Are Golf Clubs Too Expensive?

[Lihu]

5 hours ago, ChetlovesMer said:

Okay let’s dive into this.

 

I’m going to use Callaway 2017 numbers because they are readily available.

 

Callaway 2017 total sales = $1.05 billion USD

 

Cost of goods sold = $565 million USD

 

R & D costs = 36.5 million USD

 

Marketing costs = $270 million USD

 

Percent sales by product:

 

              Woods                                             $308 Million USD

 

              Irons                                                 $251 Million USD

 

              Balls                                                 $163 Million USD

 

              Putters                                             $85 Million USD

 

              Gear/accessories/other               $243 Million USD

 

 

 

So, Callaway spends about 26% of revenue on marketing… Interestingly enough, that is EXACTLY the United States average spend on marketing for B to C (business to consumer) manufacturers.

 

So, if you are going to complain that golf club manufacturers spend too much money on marketing and product endorsements, you also need complain that Miller Lite spends too much on marketing, that Chevy spends too much on marketing, Pepsi, Hasbro, Apple, Samsung, etc… etc… etc… 

 

 

 

So, to break it down even further. Let’s say Callaway spent NO MONEY on marketing (ridiculous to assume for a B to C company, but okay.) Now instead of charging $500 for that new driver, they could instead charge $370 for that new driver…. ASSUMING everything else remains exactly the same… which it won’t without marketing sales will drop. Fixed costs will remain the same and be amortized over fewer drivers. If sales drop 13-14% due to a lack of marketing, because of Callaway’s fixed costs the price of the driver will actually go UP.

 

So, does that money they spend on marketing raise sales by at least 13-14%??? My guess is “yes”.

 

 

 

Do golf clubs cost too much? …. That’s still a personal choice. If you feel they cost too much, don’t buy them. But if you are going with the “all the cost goes into paying endorsers, theory.” That’s simply not true, at least for Calloway, their numbers are easily available. They spend EXACTLY the right amount on marketing, which includes product endorsements.

 

Cost of goods is >55% of the revenue?!? That’s far higher than any other consumer company, unless that includes a high company overhead?

Clubs are cast or forged steel, should be that bad?

Edited March 1, 2019 by Lihu

[Swooshgolf]

I buy the newest models but not brand new. $800 vs $1200 irons

[ChetlovesMer]

7 minutes ago, Lihu said:

Cost of goods is >55% of the revenue?!? That’s far higher than any other consumer company, unless that includes a high company overhead?

Clubs are cast or forged steel, should be that bad?

Costs of goods sold includes direct labor costs and the costs of materials. For a manufacturer of consumer goods in a mature industry that's about dead on the national average. For a retailer that's actually a little low and it would be a little high for a tech company. 

This year, I'm sure that percent will go up. Believe me, my industry is really feeling the increase in steel prices. I'm sure every other industry is getting hurt by them as well. Steel prices tend to jump up about every seven to ten years. They generally don't steadily rise. Instead they tend to ratchet upward with years of steady in between. 

Oh, and by the way, I didn't even mention the tariffs. 

[3jacker]

19 minutes ago, Foot Wedge said:

You can honestly make it relatively inexpensive.  You can either try out a bunch of stuff and see what you like or get fit for new clubs.  Then if you know what you like, you can do your own clubwork.  Take a look at what a shop charges vs what it costs to do it yourself (after the sunk costs of the equipment) and it's ridiculous.  $3 to change a grip which costs at best $0.25 between tape and solvent, even less if you're blowing them on.  I'm starting with regripping and then I'm thinking I may get fit for irons in the next couple of years then just put together my own from there.  I'll practice in the meantime with some old beater clubs.

I also like shooting and guitar.  You can also drop a mind boggling amount of money quickly with either of those.  Shooting is like basically throwing a quarter down range non-stop, guitars are expensive but amplifiers are absurd, though at least I can play the guitar without being charged for it.

I'm sure some of y'all are into photography...phew.  My fiance is into it and the equipment is ridiculously expensive.  I egg her on to upgrade lenses and whatnot so that way it makes my equipment look like children's toys.

Some of those lenses can equate to the initiation fee at a moderately nice country club.

[tehuti]

Everybody has the right to spend their money however they want to. I am a casual golfer who caught the bug again after many years. When I saw how much the name brand OEM clubs were going for back in 2017 I knewI had to find an alternative. Prices were WAY more than I was willing to pay. I prefer buying new, but I am okay with clone/component brands custom made for me. Or one or two older models by the OEMs.

My opinion is, unless I was a serious competitive amateur or pro there is no reason to drop $500.00 plus on a driver or over $1,000.00 for a set of irons that wil only be the “new” model for 10-18 months. 

[Lihu]

18 hours ago, ChetlovesMer said:

Costs of goods sold includes direct labor costs and the costs of materials. For a manufacturer of consumer goods in a mature industry that's about dead on the national average. For a retailer that's actually a little low and it would be a little high for a tech company. 

This year, I'm sure that percent will go up. Believe me, my industry is really feeling the increase in steel prices. I'm sure every other industry is getting hurt by them as well. Steel prices tend to jump up about every seven to ten years. They generally don't steadily rise. Instead they tend to ratchet upward with years of steady in between. 

Oh, and by the way, I didn't even mention the tariffs. 

That’s much higher than I thought, I always though margins were the same as consumer electronics. That’s possibly why there’s no new innovations outside of the tech industry in the US? Engineering budgets are probably far too low?!?

That explains why golf clubs are virtually the same as they were in the 1980s 🤔