Manufacturer Callaway Golf takes a swing at resolving channel conflict

Manufacturers want a direct relationship with the buyers of their brand—but that direct customer relationship has been closely guarded by retailers. In a session at Internet Retailer`s 2007 Conference and Exhibition, Callaway Golf Interactive CEO David Schofman outlined an innovative approach undertaken by the golf equipment manufacturer that he says strengthens the ties between Callaway and its consumers in a way that also benefits retailers.

Callaway Golf Interactive’s overall strategy is to drive sales to its business partners, leverage the power of its brand and products, gather consumer purchase data, and educate potential buyers about its products. It also seeks to accelerate the new product purchase cycle, raise the bar for online brand presentation, and close the loop on sales. Callaway Golf Interactive is No. 221 in the Internet Retailer Top 500 Guide.

Three Callaway consumer programs outlined by Schofman are based on those strategic objectives for the site, Schofman said. Callaway’s web site, Shop.CallawayGolf.com, is the flagship store for its core brand. It grew out of a company started earlier by Schofman that became the first authorized Internet dealer for Callaway Golf. Schofman’s company was later acquired by Callaway in 2004 and built into a wholly owned subsidiary of Callaway called Callaway Golf Interactive.

Under an unusual business model, consumers who want to buy at Shop.CallawayGolf.com make their purchase at the site, but the order is actually fulfilled by the authorized retailer closest to the customer’s location. Authorized dealers log onto the system to see what’s been ordered, and if they have a match in stock, they register that. An algorithm built into the system’s back end then assigns the order to the nearest matching retailer. Consumers receive the order within two to five days on average, Schofman said.

Schofman added that the model addresses the channel conflict issue by awarding all orders that come in to the site to retailers, and that the system allows authorized retailers of all sizes to compete for the online orders on the same footing. It also fulfills customer demand for a “one-stop shop” for all Callaway products, as not every dealer stocks every Callaway product. In addition, he added, the web site affords Callaway more control of the brand’s presentation online.

Schofman also outlined how a second consumer program aimed at selling new Callaway clubs, called Trade In, Trade Up, feeds a third program designed to promote sales of Callaway-certified used clubs. The Trade In, Trade Up program allows consumers to purchase new Callaway clubs at ShopCallawayGolf.com, ship in Callaway clubs they already own as a trade, then receive a credit for the old clubs against the price of the new Callaway clubs they have just purchased. The traded-in clubs also can be credited against the purchase of certified pre-owned clubs at CallawayGolfpreowned.com.

Schofman calls the data Callaway posts online on pre-owned club trade-in values the “Blue Book” of the industry. “Retailers take no inventory risk,” he said. “It’s all off our ‘Blue Book.’ Our back end allows us to pay higher trade-in dollars, and the trade-in business feeds the pre-owned business.”

Schofman encouraged retailers to work with manufacturers to develop programs that leverage each other’s strengths. “Original equipment manufacturers need the web to make them better,” he said. And as to retailer concerns about channel conflict in such relationships, “Retailers will always have the upper hand,” he added. “Manufacturers know product and brand, but retailers know consumers. It shouldn’t be scary.”