Its been an interesting news week after Walmart’s decision to stop selling certain calibers of ammunition. The explanation from management has been that … “In a complex situation lacking a simple solution, we are trying to take constructive steps to reduce the risk that events like these will happen again,”. (This statement was released in reference to the recent mass shooting in Texas.) While that sounds like a statement of social responsibility, I’m not convinced. With a little thought and questioning it makes me wonder are knives next at Walmart to go on the discontinued product list.
As I listened to the comments (pro an con) regarding the Walmart decision I thought about the period of the Assault Weapons Ban in the 1980’s. It took Walmart a long time to decide they weren’t going to sell AR style rifles. In fact it was 2015 when they made the announcement to quit selling them. From USA Today 8/26/15 (coincidentally almost exactly 4 years ago) “… The decision is related purely to lack of customer demand, says Walmart spokesman Kory Lundberg, not the spate of shootings that have occurred in the past year ...” And it’s worth noting Walmart just recently reported earnings. That’s typically a good time to evaluate where a company is going into the next earnings period.
My cynical belief is that the decision to drop certain ammunition is most likely due to incredibly low margins rather than any attempt to demonstrate social sensitivity. In fact, they don’t seem to feel a need to immediately stop selling this ammunition. Instead they are simply selling out their inventory and not replacing it. Seems to me if you were so concerned over a ‘public safety’ issue you would do so immediately. Add to that the fact that there are a lot of other calibers of ammunition that work on the AR platform they’ll continue to sell.
Back in the 1980’s I was a manufacturers rep calling on retail sporting goods businesses in a 5 state area of the upper Midwest. Walmart was just moving into Iowa and a lot of smaller retail shops were hit hard by the local Walmart store. Walmart came in with predatory pricing on key products and in some cases sold products below their cost to gain market share.
One of the lines I repped was a line of leather goods that were presented to Walmart on a national level. The company I worked for lost the bid over a .5% price point. That’s 1/2 of 1 percent. In the end we were glad we lost out as it most likely saved a number of our key retailers if not our company.
In the past year or so there’s been a slow but steady increase in the number of knife manufacturers moving to MAP (Minimum Advertised Pricing). The purpose is to 1) try to keep a somewhat even playing field for re-sellers of all size and shape to compete in, 2) support the value of a product rather then letting it slide into commodity status. For the sake of manufacturers, retailers and consumers, I’m glad to see it happen.
It doesn’t take much thinking to figure out which knives fall into the ‘commodity product’ category. Look to Walmart or Amazon to find the products that can be bought for a song. It doesn’t take long for those lines to slowly fade from view. Years ago Buck, Case, Schrade and Swiss Army were key lines in my B&M sporting goods store. If your familiar with wholesale pricing you already know some of these knives can be purchased below prices some wholesale outlets offer dealers. Today, a lot of the upscale independent stores only carry a smattering of these lines. The margins have melted away.
When the major discounters take a line they can account for a huge share ( over 50%) of a company’s manufacturing capacity. In some cases forcing the manufacturer to go offshore. They may need higher production capacity and possibly a better wholesale price point. For the sake of this discussion we won’t even talk about potential quality issues. Where the concern lies is when a store like Walmart decides to drop a line for whatever reason. Something’s got to give. You’re a manufacturer that has scaled up production to meet the increased demand and now you’re suddenly over capacity. Not good.
While it may not take place with a major public announcement like the ammo discontinuance, it wouldn’t surprise me so see some of the knife products slowly disappear from WalMart as well. If you can’t make a profit on a line sooner or later it’s going to go away. When this happens it can be disastrous for manufacturers if they have too many eggs in one basket.
I still laugh thinking about a dealer complaining about the excess profits his company was making from the products with MAP. My first thought was donating that excess profit to the Wounded Warriors Project, Red Cross, Salvation Army or any multitude of other good charities sure as hell beats the risk of devaluing or losing a quality product line. Everything comes at a price. Including lower prices.