What can we learn from the failure of Golfsmith?

As you know, Golfsmith, the nation’s largest golf retailers filed for bankruptcy last year. Though this may be good news for you (less competition), it may be helpful to understand what didn’t work for them to make sure you don’t repeat the same mistakes.

Inventory management

If you think running a golf shop can be a headache, try running a nationwide golf retailer. Just like you, they purchase inventory in the beginning of the season and are stuck with unsold merchandise at the end of the season. Managing cash flow effectively (i.e. accounts payable) is key for a golf shop’s survival. It’s estimated that when Golfsmith filed for bankruptcy, their biggest vendors, Callaway Golf, Adidas and Nike were owed about $15 million combined. On top of that, the company had $200 million of outstanding bank loans. Clearly it’s important to pay your bills, but you already know that. So what else can we learn here?

Stay liquid.

Don’t dig yourself a whole you can’t get out of. If you overbought or merchandise isn’t selling, it’s okay to liquidate it at break even or even at a loss. Liquidity allows you to pay bills and staff. You can’t afford to have too much tied up in inventory, even if it means taking a hit on some of the merchandise.

Know your suppliers.

Having a relationship with your vendors is key. Not only do they determine your payment terms, but they can be valuable when evaluating new products and trends. Think of them as a partner that can help you cut costs and increase profit. Just like you, they don’t want to have their money tied up in inventory. When you win, they win.

Customer experience

Many blame Golfsmith’s “below par” in-store customer experience for its eventual demise. What can I really tell from hitting into a net? Why is there no staff around to help me?

Use your staff.

Your staff is an extension of you. All your employees should have "face time" with members and interact with them in the pro shop and elsewhere in the club. Make sure you and your staff have a relationship with members all year, even if it’s just through social media during the off-season. Then, when a member thinks of shopping, they'll think of you.

Demos.

Hitting balls in the familiar surroundings of your course or range feels far different than hitting balls into a net at a store. And when it's done under the watchful eye of a pro who the members trust, the member will be more likely to buy from you, even if they know it may cost them a few dollars more. Members or should I say most members want to see their pro do well. You don’t want to give them a reason to go elsewhere. You are much more knowledgeable and know your customers better than did the (former) Golfsmith employees. Golfsmith had to bring customers into their stores to get them to buy. You already have them in your shop. Use these advantages to your benefit.