking for new items that appeal to a broad, diverse audience, with little to no experience, and more interest in having an entertainment experience rather than a skills or self-defense experience,” he said.
With fluctuating demand, dealers are cautious of how much product they’ll buy — which wasn’t often the case during the peak years of 2013 and early 2014.
“We can’t overbuy or overstock, we’re very cautious of how much inventory we put out,” said Mike Walsh, the owner of a store in Michigan.
In reaction to 2015’s strong year-end NICS numbers, retailers pointed out this could be from the continued “race-to-the-bottom” pricing trend.
“If our area is any indication, it’s because most independent retailers are dumping inventory at fire sale prices to stay alive. We see this at gun shows and in store sales locally,” observed Jim Arias of Arias Artifacts Inc. in Panama City Beach, Fla.
“The recent uptick in NICS numbers is due to the inventory dumping, which is mostly happening via Internet sales on auction sites and online retailers. The dumping will continue until the inventory at the retail level gets back in line with consumer demand,” Wilson said.
In an effort to boost traffic in his store, Jim Arias (of Arias Artifacts Inc.)
says he plans to start a TV advertising campaign in 2016.
Online Retailer Threat
A number of dealers have identified online retailers as the greatest challenge to the longevity of their business. Dealers expressed they’d be able to compete with online retailers and provide important mentorship for new customers if price points were on a level playing field.
“Online sales affect my business big time. The number one issue is there’s no sales tax for online sales unless they’re in the same state,” said Tom Denniston of Fort Thompson Shooting Goods in Sherwood, Ariz. “This allows customers to come check the product out at their local gun shop and then order online. It wouldn’t be an issue with me if they would charge sales tax because it would put everybody on the same playing field. Somebody needs to wake up!”
“The sales tax issue is a no brainer,” said Tom Mincher, owner of American Hunter Gun & Archery Shop in Covington, La. “It should be up to who can help the customer the most, has the most knowledge and is willing to spend the time with the customer so they’re actually effective with what they purchase. Get everyone on a playing field, and see who’s who.”
Jim Arias has been selling firearms for 20 years and when asked to describe his store’s biggest challenge, he simply said: “staying in business.”
“Profit margins are at an all-time low and the public is not buying at any price,” he noted. “Online sales continue to erode retail prices — making it unwise for us to order heavy for the coming quarter.”
Dealers conclude brick-and-mortar retailers will continue to be negatively impacted by online stores unless more manufacturers introduce and enforce a minimum advertised pricing (MAP) program.
“If more manufacturers don’t start instituting MAP, the brick-and-mortar establishments will continue to see declines in sales,” he said. “This will result in more businesses deciding it’s time to bail out. So, there will be more inventory dumping — which contributes to the further decline in profit for those remaining dealers.”
“I don’t have a problem with e-tailers — they’re just doing business,” said Harold Parks of Sunrise Pass Arms Co. in Minden, Nev. “The problem lies with manufacturers who sell to them at distributor prices without a no-retail stipulation. I can compete with the no sales tax problem, but not when they’re selling at wholesale prices.
To combat online retailers, many dealers have opened up an online store to complement sales in their brick-and-mortar location — a trend that appears to be gathering momentum.
“E-tailers are impacting our sales, but we’ve added an online store and we’ve seen a lot of sales online since,” Walsh said.
“A majority of online firearm offerings now seem to be from stores with a physical location, and some are very large operations with aggressive pricing. More and more stores are using the Internet for at least some additional sales,” observed H. Taylor Buckner of Hero’s Arms in South Hero, Vt. “Main-street retailers would be better off establishing their own online presence, finding an under-served niche, or specializing in unique items rather than attempting to cripple their competitors.”
David Wilson, Lebanon Gun Shop owner, attributes a lot of the recent inventory
dumping to “quick buck” dealers and stores with overstocked items left in inventory,
such as MSRs.
2016 Presidential Election Impact?
In the presidential election cycles of 2008 and 2012, the industry experienced a noticeable increase in sales. Some dealers are expecting additional sales in 2016, although not at the levels of previous elections.
“If Hillary is nominated we expect a small uptick in MSR sales, but not to the level we saw when Obama was elected,” Arias predicted. “There may be a pick-up in October/November as the outcome of the election becomes clear but we do not anticipate the panic buying occurring again.”
“Based on previous election cycles, it’s likely we’ll see an increase in ammunition and firearm sales throughout the year with a very strong fourth quarter. In addition, we anticipate a growth in new range customers as a result of general intrigue because our industry remains in the media spotlight,” Sloane said.
Other dealers predict the 2016 presidential election will have a negligible impact on their year-end bottom line.
“I don’t see the 2016 election having much of an impact, unless another progressive liberal-type candidate appears to be headed to the Oval Office,” Wilson said.
“I’m pretty sure if Hillary gets elected and they continue to express anti-gun views, then sales may go up. But as we’ve seen in the past, customers will stop buying after a certain point — so I don’t see this helping my gun sales,” Mincher observed.
Strategy For Success
Dealers planning for a successful 2016 Business Year say they will pursue new demographics, while continuing to build on their core group of customers.
“We’re reaching out to new markets, hoping to build support for our sport and our business in entertainment categories. At the same time, we’re already working on adding value for our traditional customers through new services, such as a full-service gunsmith facility,” Sloane said. “In addition, we’re working to find value added through other services, reduce our dependence on firearm sales (which is already fairly low) and convert transfer-driven traffic into accessory, training or membership sales.”
Wilson predicts his store’s successful Customer Relation Management program will continue to be a driving force for business in 2016.
“We do two things to differentiate our store from others. One: We provide a lifetime warranty on all the new guns we stock. The second thing we do is we offer a 30-day ‘No Regrets’ policy. The details on these programs are provided on our website. This creates a strong customer retention rate and the word of mouth advertisement generated by these programs is impressive,” he said.
Some dealers looking to boost sales in 2016 have pinpointed the importance of involvement with their communities to reach new demographics.
“In 2015, we averaged more than one event per month per store,” Sloane said. “Next year we’ll have an emphasis on engaging minority communities through a specific outreach campaign. And we’re looking for ways to get more involved with Project ChildSafe to support both the local community and NSSF program nationally.”
“We’re going to continue our involvement with hunter education. When a child turns 16, they have to have a hunter education class. We stay involved with that kind of stuff. We also donate to Ducks Unlimited and the National Wild Turkey Federation. I’ll sell them guns at cost and do all the transfers — I won’t charge them anything to promote the industry we’re in,” Mincher said.
By Jade Molde