Why do you pay $50 for a dozen golf balls? No, really. Why?
It's a meta question; I'm not challenging your means or sanity. It turns out that there's a lot that goes into that cost passed along to you, the consumer, by major ball manufacturers. There's the design, the packaging, the distribution, the manfacturing, the R&D -- and that's all before the retail mark-up. It's all loaded into the price you pay.
But what you really want is the golf ball, right? So what would be the price for just that?
Greg Hopkins, CEO and founder of Hopkins Golf, says it's $20.
Hopkins' company recently introduced its first golf ball, the VL Pro, which it says is comparable to Titleist's NXT Tour ball, at that tantalizing price.
"That gets your attention, doesn't it?" Hopkins asked, laughing as our conversation began.
That's not your only choice, either. The company will also be introducing two other lines of golf balls -- the Pro line, which will be a 4-piece urethane ball, and the Speed line, which is a 2-piece "go-go" ball that will sell for $10 for 15 balls. Steal-of-the-century kind of stuff here.
Selling at a cutthroat price is nothing new, not even for golf. But offering a high-quality product for what you might pay at a garage sale is mighty rare in this game.
"We haven't removed the cost of the golf ball itself," Hopkins said. "The cost that's come out is things that don't really matter to the golfer. The costs that remain in is what does matter."
Hopkins knew a half-dozen years ago that this opportunity could be in his future.
The idea came to Hopkins when he was still head of Cleveland/Srixon Golf. He retired in 2012 after 17 years with and two sales of the company. His destination? The couch. It pissed off his wife to the point that she demanded he do something other than watch ESPN and pack on some hibernation weight.
"I could do this, I could do that, but this is all I know how to do," Hopkins said. "The 'Eureka!' moment was when I decided to get off the couch, put the clicker down."
Hopkins had told himself that if he ever formed his own golf company, he'd do it exclusively online. He'd use his expertise from within the industry to wade through the murky waters of intellectual property, component and materials sourcing and logistics to offer a product he'd stake his name on succeeding and connecting with golfers.
All of this wouldn't be possible, Hopkins insists, without the USGA.
"The USGA has done me or any startup company a huge favor," he said.
Between regulating iron grooves, driver specs, how far the ball can travel and how much energy can be transferred to the ball at impact, the USGA has created a well-defined sandbox that has leveled the playing field to a degree.
"I'm sitting here in a 3-room office and I'm able to R&D the ball, the wedge, whatever, just as much as the big guys because, with the USGA, there's a line, with grooves, with the ball, with COR (co-efficient of restitution, or how much energy is transferred from club to ball at impact)," Hopkins said. "It doesn't matter if you have an engineering degree from MIT, you can't pass that line. If you can get product to that line, then you compete just as well."
Design is one thing, but driving down the cost is another entirely. Hopkins Golf wouldn't be able to do what it does were it not for the evolution of e-commerce and on-demand logistics.
Hopkins Golf is all online. There's no middleman or, more accurately, middlemen, that jack up the cost of the goods. There's no retail presence to maintain. There's no retail mark-up because there are no brick-and-mortar accounts. Freeing themselves of retail is a competitive advantage for Hopkins Golf. The bigger companies simply can't do it in the same way.
"All of those other guys that are making golf balls depend on brick-and-mortar stores," Hopkins contends. "Pick a company, and they all need to sell to retail shops and pro shops. Those guys won't let the [ball manufacturers] sell online. If Titleist tried to sell a ball online, what do you think Dick's Sporting Goods would do?"
And you don't want to upset them. They're one of five companies, Hopkins says, that controls 75 percent of golf retail in the United States, along with Golfsmith/Golftown, Roger Dunn/Edwin Watts, The Golf Warehouse and PGA Tour Superstore.
However, the discerning golf consumer expects a custom-fit experience these days. Golf equipment is a long-term investment not to be taken lightly, so players want to know what they're playing works for their game right now, the first time. That fitting is becoming more prevalent in brick-and-mortar shops, but still isn't enough to prevent showrooming, where consumers take a few hacks with the club they have their eyes on, then flee online to buy at the cheapest price possible. And the major retailers aren't going to undercut themselves.
And then there's the matter of manufacturing the equipment. It turns out golf equipment is a high-overhead business. To be successful, an OEM needs to have skilled workers on staff full-time for a seasonal game.
"It's a recipe for inefficiency," Hopkins said.
He's right. Manufacturers can't hire and layoff workers as they need, so they have to constantly churn out equipment. That's why TaylorMade introduces four new drivers every year. What else are they going to do, sit around on their hands? The brand may as well be seen as advancing technology, even in the off-season, because they're going to pay for it anyhow.
Hopkins, however, doesn't. He has no fixed cost to manufacture his equipment. None. How? UPS. They love logistics.
Hopkins has friends in upper, upper management at UPS, and one of the executives suggested they manage not only the shipping of but also the making of his golf equipment.
"UPS said, 'If you can teach us how to build golf clubs, we can do the rest,'" he said.
"We set up in a UPS hub. I've got UPS employees that I've trained, and I trained a number of them. So (with the holiday season) we're building clubs like crazy. I brought in the number of people I needed to build clubs. Then when demand drops, they go back to packing and shipping for other companies. I have complete variable costs. That also allows me, by being in the UPS hub and staff appropriate to my orders, I can turn around a custom order with engraving, paint, length, lie, loft and grip in 48 hours. It doesn't matter how big my volume gets."
If you were a business major and didn't sleep through logistics class, that is a stunning piece of information. Your jaw should be on the ground. This just doesn't happen in golf.
The online-only nature of his business, the sandbox constructed by the USGA's equipment regulations and the company's logistical efficiencies are what make that $20 dozen of golf balls possible.
"If you remove any one of those components, this doesn't work," Hopkins said.
Hopkins doesn't see a challenger to his model on the horizon, though he says he's prepared for that day, he projects, a decade off into the future. What Hopkins expects, however, isn't a slew of copycat companies, but rather a merging of manufacturer and retailer.
"I think the retailers and the OEMs are going to morph into one," he said. "Look at some of the great brands owned by Golfsmith, Dick's. I was in a Sports Authority with a good friend -- a damn good golfer. We were in Hawaii, and he says, 'These guys have Tommy Armour and Ram.' I said, 'Yeah, they own them.' And he says, 'I used to play this stuff!'"
The challenge, however, will be doing more with a name than slapping it on a club.
"They're buying the brands up but not putting in the R&D to develop them," Hopkins said.
Hopkins is busy developing his own brand. Almost three dozen Champions Tour players have put his equipment in their bag. The Champions Tour is the purest Petri dish for OEMs to see how their equipment resonates with players. The 50-plus set doesn't get paid much for staff deals, so they tend to pick what works best for their game right now. Apparently, Hopkins Golf wedges work for them.
Hopkins also signed Vijay Singh to become the company's first staff player. Their relationship dates back to shared time with Cleveland/Srixon Golf.
The price-slashing won't stop with the ball and wedges, either.
Stand golf bags will soon hit the streets for $75, whereas most high-quality bags today around about double that price. In June, the company will release its first set of irons at 30-40 percent less than the competition. Drivers, fairway woods and hybrids can't be too far behind that.
Needless to say, Hopkins is excited for the future.
As we wrapped up our conversation, he said, "So, that's what got me off the couch."
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