Looking Ahead

Fear Shouldn’t Be A Factor In Your 2015 Business Planning.

The 2014 business year started with uncertainty. Our best and most timely gauge of sales — the number of long-gun and handgun background checks run by FBI’s NICS program — showed background checks for firearm purchases dropped in November 2013, compared to 12 months earlier. Then the gap widened through January 2014 (Chart 1).

Naturally, not knowing where and when things might stabilize, companies were concerned and began to delay critical business decisions.

However, in February, the gap began to decrease. By September 2014, background checks run for firearm purchases were on par with the previous year — this is the key. The year 2013 was the largest volume year ever on record for NICS background checks and firearm sales (Chart 2).

Handgun background checks in the latter part of 2014 exceeded those 12 months earlier, while long guns lagged slightly. As we all know, as firearm sales go, so goes ammunition, accessories and add-on sales. With retail sales of firearms now on par with latter 2013 sales, we should be happy.

So why isn’t everyone happy? Inventories.

In 2013, after years of plentiful annual sales increases, many manufacturers assumed 2014 would bring more growth, and expanded production accordingly. When sales softened, manufacturers and retailers found themselves with extra inventory. While watching sales soften in the first part of 2014, not knowing where the new normal would land, manufacturers feared the worst and began to reduce production, and in some cases reduced staff and new product development — though innovating out of a downturn is one of the best ways to excel over the competition.

Hesitation trickled throughout all levels of business, putting a damper on new capital investments, research and product development. This caused gloom throughout the trade.

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What Now?

So where do things go from here?

Certainly there was some pain in 2014 as companies sat on unsold inventory. But, considering the recovery seen in the latter part of the year, there is reason to expect a new equilibrium is appearing. There are no guarantees, of course — history is full of predictions gone wrong — but given all the other factors and barring any unforeseen negative events, fear shouldn’t be a factor in your 2015 planning processes.

The economy’s fundamentals look sound. As of October, unemployment levels continued their gradual improvements. Capital markets, despite some corrections in the stock markets, remained positive and interest rates low. The ever-growing base of firearms owned by Americans, and the new customers behind many of them, are maintaining high levels of ammo, accessory and add-on sales.

A slight bump in hunting license sales in 2013, as reported by the NSSF’s hunting license index, plus a 5 percent increase in hunters making purchases in mid-2014 compared to mid-2013, indicates that, overall, hunters will continue to purchase, though we see some softness in the Northeast market.

Meanwhile, upcoming elections and fears driven by ISIS’s gains in the Middle East and other issues may help spur short-term sales, too. Overall, conditions look good for decent consumer sales in 2015. Once inventory levels are cleared, gains should be seen at the wholesale, manufacturer and supplier levels, too.

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Changing Consumer Base

The unprecedented run in new firearm and accessory sales in the past few years has largely been driven by new customers. Manufacturers and retailers need to understand this new customer if sales are to be maximized. The new customer may be different than our traditional customer. They are typically younger, often urban, with different interests and motivations, demanding different products and levels of attention.

For example, within the rifle category, long-range and tactical shooting continue to show gains, while the proportion of purchases for handguns and self-defense purposes continue to increase. Methods exist to help companies gain better insights into the unmet needs, and the preferred features and price points of the new and traditional customer segments.

Not all companies understand these trends, causing the sales process to be challenging for both the retailer and consumer. Retailers should think of offering classes geared to the beginner who hails from backgrounds where firearms weren’t common. Firearm rentals at shooting ranges are helpful.

Diversify your sales force to include those who understand your customer. Think younger, with little firearms experience. Often these new customers are from different ethnic backgrounds — and all are interested in spending money. These markets, along with the still relatively unknown self-defense market will be the focus of new research in 2015. (Editor’s note: Shooting Industry will announce and feature market research throughout 2015.)

Better Year For Business

Granted, 2014 presented numerous challenges that impacted virtually every segment of the industry. At the beginning of 2015, while there are residual effects from last year and barring any unexpected events, there is strong evidence it will be a good business year for the shooting sports.

Southwick Associates provides information and insights to help companies reach greater levels of success through data-driven decisions. Specialties include measuring the size of the market and specific niches, tracking trends, identifying product features and price points preferred by customers, helping companies identify if new products will succeed before bringing them to market, brand awareness and testing, and more. For more information, contact Nancy Bacon, director of business development at nancy@nullsouthwickassociates.com.

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Understanding Market Research

If your business is interested in greater market research but you don’t have the budget to hire a full-time analyst, consider attending NSSF’s first-ever “Market Research 101 for Small to Mid-Size Manufacturers” at the 2015 SHOT Show.

This seminar will explain the latest market information resources available, and help small- to medium-size businesses understand how to obtain and effectively interpret these valuable resources without having to increase staff.

Lessons will include simple methods for collecting feedback from customers and how to employ these new insights. Southwick Associates and the NSSF will host the 90-minute seminar. After the Monday, January 19 seminar, a reception will be held for participants to meet and share ideas.

Two seminars sessions will be held: Monday, January 19 from 4:00-5:30 p.m. and Thursday, January 22 from 3:30-4:30 p.m. Space is limited. Reservations can be made at www.etouches.com/101991.
By Rob Southwick,
President, Southwick Associates

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