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In 2006, America’s 58,000 FFL holders sold 9,800,000 firearms. In 2007, they sold 11,100,000 firearms. However, the pace of firearms sales did slow in the last quarter of 2007. by Andrew Molchan(December 27th 2007) The December 22, 2007 issue of The Wall Street Journal (WSJ) reported guns sales as "Sluggish" and "Guns are taking a hit." The WSJ was factually wrong. In 2007,America’s 58,000 FFL holders sold over a million more firearms than in 2006 for a 12% increase. The Wall Street Journal also said that Smith & Wesson took a major hit with the price of S&W stock, and that part is true. In 2007 S&W stock went from 22 to below 6. For two years I’ve been advising the managers at S&W to broaden their sales base and take in the FFL retailers who sold those extra million guns in 2007. That continues to be my advice. Every good textbook on management states the same thing. For companies with a broad based product line, 50% of their net profits are going to be in the last 20% of their gross sales. America’s 58,000 FFL holders, ALL OF THEM, are the "margin." 14 CHALLENGING YEARS All of America is eyeball deep in a Matrix of lies, and the lies have started to come crashing in on America. In this month’s "How To Survive the 21st Century" monthly column, I’m predicting a highly troubled American economy for the next 14 years. Adam Smith’s "hand-of-reality" is going to burn away many of the lies. Our firearms industry is part of America, and like America our industry has its Matrix of lies, such as: the SHOT Show really isn’t 80% about worthless status symbols that come with an enormous cost, and our firearms distribution system really isn’t hopelessly inefficient, outdated and more akin to Japan’s never-ending distribution chains, and the newsstand gun publications really aren’t dying, and so forth down the Matrix’s long list of popular delusions. Eighty-five percent of the business managers in America are going to make a horrible grand strategy mistake. They will (are already) saying, "Okay, so 2008 will be a so-so year, we’ll just cut back, lay-low and wait for everything to blow over in 2009." Wrong! Things are going to be in turmoil and difficult for 14 years. The strategy of "waiting" will prove to be deadly. The Matrix says that used gun sales don’t mean anything to manufacturers. In truth, the majority of 2007’s gun sales made by America’s 58,000 FFL holders were used firearms. The unwanted truth is that the biggest competitor to Smith & Wesson, is Smith & Wesson. The biggest competitor to Marlin is Marlin. The biggest competitor to Mossberg is Mossberg, and so on down the list. The unwanted truth is that many of America’s distributors sell used guns and are at times DIRECT AND IMMEDIATE COMPETITORS to S&W, Colt, Ruger, and so forth. What is a strategy that major manufacturers could use to reverse this fundamental long-term trend? "CUSTOM" IS ONE ANSWER Let’s suppose that in 2006 Smith & Wesson went to the 48,000 FFL holders that S&W is NOT doing business with now, and said: "Order any gun you want, and for an extra $40 dollars we’ll laser cut ‘This Firearm Was Made For (the name you provide)’ on the side of the gun." If done right, S&W would have sold those additional 106,000 guns mentioned. Of even more importance,S&W would have received the cash in their account BEFORE delivering the product. No inventory sitting in either the distributor’s warehouse or the retailer’s store. Pre-payments, fast cash flow, and NOT having inventory in somebody else’s warehouse is going to become critical as the overall American economy slows in the coming years. In 2007 the above would have been "nice," for S&W, but by 2010 it will be "essential." Laser-computer-driven etching machines are no big deal. At shopping malls you can find kiosks that will laser etch a picture of your face inside of a glass ball, while you wait. The majority of the sales by America’s collected 58,000 FFL holders are used firearms. However, new or used is NOT important for accessory manufacturers. The customer is still buying ammo, scopes, accessories, and so forth. When you buy a used car you still need gas, oil, tires, battery, new breaks and shocks, car wax and so forth. The 11,000,000 guns sold in 2007 by American’s FFL’s drove a lot of accessory sales. The 2008 and beyond vital questions for accessory suppliers are, "Do YOU know who your retailer customers are? Do YOU have their names in YOUR database system? Are YOU communicating to them?" If your answers are "no," then take out a sheet of paper and write at the top, "In a slowing economy this is why I DO NOT need to know my retailers." Number the sheet 1 to 20 and then see how many good reasons you can put down. You WILL NOT have any reasons that would stand up under even a short cross-examination. Most sales and marketing in America, for adult products and services, since the late 1960s has been driven by the massive baby boomer generation. Ninety-five percent of all humans think in straight lines, like what was in the past - is going to be in the future. However, for firearms and shooting products, the baby boomer generation is going into steep decline, and the decline will increase in speed. All the denial in the world is not going to stop the baby boomer generation from growing old and dying. The Wall Street Journal article quoted above also said that both Cabela’s and Gander Mountain saw their sales and stock prices go down in the last quarter of 2007. Both Cabela’s and Gander Mountain are still selling to the baby boomers.Take a Cabela’s and Gander Mountain catalog into a "Hot Topic" store (the young buyers of guns), and look at the store.Then look at the catalogs, and you’ll see two radically different mindsets. Before Christmas, I went into the Neiman Marcus in my neighborhood. I hadn’t been there for over a year, and I was shocked. There was nothing in the store for anyone under 40 years of age, and the store was dead. I talked to the sales people to see their attitude. At Neiman’s it was an attitude of, "You’ll buy what we have – end of discussion." Nieman’s is selling to the baby boomers – and dying. Over at Saks, it was totally different. Lot’s of things for young people, and a sales staff with an attitude of, "Tell us the look you want and what you can spend, and we’ll work with you." BIG GREEN IS MAKING THE TRANSITION The Remington group recently purchased both DPMS Panther Arms (in December) and Cobb Manufacturing (in August). The Remington group already had Olympic Arms. The Remington group is now the #1 largest manufacturer of AR-16, M-16 type rifles in the world. Cobb Manufacturing already had the start of a global sales footprint for M-16 and BA-50 sales, and I’m sure that will be expanded. The Remington group now offers AR-15 type rifles in: .22LR, .223, 5.56X45, 6.8 SPC, 204 Ruger, 243 Win., 260 Rem., 30-06, 300 Rem., and 338 Lapua. Most important, DPMS already builds "custom guns." This is one of the must-have services for tomorrow’s market. The "age of custom service" is expanding. For example, there is a new chain of shoe stores opening in malls, Morgan Miller Shoes, where women design and build their own shoes. They will build them while you wait. With "custom guns" both the manufacturer and retailer have the wonderful advantage of starting with the sale and a nice profit margin, and then working backwards to the product. It puts the customer at the top of the pyramid. Manufacturers MUST get as close to their dealers and customers as possible. They must have a computer program with the objective of having at least 95% of their dealers in the program, and with as many details about those dealers as possible. As the economy endures corrections and overall stagnation during the next 14 years, the must-have strategy will be good communications at the core customer-retailer level. Some manufacturers and importers say to me, "But my distributors do not like it when I talk to the retailers, and they won’t give me any information about who’s selling my products." Here is the solution. When you start to build your database, do NOT tell your distributors, or your reps, or anyone else outside of the people in your company who absolutely have to know. A cost effective way to gather information is to put a coupon for a free something into every one of your product boxes, and/or a free contest. Today, a $2000 PC has the memory to hold retailer information for the biggest firearms manufacturers in America. If you’re a smaller company, hire somebody part time, like a mother with small children in school who can only work 9:00 to 2:30. She can start imputing data in a systematic manner, and you’re not paying for a full time person. Once a manufacturer or importer has his retailers in his database, and their emails or fax numbers, then that manufacturer or importer is in control. With emails the manufacturer can send a message, instantly, to thousands of retailers for a cost of a few dollars. If a manufacturer/importer was in a financial bind, they could within a few hours discount inventory directly to their retailers, and via credit card payment from the retailer get the money into the manufacturer’s bank account that same day. The retailer would get a great bargain, with zero middleman costs, and at exactly the same price as everyone else, and the manufacturer would get immediate cash. When the retailer buys with a credit card they still have 30 days to pay, and they get free airline, hotel, etc., "points." After your retailers are known to you, then you can pay your distributors for only distribution, and not as sales agents, and/or Shotgun News like publishers, and/or direct-mail houses, and/or advertising agencies, etc., and so forth. Today, having 25 distributors is like having 25 advertising agencies. Aside from that, as the weakest distributors start to go under, you’ll have a lifeboat (your database of your retailers) that’s under your control. Firearms retailers must also change. Gun dealers collectively waste thousands of working hours every week calling distributors to find some product that’s a few cents cheaper than anyone else. The many wide spread and highly expensive inefficacies of this kind are the reason for our firearms industry’s perpetual low profit margins. The baby boomers wanted mass products at the lowest price. However, the new generation of buyers want custom products, and exactly what they’re looking for to solve their wants. The old retailer attitude of, "I only sell what’s in my store," is NOT going to fly in the future. Retailers have to be like the concierge at good hotels. Good malls are now adding concierge services. The sign in the gun retailer’s window should say, "Tell me what you need and/or want, and I’ll get it for you." Custom items and fast delivery of what the customers want is what has value to the customer. It’s a manufacturerretailer- customer, and a customerretailer- manufacturer circle.Yes, the "old ways" of marketing firearms and accessories are very comfortable, but the old ways have NO value to the customers who are going to become harder to sell. For example, what’s the direct value of the highly expensive SHOT Show to the end user customer? Answer – nothing. In