With an ever-changing product line that includes everything from stuffed rattlesnakes to military surplus items, The Sportsman’s Guide, South St. Paul, MN, has created a successful niche serving outdoorsmen in this country.
The company was founded in 1970 by Gary Olen, an avid deer hunter who was frustrated by the wealth of merchandise available for duck hunters while virtually none existed for deer hunters. Seeing an opportunity, Olen designed patches costing $2 that displayed what a hunter had bagged, including the size of the deer. The patches were instantly successful selling in outdoor magazines.
From 1970 to 1977, the company was a moonlighting operation in Olen’s home while he worked at Fidelity File Box Inc., a direct marketer of office storage products and industrial supplies. During this period, Olen developed the company’s first catalog, a 16-page “Slim-Jim” with merchandise designed to attract deer hunters.
In early 1977, Olen was joined by a co-worker, Leonard Paletz. Olen concentrated on marketing and merchandising while Paletz served as CEO. They created the company’s first color catalog, and sales grew to just under $1 million.
By ’86, sales had reached $43 million and the company went public, raising $2 million. Fresh with a cash infusion, The Sportsman’s Guide paid off $900,000 in debt and learned a hard lesson in the mail-order business. Without doing any advance research, the company produced almost 3 million copies of a fishing catalog that was a dud. By early ’89, the company had to file for reorganization under Chapter 11. It emerged from bankruptcy in November of ’89 when Dr. Vincent Sheil, one of the leading consultants in the outdoor sporting goods market, made a capital infusion into the company.
At this point, the company shifted its marketing and merchandising focus to concentrate on value-priced merchandise bought through manufacturers’ close-outs, military surplus and other high-margin sales. Sales grew from $38 million in ’92 to about $122 million in ’98 with net earnings of $1.25-1.7 million, despite unusually warm weather negatively affecting fourth-quarter sales. In ’98, the company sold an additional 1.6 million shares, raising $8.7 million.
Using humor and creative copy, The Sportsman’s Guide derives most of its revenue through distinctive monthly main and specialty catalogs that are marketed as “Fun to Read.” Products are offered at “ridiculously low prices,” which range from 25 percent to 60 percent below original retail prices. In addition, the company has a buyer’s club where customers can purchase a one-year membership costing $29.99 that entitles them to savings of 5 percent to 10 percent and offers installment payments. The club currently has 100,000 members. The company also runs two outlet stores in Minnesota and sells its products through the Web. Catalog sales represented 99 percent of total net sales last year while the stores, memberships and Web sales combined for less than 1 percent of sales.
Products and markets. The Sportsman’s Guide’s demographics are heavily tilted toward men. Men make 75 percent of all purchases, and a good portion of the 25 percent of purchases women make are bought for men.
The company’s wide range of products includes extreme weather gear, hunting supplies, footwear, clothing and specialty items targeted to this market. While the company is primarily in the $43 billion sporting goods market, the variety of items places the company in many industry categories. The Sportsman’s Guide’s primary audience is hunters, outdoorsmen and collectors, and it offers more than 22,000 SKU’s in eight product categories.
Merchandise is purchased from more than 1,000 suppliers, and is selected and field tested by eight buyers. In order to maintain the company’s 30 percent new merchandise mix, the purchasing process is highly proactive with buyers continuously soliciting and developing relationships with new vendors. Market conflicts between The Sportsman’s Guide and suppliers are not a problem since the company sells nationally while most suppliers have a regional base.
Because of its off-price strategy, The Sportsman’s Guide needs to purchase merchandise at the lowest possible price. As a large liquidator, it can literally purchase all of an item that a manufacturer is willing to sell. One drawback to buying merchandise in this way is that the best buys may not coincide with their ideal selling season. Thus, the company sometimes suffers inventory turns.
Because surplus and close-out products are often in limited supply, sales of these items only last for one or two catalogs. This creates what the company calls “phantom” demand — demand above available inventory. While this causes some cancellations if an item has great “phantom” demand, the company will try to manufacture the item to the same specifications and quality level for future catalogs. Thus, most of the company’s private-label items are proven winners.
Customer service/catalog operations. The Sportsman’s Guide uses a two-step process to maximize response rates, minimize advertising expenses and acquire new customers. A main catalog is used for prospecting while specialty catalogs are developed based on response rates to offerings in the main catalog. All catalogs are designed in a promotional format to be entertaining. The company mailed 61 million catalogs in ’97, including 18 specialty catalogs.
The Sportsman’s Guide currently has an inhouse mailing list exceeding 4 million names and a 12-month file of 1.1 million buyers. The company promises next-day shipping of in-stock merchandise on orders received before 7 p.m. Virtually all orders are shipped from the company’s South St. Paul, facility with less than 1 percent being dropped shipped. The average order is $75.
Future plans. The company has developed the following strategic plan:
* Expand within the value-oriented male niche.
* Continue to offer quality products and a continually changing product mix at low prices.
* Provide a fun shopping experience.
* Actively use inhouse information systems to test, assess and adjust operations.
* Capitalize on a short 60-day catalog lead time to better meet customer needs.
Although Web sales accounted for less than 1 percent of sales in ’98, the company believes that Web-related revenue will grow strongly in the future. It expects such sales to represent 4 to 5 percent of total sales next year.
Bill Dean is president of W.A. Dean & Associates, San Francisco, a catalog, consulting, publishing and research firm.