Jim Shults, President, Shults Media Relations, LLC published a thoughtful and largely accurate commentary on the future of retail firearm sales.
The brick and mortar retailers are, in fact, under severe pressure from internet sellers but what concerns me even more is that both face the harsh reality that discretionary spending by consumers is under tremendous pressure. Until we see a meaningful increase in disposable income and lower taxes, a trip to the mall to cruise your favorite store and pick something up along the way will be few and far between.
The GRIM Future of Retail Firearm Sales in the U.S.A.
By Jim Shults
When reading through a recent copy of Forbes, I keyed in on an article about major brick and mortar retailers having problems (to say the least) with losses to internet sales. You see, my wife and I had just been in a Dillard’s store in Scottsdale’s Fashion Mall. This huge (I would guess 200,000 square feet per floor), multi-level store was packed with costly inventory, cost a lot to operate – and had just eight customers in it (including us). When I questioned employees, they said the Internet was killing the store.
I go into our local Cabela’s during the week and wonder how they do it – or if they really are. In Phoenix, Dick’s Sporting Goods big box store was so empty of customers we rattled around like BBs in a box car. This is not good!
Put yourself in a retailer’s place. Typically, you may have several hundred to several thousand different SKUs (stock keeping units) in your store. This means you have a boatload of money tied up in inventory – and that leftover store inventory also gets taxed (inventory tax) at the end of the year in most states (something few folks know).
Couple this world of retail competition with the costs of payroll, mortgage or rent, city and county property taxes, property insurance for fire, theft, and liability – and then add water, electric, heat, cooling, displays, upkeep, security, marketing/advertising, and theft (shrinkage), and you can see how a retailer’s cost problems grow exponentially.
To keep it simple, let’s look at payroll. For this example, we will set employee base pay at $15 per hour (it can be more or less but let’s just go with this number–please do not pick on the author). Now add in the employer’s silent share (payroll tax made up of FICA and Medicare), unemployment tax, workman’s compensation, and other costs and fees in any particular state regarding an employee, and suddenly this “$15 per hour” employee becomes a per-hour cost to the employer of about $21 per employee – and that doesn’t even count health insurance.
So what does just this extra “puny” $6 ($21 minus $15= $6 for those in Loma Linda) an hour represent in cost to the employer for a full-time employee – more than $12,000 annually! This figure also does not include any employer profit sharing, IRAs or simple 401Ks (if provided in today’s high-cost world).
Now to cover that single “silent cost” of just $6 an hour or $12,000+ a retailer has to sell somewhere between $59,000 and $90,000 in guns at full MSRP to make up that one employee’s “extra” cost from the profit. If it is a full line store, they can make it up a bit easier with lots of optics, cutlery, clothes and other ancillary sales that have a slightly higher margin – except that those are also the very items and sales that the Internet is syphoning off.”
Gun profit margins are thin, yet guns are important to have in a full line store, and vital in a gun shop. On top of that, the cost of maintaining a gun inventory is not cheap! All these costs are one reason why so many brick and mortar retailers (of all types) are struggling to survive against internet sales.
Something to think about in just the gun industry. If we keep losing major retailers such as Gander Mountain, Sports Authority, and the failed parts and pieces of Sportsman’s Warehouse (from a few years ago), the gun industry and its consumers are in trouble. Additionally, if you think the mom and pop gun shops across the country are making it, you are wrong; we just do not hear of them going under the way we do when big operations go down, and the generally older folks who own them are retiring and shutting down.
If these outdoor/hunting retailers continue to shrink or go out of business, how will the firearm industry survive? And, if big box gun retailers and full line independents keep going out of business, say goodbye to all the other stuff they carry, from shoes to camping gear, and boats to bullets.
Generally, (remember, we said generally) one cannot legally buy new firearms (and in many states even used guns) through anything other than a FFL licensee. So a legal transfer means an FFL licensee must usually process the sale. If we continue to shut down or kill off the firearms retailers, there is certainly no future for new firearm sales because Internet sales without FFLs being involved are, contrary to politically inspired left-wing media lies, illegal.
Now, you can say, “Well, private people can get an FFL” – and that was true years ago (for example, I had a special one as a military and gun magazine editor-in-chief in the 1980s and 1990s). But things are much tighter today, and more regulations by a hostile liberal government and/or ATF can literally tighten the legal FFL outlet stream to a tiny trickle almost overnight!
Currently, there are about 145,000 FFLs in the U.S. – but in the mid-1990s there were 450,000! A regulation change here or there can take that remaining 145,000 down big time. Also, of that 145,000, many are institutionally owned by manufacturers, retailers, importer/exporters, et al, and they often have several FFLs for various legal and business reasons. Cabela’s has recently taken to selling guns online but, to finalize the sale, you still have to go to one of their stores to get the gun and fill out the federal and (usually) state clearance. Is this then the future of “gun sales?”
Firearms sales actually support a large part of our economy, to include many state game and fish operations. As Internet sales continue to rob retailers of their non-firearm, higher profit margin items, you may begin to see an interesting problem for the entire firearms manufacturing, hunting and outdoor industry develop.
The firearms industry (guns) is the base of many other industries and businesses dependent on hunting and shooting in general. Think of all the items dependent on gun ownership and the related shooting sports, to include even big ticket items like SUVs, RVs, etc. and the towns, and even states, that have hunting as part of their income base.
Retail locations are simply becoming showrooms for Internet sales. As a guy with a long history in retail sporting goods years ago, it all makes me seriously sad, and it bodes badly for the health of our currently free society when it comes to the Second Amendment and what that amendment really means for citizen freedom.
Go to most any shopping center nowadays and you will see closed stores of all types, courtesy of Amazon and other Internet warehouse outlets. Perhaps the Internet scenario is something the firearms industry and associations should begin to address, because it is coming at us at light speed – and when the retailers are gone, or retail gun access is gone or incredibly reduced, then where will you legally purchase a firearm and, if you can, what will be the cost and trouble to do so?
Shults Media Relations, LLC
A media relations company made up of shooters and strong supporters and promoters for the firearms and outdoor industries, our Constitution (what is left of it) and our Second Amendment.