Over the past month, we’ve been looking at changes in the outdoor industry. Among recurring themes like repressive, although ultimately unenforceable, legislation, we’ve noted another concern: disruption in the long-established way the industry does business.
Over the past century, a three-step business process has worked just fine. A manufacturer made a product, then sold it to a distributor. The distributor warehoused a selection of products and sold them to retailers.
Retailers then offered the products to their customers. A profit margin was tacked onto each step, enabling everyone in the chain to function.
Today’s retail model is radically different.
The internet enables consumers to “pierce the veil” of selling. They’re better informed as to what’s available -and what it costs across the country.
That’s great -if you’re a consumer.
If you’re a maker or distributor, it brings its own set of challenges.
Generally, these “new customers” are better informed. Product cachet alone won’t get the sales job done. Neither will buzz from “influencers” if consumers find out your products aren’t quality.
In this new world, news travels fast. Bad news is even faster.
Retooling business models in a medium that prides itself on “disruption” is a lot like trying to redirect a river during a flood. Sometimes, you have to just hang on and hope you can get to calmer water downstream.
Not everyone is gets downstream. And the casualty count is mounting among distributors.
Before the end of the year, at least three more distributors, representing nearly a hundred and fifty years of business experience, are calling it quits.
And they’re not failing, they’re quitting, there’s a big difference.
They don’t represent a series of bad business decisions. Ellett and United Sporting represent classic tales of bad decisions snowballing. But these distributors don’t.
Just over a month ago, LM Burney Distributors of Waco, Texas, sent a letter to their customers saying, simply “LM Burney’s is planning to discontinue business by the end of the year.” With that simple declaration, the industry lost a 67-year old company.
Burney’s letter reads much like the September letter Lew Horton Distributing Company sent customers. In it, the Westboro, Massachusetts, distributor told customers “Lew Horton Distributing will be winding down operations with a target closing date of December 31, 2019.” Their closure ends a 42-year old business.
The letter announcing that Williams Shooters Supply of Quincy, Illinois, was closing wasn’t as brief.
It offers insight into what is happening inside the industry.
“We regret to inform you that we have made the decision to begin closing Williams Shooters’ Supply, Inc.” it reads, continuing “We are NOT going bankrupt and we are NOT liquidating” it states.
Instead, it explains, “the marketplace has changed such that we are no longer able to make a positive return on our investment (emphasis added).”
There, in a nutshell, is the challenge facing everyone in the industry operating under the traditional business model. It is still possible to be in business, but the world of direct-selling and direct-to-consumer deliveries doesn’t allow for the burdened costs associated with middlemen.
For some, the squeeze simply doesn’t make it worth the effort. Investment dollars are better spent - or banked- elsewhere.
Middlemen- and their customers- are in the crosshairs of a changing business model.
Ultimately, if some of them don’t adapt, the ultimate customer- consumers - will feel their loss.
Granted, consumers they can source new products off the internet. But ordering a new gun doesn’t mean much if no FFL-dealer exists to take delivery from the manufacturer and process the requisite paperwork to transfer the gun to the purchaser. Gone, too, would be the opportunity to actually look at accessories or ask about the ammunition best suited for your purposes based on that most important element: local knowledge and experience.
If you get all your information off your computer, that might not sound like a big deal.
But we’re analog creatures- we need retailers for many of the same reasons we still need grocers. And retailers, especially smaller ones, need distributors. I’m not discounting the buying groups - they serve a valuable function as well- but not everyone can get in buying groups.
Distributors aren’t going extinct, but the herd is definitely thinning.
Will retailers find themselves dealing with a mix of direct-sell manufacturers and a reduced universe of mega-distributors? Especially after the Ellett debacle clearly demonstrated big can’t insulate you from bad business practices.
“Ultimately,” says Miles Hall of Hall-N-Hall, LLC, an Oklahoma-based consultancy to retailers and ranges, “we’re all interconnected, whether any of these groups want to admit it or not.”
“Dealers have to be profitable to help the distributors be profitable to help the manufacturers be profitable.”
The hasn’t gone unnoticed by Pete Brownell, third-generation leader of the nation’s oldest and largest mail order and online source for firearms enthusiasts. He reminded me that the industry’s also being impacted by business decisions that weren’t driven by traditional business numbers.
“When big players like Walmart and Dick’s leave the market,” he said, “there’s an economic skid mark to those who relied on that volume. Those moves redistributed the supply away from a few wholesalers to all wholesalers.” That, he said, “is a shot of life to the rest of us.”
News, good and bad, accompanies change of any significance. And the industry is definitely undergoing change, ready or not.
We’ll keep looking, asking questions, and as always keep you posted.