Editors note: The Golf Warehouse, the worlds largest online golf store at www.tgw.com, boasts roughly 25,000 items in its expansive warehouse in Wichita, Kansas. In addition to its online dominance as a one-stop shop for all golfers and gift-givers needs, in recent years TGW has greatly benefited from its catalog operation. TGW is also active in the promotional merchandise business, providing custom-logo items for corporations, meeting planners, charities and golf-tournament organizers. The overall tenets to the companys success are providing superior selection, information, customer service and price.
TGW CEO Mark Marney, along with his brother, Mike Marney, formulated the idea for TGW in August 1997, the first product was sold on April 1, 1998 and TGW was acquired by the Sportsmans Guide (Nasdaq: SGDE) in July 2004. Today, TGWs sales data is regularly used by golf-industry executives and media as a leading indicator of emerging trends in golf products and overall industry health.
A conversation with Mark Marney, CEO of The Golf Warehouse (www.tgw.com):
Casey/Q:
Mark, what is your background?
Mark/A:
I spent twenty years, starting in 1980, in the over-the-road charter bus business which my brother Mike and I started. It morphed from the charter bus business to include a travel agency and at the end of twenty years we pretty much grew that business as much as we wanted to grow it. We had eighteen buses scattered all across the country and Canada. There was a lot of liability there and so we eventually sold that business. We kind of goofed around for a couple of years and then started to play around with the Internet. We always had an interest in golf so we kind of came up with this idea of selling golf equipment via the Internet.
Casey/Q:
Both you guys played college golf, right?
Mark/A:
We both played for Oklahoma State back in the mid-seventiesthat will give you some idea of how old we arebut, yes, weve always had an interest in golf. Of course, as Im sure you know, as soon as you get involved in the golf business thats kind of like signing the death ticket in terms of playing golf. At least, that what it seems like. We dont get to play very much anymore.
Casey/Q:
So, you just started TGW, just like that?
The Golf Warehouse expects to do $80 million in sales in 2006.
Mark/A:
Well, we pursued the idea. Actually, we worked both businesses for about two years. Then, TGW started growing by leaps and bounds so we sold the bus business and here we are today.
Casey/Q:
Who is the older brother?
Mark/A:
Mike is two years older than I am. We grew up in the Wichita area. Being an Internet business our company can be located anywhere, so, weve stayed here. And, we didnt really plan it this way, but, being in the center of the nation is really an advantage when it comes to shipping product. Product to customers on either coast in no more than three days delivery time.
Casey/Q:
What was the process likefrom the time you had the idea to the time you were up and running?
Mark/A:
The first thing we did after thinking about the idea was to go to the Fall PGA Show in Las Vegas in 1997 and start talking to vendors and it was amazing. No one, really, had any concept of selling things over the Internet, even in 1997. And, so, we just went ahead and did it. We got together with this 28-year old kid out in Los Angeles who had just written an E-commerce site for another product warehouse type company and ended up doing a contract with him to design the site for us to sell golf equipment. Then we started contacting vendors and we opened up a little warehouse and store here in Wichita ' a little 13,000 square foot store and warehouse ' got some initial accounts set up and started selling. We went live April 1 of 1998.
Casey/Q:
How did you drive traffic to the site?
Mark/A:
We really didnt know what the heck we were doing. We ran an ad in the Delta Airline magazine and that did marginally well. Back then, you couldnt really buy search engine terms so you just tried to get noticed as best you could. We bought some banner ads here and there on different sites. So, it was little bit of slow going. Although, I say that, but, the last day of 1998 we went over one million dollars in sales for the period April 1st to the end of 98. So, we were fairly encouraged by that.
Casey/Q:
You didnt anticipate that growth, so, how did you handle it?
Mark/A:
About that time is when all the big venture capital money started pouring in to the dot.com businesses. Looking back, I wish the smaller entrepreneur E-commerce type people could have had a little more time to themselves before all the big money came in. In our case, in another year or two, we wouldnt have had to take that investment money. We would have been able to fund our own growth. But, as it was, we were getting approached left and right by venture capitalists and we ended up selling the majority control of the business basically because we didnt know if we would be able to grow as fast as we needed to keep up with the explosion of the E-commerce businesses that were taking off around us.
Casey/Q:
Whats your current position in the business?
