A wise old philosopher once said we can’t fully understand a historical “moment” until it has been given time to pass.
If that’s true, and many of the powerbrokers in the Canadian golf industry think it is, then the reasons for the latest contretemps that has thwarted the growth of the game (the shortage of goods, and the “supply chain crisis”) could take years to digest, decipher, and solve.
Have these problems laid waste to all the gains made by the business side of the game over the last two years?
These striking turns of events have unnerved the business bigwigs in the game and have now filtered down to even the pettiest of players.
Golf has gone from the heights to the doldrums in a matter of months – like a low-handicapper suddenly developing a nasty case of the shanks.
This trauma has forced the business sector to reflect and reassess its operating model and ask itself how or if it should continue to receive a high percentage of its supplies from its now unreliable manufacturing partners in the massive factories in Southeast Asia.
Has our golf industry lost its grip on the game by over-extending its grasp into far-off markets?
Is the shipment of goods from Asia to North America simply a trip too far, and have the vagaries of bad weather, political disruptions, and even climate change worries, been superseded by the rising costs of transport, and the higher prices caused by labour shortages? What are the lingering effects of a pandemic that during the past two years, has been touted as a saviour of golf, and enlivened a moribund business model?
It’s clear that this disruption in the supply chain (the invisible hand of the industry), and the higher costs of production, have put a governor on the growth of the game – although by how much is yet to be determined.
This is a particularly troubling turn of events since, for the past two years – and during the midst of a world-wide pandemic, no less – the golf industry has basked in the glow of rising participation numbers, fuelling revenue spikes for course owners, club and ball manufacturers, apparel firms, and all other suppliers and distributors. The most recent economic impact study of the sector shows direct business activity (direct sales, golf related travel, capital spending) is estimated to be a whopping $20 billion.
The supply chain and production contretemps are untimely, and open-ended. The business sector of golf, like all others, needs guarantees on costs, pricing, and potential profits. These disruptions come at a deadly time: the fall, and holiday buying seasons.
Is this a temporary setback, or a killer blow? What economic, psychological, or physical impact will it have on the game’s business leaders? This remains a great unknown. But we can guess, and it isn’t a net positive.
Do the math. When demand outstrips supply, and when goods sit in unopened container ships on the high seas, on course and off course revenue generators will melt away in the cold light of fall and winter.
The business world went on high alert in late March of this year when a colossal container ship got stuck sideways in the Suez Canal for nearly a week. It clogged one of the most vital waterways on the planet, and this cost companies billions a day in lost revenue. The ship was finally freed by a flotilla of tugboats, but this seemed to act as a cryptic clue that something on a much grander scale could happen later in the year.
Now the open seas are jammed with thousands of container ships sitting like ten pins offshore, and many of the ports in North American cities are reeling as they try to get them unloaded. Many are filled with golf paraphernalia – the clubs, balls, tees and other products that sate the wants of pro shops and retailers. Does it put in peril those who failed to get their orders in early for the 2022 golf season looming in the distance?
The worry is that the shelves at pro shops and giant retailers like Golf Town, will be thinned out or emptied, as production costs climb along with shipping costs.
Pro Shop Magazine reached out by telephone and email to a Golf Town executive to get his take on the current status, but got no response in the run-up to this deadline.
Many industry veterans have never seen the likes, and one is a chief financial officer with 35 years in the game. Kevin Woods of Oshawa, Ontario-based GDF Leisure Sports, has served golf retailers with quality branded products from Canada and around the world since 1983.
It’s a family-run business, founded by Woods’ father and mother, and has been distributing product lines as varied as umbrellas, chipping nets, range finders, tees, putter covers, and spikes for golf shoes. Its list of goods is as long as it is varied. GDF gets some of its product lines from the U.S., but more from Southeast Asia, especially China, and the production and delivery has always been on time, first-rate, and cost-effective.
Woods admits that the production of goods, and the delivery of product from many of those manufacturers in those Asian factories was so good, so timely, he often took it for granted. But as Covid spread its deadly payload there, it shrank workforces, upped labour costs, and when product finally made it into containers, the old $4,000 price tag per delivery from last year was bumped to $18,000 in 2021.
In the six-week time period between April and June of this year, the costs jumped $2,000. The price to ship what once checked in at $58 per cubic metre, is now $258. The problem isn’t just the cost of containers, but even trying to secure one to rent.
The rates are “crazy,” Woods said, and the logical challenges are many. What was once guaranteed – price, time of delivery, where the container was located in the supply chain, and when it would be unloaded – is now a guessing game.
He went on to say, “there’s even a shortage of raw materials to make tees and golf balls, and this makes us rethink whether it’s worth it to try and buy and ship certain items that may be light but too bulky, and eat up too much valuable (and costly) space on a container.”
A bulk item that might have cost them $35, has now doubled because of freight costs. GDF is re-evaluating how to cost things out in the future.
Woods is good-natured about the challenges, fully understanding this is a macro, even geo-political issue far greater than the golf business. It’s a political nightmare in some countries, and U.S. President Joe Biden recently moved to open up American ports 24 X 7 to help break the gridlock.
This means CFOs like Woods are continually running their numbers one week, then again, a week later.
He concluded: “In the past, we’d do the pricing for the year, and there might be small variances, but now…”
What remains unsaid looks as if it will dog the golf industry as courses close this year and the snows begin to fly.
Pro Shop reached out to many suppliers and distributors, and some were reluctant to go on the record because the situation is still fluid.
This slowdown or stoppage in delivery of goods is so acute in all sectors of business, that Costco (and Home Depot) are renting three container ships and ‘several thousand containers’ to shield themselves from rising costs, and supply chain delays.
