Golf During a Recession

These days all the media talk about a recession in the US which in turn affects the rest of the world. I’m no economist, but I’ve read the common definitions of a recession in the newspapers as ‘decline in the Gross Domestic Product (GDP) for two or more consecutive quarters’. However, as an ‘Average Joe’ my definition is a lot simpler: I may have less money to spend; hence I have to be more prudent with my purchases.

As an avid golfer, does this mean that I have to shelve my plans of buying some new clubs this season? Of course not, I just have to be more prudent as per my definition above. On the other hand I don’t want to buy some cheap, inferior clubs just because I’m a bit short of money. I still want top quality, but at a reasonable price I can afford.

The solution is to stay away from the well known but expensive top tier brands like Titleist, Ping, Nike, Callaway and the likes, and instead look at the cheaper second tier brands which offer the same quality but at a much reduced price. And just to make sure, I’m not talking about some cheap counterfeit clubs slapped together in a sweat shop in some third world country, I’m talking about proper clubs from well established manufacturers and merchants.

Let’s look in detail at the two main issues: price and quality – how can a second tier manufacturer offer the same quality at a fraction of the price?

Quality: there are only so many factories out there that produce club heads, shafts and grips – the three main components of every golf club. Quite often the factories that produce club heads for the big names also produce the heads for other, less known manufacturers. They use the same raw material, including high quality titanium and stainless steel, in the production processes. When it comes to shafts and grips it becomes even more obvious: both top and second tier manufacturers use the same shafts and grips which can easily be verified when you read the respective product descriptions. In other words, since the same materials and components are used the quality of top and second tier manufacturers is very similar if not the same.

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Price: An article in the respected Golf Digest a while ago argued that a modern $500 top-brand driver actually costs about $77 to build: $55 for the club head, $15 for the graphite shaft, $3 for the grip and $4 for assembly. Since you as the consumer pay $500, where does the remaining $423 go? Well, some of course goes into R&D, some goes to the company shareholders, but a huge chunk goes into the pockets of golf professionals for endorsing that particular brand. Let’s look at some cases in point:

A more recent article on the Golf Digest website listed both the on-tour and off-tour income of the top 50 money earners for 2007. It will come as no surprise that Tiger Woods leads the list, having had tour earnings of approx. $22.9 Million plus an additional $99.8 Million in off-tour income. That’s almost $100 Million in endorsements and other engagements! Phil Mickelson made approx. $40 Million in off-tour money, and Vijay Singh about $25 Million. Even Michelle Wie, who only won a measly $9,899 for playing golf, raked in some $12.5 Million in off-tour income in 2007 alone. So who paid for that? Well, if you bought a golf club from a well known brand than you did – by paying a huge premium on top of the actual value of the club. This is definitely not where I want to see my hard earned money go, especially if times are getting tougher.

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So what’s the alternative? Second tier manufacturers! Their manufacturing costs are still the same as above, but they don’t spend money on endorsements. They also save money by selling their products online rather than in a retail shop, thus cutting down on rent and related costs. While it still costs them some $77 to build a driver (as per above example) they are able to sell it for just around $100 – and still make some profit.

For the same money I otherwise (involuntarily!) stuff into some golf pro’s pocket I can now buy a complete new set of golf clubs. I like that! What about you?

Fortunately there are quite a number of websites out there that provide more details on second tier manufacturers and help with decision making.

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by Frank Peter