Mark/A:
Now we have no ownership. We are under a management contract to The Sportsmens Guide, our parent company, a major catalog and Internet company. And, it is planned we will be under employment contract to Redcats USA, a huge E-Commerce and catalog company, if the impending sale is finalized.
Casey/Q:
A million bucks in your first eight months of operation. What kind of volume do you do now?
Mark/A:
This year the company will do about 80 million dollars in sales.
Casey/Q:
Do you and your brother Mike ever sit around and say, wow?
Mark/A:
Oh, yeah. There are times we sit around talking and we wish we wouldnt have had to take all that investment capital money or the whole thing would still be ours. We talk about that, I can tell you. But, thats 20-20 hindsight.
Casey/Q:
Whats different about TGW? What makes you successful?
Mark/A:
Selection and customer service are the hallmarks of success for us. It sounds kind of old fashioned, but, thats what it boils down to. We stock over 25,000 items in our warehouse. If you order before 3:00 pm we ship the same day. We have 24-hour customer service. I think in the
E-commerce business once people get a comfort level with buying from you ' they know theyre getting good service and a good price with good selection ' buying via
E-commerce becomes very easy. Then the next time they go to buy they tend to buy where they had that good experience.
Casey/Q:
How was it for you getting started with vendors?
Mark/A:
Most of them were fine. A couple were slow to get going.
It took a good year-and-a-half before we got both PING and Callaway. Those were the two most apprehensive companies in terms of understanding what we were trying to do.
Casey/Q:
Your relationship with manufacturers and vendors is good now?
Mark/A:
Its pretty good. The vendors catch some flack from the major big box retailers that were not a traditional retailer like they are and that thats the only type of retailing there ought to be. And Im sure the green grass guys were saying the same thing about the big box brick-and-mortar people when they came along and started taking business away. But,
E-commerce on the Internet is not going away. Its so easy and convenient for people to purchase the things that they want. Its our challenge to keep our eyes on the target and keep doing our best to get better and better at what we do and keep growing.
Casey/Q:
What is your facility like?
Mark/A:
The facility now is 150,000 square feet. We have 140 employees. If you take our warehouse and customer service you have about half our workforce. Maybe a little over half. At management level, its still pretty lean. Probably around twelve of us. Beyond that, our purchasing staff, our accounting staff, order processingwe take every photograph ourselvesevery photo you see in our catalog or on our web site we take ourselves. How everything is styled, whether it be apparel, bag, clubsthats all done
in-house. The 360 degree views that we do online is all done in-house. Everything we do is done here. We dont outsource anything. We have a dedicated marketing department. We have a dedicated catalog production staff. Each one of those departments probably averages anywhere from five to ten people.
Casey/Q:
What about the IS part of your business?
Mark/A:
We host the site through our parent company, The Sportsmens Guide, up in Minneapolis. As far as writing for the site we have what we call our front end and our back end. Our front end is what you see online, the actual web site. We have three full-time programmers that handle that. Our whole web site is written in JSP format. The back end software does inventory, order processing, shipping, tracking and all of that type of stuff and the team that handles this is six people.
Casey/Q:
What do you make of the frequency of new product launches we see in the golf industry today?
Mark/A:
For a while consumers kind of bit on that bone and they traded just about every time something new came out. Now theyre becoming less likely, I think, to bite on that next new piece of technology really taking more of a critical view of how much better it is than what they already have. Is it worth another $200 from what I just spent a year-and-a-half ago or even six months ago? I think consumers are becoming a little more skeptical about that. But, I think the biggest thing were fighting as an industry is just a lack of play and a lack of new people coming in to the game. And Im not sure that that is necessarily exclusive to just golf. I think it crosses over to many of the participation sports and maybe participation activities in general. The two real retail growth sectors that I see are restaurants and workout centers.
Casey/Q:
People eat and get fat and then they have to work out to get back in shape. And lets face it, golf isnt cheap.
Mark/A:
Thats exactly right. Golf can be expensive. Its expensive to get the equipment, to pay the greens fees and it takes a lot of time to play a round of golf. How many restaurants do you see going up all over the place? They never stop. And if you take a family out to eat its what, $50 or $75 every time you go out? Theres a limit to where people can spend their disposable income. Right now, I dont really see the disposable income going to golf as much as we would all like it to. Believe me, golf retailing would be much healthier if there were more people coming in to the game. But, as things stand now, were all fighting for the same customers. Fortunately, we have a pretty loyal and vigorous customer base.