Canadian Tire (this country’s largest retailer) recently bought part of a shipping port in B.C. to give it “flexibility and sustainability.” The deal secures railway capacity against future requirements.
What’s clear is that inflationary factors abound: higher labour and transport cost, and the consumer price index is on the march upwards. There’s a new round of in-fighting for container space or dock time to unload goods.
The headlines in golf have moved from the sports pages to business ones, with media organs like Bloomberg following the production and supply chain stories, even in golf.
One recent story talked about a rise in club demand and that a shortage in labour was so acute it forced Ping executives back to the shop floor to fill orders. When a cargo ship hit rough seas this year, 1,900 containers fell into the ocean, and four or five of the containers were carrying Ping products. Some were damaged. The spill caused a two-to-three-month delivery delay.
A Canadian distributor said everyone in the business has heard about shipping delays based on the availability of containers, port congestion in Asia and North America, and the shortage of rail capacity in Canada.
“We’ve seen delays of five months on some orders and shipping lead times have stretched to as many as 14 months for some box sets. One bag manufacturer just advised that they have been restricted to night-time operations only,” he lamented.
The president of a major club, ball and apparel supplier in Canada added the supply chain quagmire is deep and could be very long term.
Covid’s spread remains a huge “unsolved issue” in Southeast Asia, he said, and when workers are tough to come by, prices spike.
His prediction: “The delays and costs of shipping will continue to extend ever outwards.”
The consensus is this: companies need to analyze supply chains now to mitigate against future disruptions. Trade wars, global politics and national policies will influence the future of supply chain structures. Even climate changes worries have to be factored in. Too many companies are hugely reliant on production and supplies in China, Southeast Asia and other low-cost jurisdictions, like Vietnam.
In recent years, the rising menace of China and other broad global developments have forced these companies to rethink their supply chains because of instability and unreliability. Business doesn’t like political uncertainty.
This is not just in relation to Covid-19 but a grab bag that includes government actions throughout the world, which have begun impacting supply chains. There is an increased risk of trade wars, trends of nationalism and protectionism, issues of sustainability and yes, human rights violations.
How far is too far when it comes to extending the supply chain lines?
This is all distressing to the golf industry because 2020 saw the biggest net increase in golfers in 17 years, according to the National Golf Foundation in the U.S. You can ditto those figures in Canada.
Mizuno told a Bloomberg business reporter it went from expecting to have a surplus of leftover inventory to “practically having no inventory at all.”
The stresses of this new business order have left big and small players struggling to get their hands on products, even raw materials.
Canada’s golf industry neatly sidestepped the “business apocalypse” that led to some major names going out of business as the buying of goods exited the bricks and mortar stores at malls or in the high-traffic shopping districts, to online, and e-commerce.
The Amazons and Walmarts stepped up, and were never more profitable.
This dark by-product of Covid-19 continues today. But the good news is that the golf business not only survived, but thrived. Has its luck now run out on the high seas as product-filled container ships sit idle, waiting to be unloaded? Will the production shortages in Asia ever return to pre-Covid times?
The frustration running through the industry is tangible.
Golf’s business model is strong, participation levels are through the roof, and tee sheets are full to bursting. Golf’s new wave of players has plenty of pent-up disposable income, and are eager to buy.
This turn of events – golf exploding in popularity while the global supply chain crisis is making a mess of those substantive gains – has put a damper on the game’s traditional buying season.
“There hasn’t been this much optimism and new activity in the golf business since the turn of the century,” Joe Beditz, president and CEO of NGF (National Golf Foundation), wrote on the organization’s blog earlier this year.
He has plenty of stats to back up his statement: as of July, combined sales of golf clubs and golf balls was up by 77 per cent (U.S. numbers) from last year, and 35 per cent from 2019.
Every manufacturer, supplier, distributor, pro shop owner, or major manufacturer knows this, and thus, they have the same sad lament: sales of goods are unreal, but how do we meet demand?
As one veteran industry maven who has analyzed the business sector for the past 25 years said: “The bottom line is this: the pros better buy NOW in order to get something in the spring. If they wait until March/April they may never get the product till the end of the season. The other problem is that many distributors rely on the U.S. market. I’ve heard for years the Americans will make sure their market is taken care of first. Where does Canada sit in terms of priority?”
To repurpose a now-popular political phrase, the golf industry is suffering from “good trouble.”
If the industry can emerge triumphant from the current crisis, its recent rise in popularity, coupled with a new business model that might rein in our over-extended production and supply chain, could bring more manufacturing closer to home.
Heck, it might be the catalyst to create a new business model that will produce a made-in-Canada production model for goods. Will the supply chain rein back its expansion to Asia in the future?
Covid-19 gave golf a chance to expand its participation numbers in 2020 and again in 2021, but some of that momentum has been eaten away by a crisis that is very much not in the control of the industry’s major players.
These next few months, as fall turns to winter and then the spring golf season arrives, might be the most critical in the game’s business history.
Whether players will have any tees or even a ball to put down on the tee block next spring, is anyone’s guess. As one industry executive told Pro Shop Magazine, let’s hope golf doesn’t run out of fairway.
It’s clear that golf is very much on the ascendency, its participation numbers a modern-day marvel. The numbers haven’t been this strong since the game went on a massive growth spurt, driven by its popularity with the boomer generation that fueled this expansion of players, and courses.
Now that a new diverse group is replacing these boomers, it might be said that the game’s ship has finally come in.
It’s those other ships filled with product and sitting on the high seas right now, that need to do the same thing.
If they do dock, if they do get unloaded, and if they do get product into the shelves before the next season begins, then 2022 promises to be the best year yet – both on and off the course.
But that’s a whole lot of “ifs.”
