There’s been a lot of “spitballing" throughout the industry since Walmart’s announcement yesterday that it will no longer sell certain ammunition calibers. Seems everyone from the manufacturers to the smallest retailer is trying to figure out what the decision means to them.
After all, it’s not often a retailing giant with a reputation for predatory pricing ever cedes market share of anything. And Walmart says they estimate the impact about 12-14 percent of the entire U.S. ammunition market. Since they’re innovators and pioneers in customer information collection, there’s no doubt they’re closer than a ballpark estimate.
Here’s one simple fact: ammunition consumers (shooters) across the country will now be forced to find another source for the fuel to run their guns. If you’re in California, for example, you’re going to be forced to look locally- there’s no option otherwise.
Certainly, it’s an opportunity for retailers -but there’s really no clarity on just what it might mean to small independents.
One idea about estimating upside potential for a small retailer involves looking at the numbers on how much their sales declined after Walmart came to their area. Take that number and start estimating how the market has changed since that decline.
OK, as an aside, it’s unlikely that any retailer will regain all the market share lost to Walmart and their economies of scale. But it’s also true the marketplace is larger than five, ten or twenty years ago.
Simply stated, there are more shooters than even five years ago. So…there’s some reason for optimism if you’re a retailer.
But there’s more at play than simple market share. There are economic and logistic factors as well. A retailer will need the means to purchase and then warehouse the product to service customers.
That wherewithal is one primary reason Walmart was able to squeeze small retailers out. Their volume buying, distribution and inventory management gives them advantages no single-location retailer, buying group or distributor can hope to match.
So….there’s some ground to be gained there. Provided, of course, the small retailer has the financial wherewithal to buy and warehouse the ammunition. Walmart’s volume buying offers advantages that no single-location retailer can ever match. And no ammunition company is going to want to sit on the amount of product Walmart regularly accepted at distribution centers around the country.
Twenty percent of all U.S. ammunition sales represents a lot of investment in raw materials and manufacturing costs.
So what’s a manufacturer to do?
Here are a few suggestions:
- Don’t panic…the demand is still there.
“It’s really a time of opportunity for small retailers,” Pete Brownell of the eponymous Brownells told me yesterday, “the core of our industry, small retailers are going to have an opportunity to get back some of the business lost by a retailer that focuses on squeezing the margins, not selling based on knowledge, experience and affinity.”
“To me,” he says, “it’s actually good news, although it’s never all good news when any company starts to give in to social pressure.”
He’s right on both points. Granted, some consumers will lose the ability to hit a Walmart for a box of rifle shells, diapers, orange juice and sodas. But they’ll now have a valid reason to go back to the stores where the shelves and displays are full of products they actually enjoy.
On an unrelated note…we have gotten word that Ruger has filed a lawsuit in the U.S. District Court for the District of New Hampshire against American Outdoor Brands Company, Smith & Wesson and Thompson/Center Arms. The suit alleges that Thompson/Center’s T/CR22 rifle infringes on the “trade dress” of Ruger’s ubiquitous 10/22 rimfire.
No further information available, but as always, we’ll keep you posted.