Casey/Q:
When buyers or potential buyers go to your web site, do they know what they want or are they looking for guidance?
Mark/A:
About 93% of all our orders are done strictly online without any interaction between human beings. So, really, only a few people call. We do have people on staff who are qualified to answer custom fitting questions, customer service questions and just plain order questions. There are people who want to talk to someone when they place an order and were happy to talk to them when they do call. But, in reality, were highly automated in terms of how our business runs. Even from day one weve always taken the attitude that if the web site does what its supposed to do our customers shouldnt need to talk to anybody. That doesnt mean that it is 100% there, but, its getting close.
Casey/Q:
Walk us through placing an order.
Mark/A:
Well, if you want a TaylorMade R7 460, for example, you go to the home page, TGW.com. There are several different ways of finding the club. You can put it in the search box, you can look under equipment, you can go to the TaylorMade page. In any event, you find the TaylorMade R7 460. Then, you choose from a list of attributes: right hand or left hand, the shaft you want, the loft you want, OK, then you put it in the shopping cart. If youve shopped with us before you already have an account and you can go to an express checkout option. That entire process is less than five minutes. Even if you have to build a new account, that only takes another couple of minutes. Then, your order is handled by the back end software we talked about earlier and its brought in to our order processing department. The credit card is cleared and the order is sent downstairs for picking and shipping. And, like I said, as long as that order is placed before 3:00 pm on a week day it will be shipped that same day. You can pick the type of shipping you want, whether its ground, next day or second day. As soon as its shipped we fire you out an email and give you a tracking number and you can click on that and find out exactly when its going to be at your door.
Casey/Q:
How do you handle custom orders?
Mark/A:
We have a custom fitting area on the site where you can put in a lot of your specificationsyour height, different measurements like wrist to floor, hand measurements, etc. Then we give you suggestions based on the information you give us, but, we also allow you to alter our suggestions so that you get exactly what you want the way you want it. Custom fitting online with us is becoming a very big business. Within a couple of weeks, in fact, well be launching an entirely new custom fitting site. Weve had one that worked well for us for the last few years, but, we thought it was time to update it and make it much more interactive for the customer and do a lot more defining of terms and offer much more information on shafts and desired ball flight informationthings like that.
Casey/Q:
Whats the average inventory on-hand worth?
Mark/A:
At any given time we have about 12 million dollars worth of inventory.
Casey/Q:
Thats a lot of stuff. How do you keep track of it all?
Mark/A:
With our back end software, basically, a location is a location. Our computers dont care where the product is located in our warehouse, it has a number and its easy to find. Were in the baseball business now as well, so, you could have an R7 460 sitting right next to a Louisville Slugger bat. The way our software is set up the product pickers just have to go from location to location and find what theyre looking for, fill the cart, and its taken over to the shipping line.
Casey/Q:
How do you handle returns, or, people that want adjustments made to clubs?
Mark/A:
We dont have many clubs returned or people sending clubs back in to be tweaked. I think they mostly do that at their local club or their local store. We do have a lot going on in the custom fitting level, though. We work very hard to get things right before they go out the door.
Casey/Q:
TGW has a trade-in program, dont you?
Mark/A:
Yes, we have an online trade-in program which works exceptionally well. People can trade in for a new product or a different product, or, trade in for a gift certificate that can be used later. You go online, we have a pull down menu that you can match up to the type of club youre trading in and it will give you a value. Then what we do is fire you out a pre-paid Federal Express shipping label. You box it up and your club that you are trading in goes to Texas to be inspected. We get credited from Texas and then in turn issue our customer a credit. We actually dont see the clubs youre trading in here in Wichita. They all go through this facility in Texas. And this has worked fantastically well. We probably do 60 to 80 trade-ins a day.
Casey/Q:
What makes E-commerce so inviting?