my opinion, the SHOT Show is part of the Matrix of delusion. The fact that over 53,000 of the 58,000 FFLS were not at last year’s SHOT Show, and will NOT be at this year’s SHOT Show, or the 2009 SHOT Show, etc. That’s not the SHOT Show’s biggest problem. For manufacturers and importers, what’s at the SHOT Show are 100% of your competitors. In my opinion, the SHOT Show is really the "Shark Show." Every rip-off artist in the industry is at the SHOT Show. It’s also at the perfect time of the year to rip-off somebody else’s product ideas. The biggest sales quarter for our industry is October, November and December. The SHOT Show gives the rip-off artists over a half-year to steal your ideas, and then have them ready for the big October-December season, and/or start selling them worldwide. At the SHOT Show, in addition to the Americans looking for what to take, teams of production people from China, Japan, Taiwan, Europe are also trolling the isles looking for good ideas to steal. The SHOT Show has become especially deadly for importers. Now that America’s biggest brand-name manufacturers have discarded the idea that everything has to be made by them and in America, every small and medium sized importer is a small fish swimming into a gathering of barracudas. How convenient to have all of your imported items at the SHOT Show so the biggest brand names have an easy time deciding what to take over. The brand name manufacturers go to the overseas manufacturer with an unbeatable argument of, "We are a major brand name and we can sell more of your product better than XXX small fry." Here’s a true story of a small importer. A flashy and jewelry bedecked advertising man talked a small importer into a massive booth at SHOT. Ah, the "Status of it all, if you have a big booth at SHOT that means you’re thing is big!" Another company took notice of the importer’s impressive booth, figured the importer had to be doing good to have wasted so much money at SHOT. So, the other company went to the overseas manufacturers and took-over the importer’s product line. The be-jeweled ad man is gone with lots of the small importer’s money. Reed has lots of the importer’s SHOT Show money, probably in their Cayman Island’s bank accounts, and the small importer is now in serious financial trouble. As to new product timing, my advice has always been, "As soon as it’s ready, and you can make delivery, get it out there.” This is one of the many places where your database of your dealers comes into very profitable play. You tell the dealers about the new item, and when it becomes public it’s already in the dealer’s store. Compare that plan to the stupidity of the SHOT Show where 100% of your competitors know about your new products before it’s even in the dealer’s store. Things are changing. At this year’s SHOT Show many companies are going to take much smaller booths for 2009, and beyond. They are going to stop playing Reed’s ego game of paying big bucks for worthless status symbols. Some manufacturers are going to start introducing new products as available regardless of the time of year, and that is in my view, the correct way to market. For over a year, I’ve been asking questions about "Where is the $25 million in total profits that the SHOT Show makes?” There have been ZERO answers. I think we (the collected people in the firearms industry) deserve some answers. At this year’s SHOT Show, all the Directors of the NSSF will be at the Show. Their names will be in the front of the 2008 SHOT Show Directory. You can usually find them at their company booths. If you want to do something for the industry, go down the line of NSSF Directors and ask them, "Where’s the 25 million dollars in total profits going every year?" If the NSSF Board of Directors does not have the ability to make the SHOT Show’s finances transparent, then in my opinion, the NSSF Board of Directors should prevent Reed from continuing to use them as "native chiefs", and they should all resign from the NSSF. They should stop being native chiefs who are being manipulated, like all the other native chiefs who were manipulated during the last 400 years in every other British colony. Am I angry? Damn right! I have over 4100 dead and 12,000 seriously wounded American reasons to be angry. England was one of the three main countries that subverted the CIA and conned President Naïve (Mr. Bush), into believing the Weapons of Mass Destruction con game. James Bond’s "license to kill’ moved into the White House and made President Bush into a British "native chief." The key to individual exhibitor SHOT Show freedom is the booth selection process for the next SHOT Show. Once you sign the contract for 2009, you’re trapped on the plantation for another year. However, judging from the exhibitors who already said they are going with much smaller booths in 2009, plus the long-term economic downturn America is going into, we can expect lots of open space in Orlando in 2009. Rather than giving Reed an interest free loan for 11 months, I’d call a month before the 2009 Show, and buy a booth. Somebody might say, "But we might not get a good booth location." Let’s get real, 93% of the FFL’s are already NOT at any SHOT Show. That might go up to 95% or 96% in 2009 and beyond. However, 100% of your competitors, and 100% of all the "rip-off sharks," WILL be there. In my opinion, with 1000% to 2000% cost markups for everything the exhibitors buy at SHOT, and for only 6% or 5% of America’s FFL’s going to SHOT, that in my view makes EVERY booth location at the SHOT Show a bad location. OTHER TOPICS: A SINCERE "THANK YOU" TO THE CIA, AND THE