How Online Retail Fails The Golf Startup
As a new golf product you are looking to enter the market and grab as much margin as possible to grow and sustain your business. However, what tends to happen the minute your product becomes visible within the golf industry looks something like this:
Dozens [if not more] websites and online retailers contact you and express that your product is what their golfers are looking for and would love nothing more than to sell your product on their site.
These retailers and affiliate sites boast large audiences of active customers to which the golf entrepreneur swoons over - thinking of the MAJOR win they are about to score.
Although the prospect of instant product visibility and bulk orders are enough to send most new brands to FedEx with a car load of product, it may be wise to finish the rest of this post…
First, let’s look at the retail deal
Most online retailers are happy to add your product to their product line and will even promise to promote and market your product to their customer. In this scenario, the online retailer is helping shoulder some of the marketing and advertising expense you’ve been scared to invest. Most startups are trying to avoid the rookie mistake of making a bad marketing investment so the prospect of wholesale deal seems relatively low-risk.
This deal could be great for product visibility, but you must keep in mind that the ultimate goal of the retailer is to drive transactions of ANY KIND to their website. The benefit for them is that they have increased product selection and their odds of turning a sale, though not necessarily for your product.
The other thing to consider is that your margin has shrunk, and for a new golf company, this can cripple your cash flow. Most golf startups that I speak with are not very well-funded, counting every penny to ensure the long term success of their company. Retailers often require anywhere from a 25% to 45% share of your products’ revenue and although they place bulk orders [some drop ship], the economics simply do not work in your favor.
Second, let’s look at the competitive product channel
The golf retail space is a cluttered shopping environment. As a product company, you are looking to differentiate your product from competitors. What ends up happening in the retail scenario is that your product is often grouped with similar products into product categories. So, although you do see a benefit from marketing and exposure, the traffic is driven back to the retail site where the consumer is introduced to competitive products. The traditional e-commerce website is inherently overwhelming — banners, recommended products and supporting web content could dissuade a potential customer.
Add to this, the traditional ‘product listing’ on a retailers website is never comprehensive enough to make a compelling case for consumers to choose your product over a competitors. At the end of the day, the retailer has raised visibility of your product, but they also have seeded competitive products into the purchasing process - whichever product the consumer selects is ultimately to the benefit of the retailer.
Focus on Direct to Consumer
The best strategy that I have seen work time after time is to run a very contained product launch that drives traffic from affiliates and your own marketing spend directly to YOUR shopping cart.
Keep in mind, any consumer that purchases on your retailer’s site is property of the retailer and you have no access to those customers for potential upsell or future marketing. Within the first 12 months of your product launch — for some, within the first couple of years — you want to focus on driving all transactions and traffic directly to your website. This allows you to grow your own consumer base and create sales history which you can then leverage to better position yourself within the retail environment when you have sufficient inventory and cash flow to support lower margins.
As you rush to bring your product to market, there are some pitfalls to avoid. I see the retail model for a brand new products as being one of those pitfalls. My advice is to avoid the lure of retail placement until you have learned the lessons of launching a product in the golf industry.
It’s hard work brin