Mark/A:
I think the thing we really sell is convenience. Youre not going to jump in your car and have to sit in freeway traffic and burn gas. We have a tremendous number of people that jump online during their lunch hour. I tell people you can track the working force of Americas lunch hour from coast to coast just by looking at how many orders are coming in during what hours and from where. We sell convenience and we sell service and we have to do that very well, because, when you get right down to, were all selling the same products in golf retail. If we can make it more convenient for you than the next guy, then, chances are were going to get our share of the business.
Casey/Q:
You must be able to collect a lot of useful and valuable data. Do people want the info you have?
Mark/A:
We certainly do have many of the manufacturers ask us for a lot of information. We sell golf equipment not only nationwide, but, last year, we shipped to 68 different countries. I think we have a really good pulse on whats hot and whats not.
Casey/Q:
OK, what is hot, say in drivers?
Mark/A:
In drivers the R7 family, to include the 425 and the 460, are hot. The SQ, Nikes Sasquatch driver, is doing very well and Clevelands HiBORE driver is really heating up. I think it has taken people a little bit of time to get used to the HiBORE, the way it looks, but now its really catching on.
Casey/Q:
How about irons?
Mark/A:
I can tell you people dont change their irons nearly as often as they do their wedges, putters and drivers. Game improvement irons and combination or mixed set configuration irons that include hybrids are doing very well. Adams Golf in particular has done extremely well with their new A2 combo sets.
Casey/Q:
And its not just clubs, of course. You have just about everything for the game.
Mark/A:
Yes, we do. In balls, the Pro V1 is still doing quite well and Nike and Callaway are also selling well. And, Bridgestone is selling, too. There are a lot of good balls on the market. Its going to be interesting to see how TaylorMades new ball doeshow much traction it gets. I can tell you they have very high hopes for that ball.
Casey/Q:
And the hybrid category just keeps getting stronger?
Mark/A:
Its a huge market for us. There is a continued, steady growth in hybrid sales. It started out with people taking two iron and three irons out of their bags and going with hybrids as replacements for those long irons. Then we saw it going down to the 4-iron. Now its made its way down to the
5-iron. It keeps moving down because people who try hybrids find out how easy they are to hit compared to their longer irons and were just selling more and more hybrids all the time. It really is a bright spot in golf retail.
Casey/Q:
How do you figure out how deep to go in terms of carrying more obscure products?
Mark/A:
If there is a demand out there, even a little demand, were going to carry it. You can take Sonartec, for instance. Theres not a monster demand out there for it, but, theres a steady demand. And, of course, we get demand reports every day of what is selling and what is not selling. And thats our business bible. Our back end software keeps track of all that information. We can get very specific information. In fact, weve just implemented a new database system where we are able now to name criteria and pull information specific to that criteria. If I want to know how many Callaway Fusion FT-3 10 degree right handed drivers with S-flex shaft Ive sold in X,Y,Z zip code for any day range, I can pull it for you in a matter of seconds.
Casey/Q:
You could actually tell an OEM if there is a spike in sales based on a staff player winning with a certain piece of equipment?
Mark/A:
We can tell them on an hour by hour basis. And there is some of that. We can see spikes in sales based on who is winning on the PGA Tour on Sunday, and honestly, what weve found is it really takes a big name player to translate in to a spike in sales of a particular product. When a not so big name player wins, we dont really see any significant jump in sales. But, for instance, when Phil Mickelson used the two drivers in the Bell South and then again in the Masters, there was a definite spike in the sale of Callaways FT-3 driver. Big time.
Casey/Q:
How do you design sales campaigns around certain holiday or seasonal buying times?
Mark/A:
We do that based around our catalogs. Our catalogs are based around certain events and sale dates. Fathers Day coming up is a big one for us. The beginning of the season is big. And then we adjust that based on three things. Number one, whats hot? Number two, what is new? And three, what have we been able to get as far as close-outs go? That will make up our selection both online and in the catalog.
Casey/Q:
Being competitively priced must be important.
Mark/A:
We find a lot of illegitimate golf commerce done on the Internetwhat we refer to as grey market. From one source or another they get their hands on new product and it ends up on Ebay. Ebay is a force to be reckoned with when it comes to golf E-commerce. And people selling on Ebay dont have to abide by any manufacturer restrictions the way we do. So, youre going to see some crazy prices on the Internet from time to time. But, day in and day out we provide a secure buying environment with great selection, prices and customer service and thats what we rely on to make our business successful and our customers happy.
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