Hi,
So, post up your Type 7 and answer all the other industry related questions and we can continue this conversation.
Until then....some inside information as to the State of Affairs of manufacturers transitioning to a more direct business model.
RUGER...yes..That Ruger.....
In their new 2020 10-K filing to the SEC and their BOD...they put it in black and white that the lose of a distributor would not have an adverse long term affect on the company.
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Also..here is the prime reason the industry is transitioning to be more consumer direct. From the 10-K of Ruger.
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Leaving your companies sales and financial condition to a 3rd party company is just not good for business because the credit insurance policies will only cover so much.
Sincerely,
Theis
All levels of the supply chain answer to the end user and what they demand. Ruger knows from recent, painful experiences they need to keep options open in getting product to market. Those lines may not portend exactly what you’re thinking. Yes, in last 3.5 years two of the largest firearms wholesalers went bankrupt, hundreds of millions of sales volume for manufacturers went *poof*
Ruger didn’t lose too severely on the actual bankruptcy filings, as they didn’t extend either company much credit, seeing the proverbial writing on the wall months ahead. Vista and S&W took much larger losses in real dollars, both being major debt holders in both bankruptcy cases. However, Ruger simply shifted their volume lost in those bankruptcy cases to other wholesalers and bringing on a new wholesaler (taking a hit in one quarter from the real losses, but experienced no long term loss in sales volume because the end user remained intact and purchasing Ruger guns). Ruger has
15 sales people. The efforts of those 15 employees are leveraged via hundreds of wholesale sales staff and thousands of retail sales staff on which Ruger doesn’t have to pay a dime of salary, commissions, or overhead.
The risks and costs for manufacturers,
at Ruger’s size, selling thousands of different customers would be extensive. The risk is different (and on the whole, lower) selling to a dozen wholesalers. To expound, these costs are significantly lower selling to a dozen wholesalers as they take on the credit risks of 1000’s of retailers as well as a portion of the compliance burden. Further, consider the logistics and inventory considerations. Ruger keeps very, very little inventory in finished goods. Wholesalers hold virtually all the finished goods and pay Ruger quickly, keeping their cash flows in the net positive. Ruger realizes tremendous savings in
not holding any significant finished good inventory.
Respectfully, neither solution (solely consumer direct or two step distribution) is one size fits all. Several manufacturers practice a blended model with some two step distribution, some direct to retailer, and (where practical) consumer direct sales. At the volume and price point of a Hoplite Arms, direct to end consumer is a winning distribution solution. At Ruger’s price and volume, the associated costs to sell individuals would fail to scale very well.
The regulated nature of the product is a real caveat in this discussion. Sans regulations, online (mail order) would rule the market. I’ll also add that profit margins (outside those of the manufacturers) in firearms are no where near as generous as other consumer goods.
Cheers,
Middle Man