OTHER INTELLIGENCE AGENCIES FOR FINALLY DOING THE RIGHT THING. From the very start of the Iraq War, I said it was a set-up and con game to weaken America. During the first week of December 2007, the Nation Intelligence Estimate (NIE) report on Iran was released. The report said that Iran is NOT planning an immediate attack against anyone, and I believe that assessment. For five years, I’ve said that three countries, in particular, conned America into the Iraq War. The British were one of them. With the NIE report, some of the America media con artists who helped set up the Iraq War, came out of the woodwork screaming. They said in effect that no "government agency" has a right to "find" anything other than what the supreme leader (Mr. Bush) tells them to find. The con artists said the current NIE report is "wrong" because America’s collected intelagencies had changed their minds from 2005. Yes, America’s intelagencies finally saw that they had been conned, and they finally got smart. Let me try to clarify the core moral and legal issue with Iran, and Mr. Bush’s mental confusion. Let’s pretend that you are a Cop. You are on one side of the street and Leroy is on the other side of the street, leaning up against a wall. Now, Leroy is not the most sterling person in town. You have an "informant," and this informant does not like Leroy. You walk across the street, pull out your pistol, aim it at Leroy’s head, and you pull the trigger. Bang! Pieces of Leroy’s brains and bloody chunks of his skull are splattered all over the wall. Lot’s of police soon arrive, and your captain asks you, "What the hell happened?" You say, "I have an informant who told me that Leroy had a gun, and he was going to rob the bank this Saturday. So I stopped him from robbing the bank." Now, is the town’s DA going to:A, give you a medal for effective law enforcement? Or B, will the DA charge you with murder, and/or send you to an asylum for the criminally insane? The answer is "B." President Bush is insisting that America must bomb Iran because he (Mr. Bush) has been convinced, by the same people that did the WMD scam, that Iran will do something wrong in the future. Adolph Hitler convinced the German people that all Jews were potential traitors to Germany. The "law-enforcement solution" to make Germany safe, was to kill all the Jews.What today is known as the "Holocaust" was to the German police at the time, preventive lawenforcement. The judges at the 1946-47 Nurmberg trials said that was totally insane and immoral, and the judges were 100% correct then, as they would be 100% correct today. In 1952, as the Chinese Army was pushing the American Army back down the Korean peninsula, General Douglas MacArthur was lobbying for a massive nuclear attack against Red China. General MacArthur argued that China would soon have atomic bombs (true), and China was violently anti- American (also true, and would be true for the next 20 years), and China was de facto at war with America (also true), and China would grow in power (also true). However, President Truman had ethics, understood morality, and could see past the immediate situation. President Truman fired General MacArthur. An American nuclear attack against China in 1952 would have been a monstrous crime against humanity. Fortunately, President Truman had some common sense about mass murder. Even though all of General MacArthur’s arguments at the time were true, in the long run they were all wrong. Exactly like Mr. Bush’s arguments about Iran, in the long run, will be proven to be wrong. This time around, the collected intelligence agencies (via the NIE report) became President Truman. The American people owe the framers of the NIE report a sincere, "Thank You." America’s intelligence agencies have made a courageous turn for the better. They have already come under pressure from Mr. Bush, and the con artists who set up the Iraq con game, and now want the Iran con game.Another stupid war that for America’s working class is a wrong war, in the wrong place and for the wrong reasons. America’s workers do NOT need another Middle Eastern war that will murder more young American men and women. Hopefully, American’s intelligence agencies will keep their courage. For the first time in many years, they put the welfare of the American people at the top of their list. Let’s pray that they continue to have the courage to continue doing what’s right for the American people, and we should give them all the political support possible. On October 21st 2007 I posted an article on AFI’s website: www.amfire.com, "How America Can Decisively Win in the Middle East." In that article I said America’s intelligence agencies have to become like Italian Field Marshal Pietro Badoglio, and realize that loyalty to the "Great Leader" is not always the same as loyalty to the nation. At the end of the day, it has to be "Semper Fidelis" to the American people and what’s good for the future of America. My deepest hopes were realized with the NIE report. America’s intelligence agencies became Field Marshal Badoglio, and thank God. Semper Fidelis to what is best for the American people, and to the classic moral and ethical traditions that made the idea of America great. Andrew Molchan American Firearms Industry magazine is a business-to-business publication (issued monthly). It is only circulated to professionsals within the American and International arms industry and to interested parties within the universe of law enforcement, security and the military. For those interested in subscribing to American Firearms Industry, please email kathy@amfire.com for details. |