MidCurrent had a short article on how gear prices are set in fly shops.
Except for a brief discussion on markup, most of the article focuses on the reasons for the lack of flexibility in retail pricing. That basically comes down to maintaining brand reputation and protecting fly shops from the big-box stores and discount online retailers.
As I noted in other posts, the fly fishing industry is tiny ($750 million revenue in 2012); compare that to Trident gum that had sales of $3.32 billion the same year. So the sales of all the rods, reels, waders, flies, and so on was less than the sales of one brand of chewing gum.
During that same year (2012), the average annual sales per shop was $314,789 – with shops in the West leading with sales of $431,294.
Out of those sales, a fly shop owner has to pay for building rent, utilities, taxes, salaries for employees, carried inventory, and finally take home enough to feed one’s family.
Now think about going into a fly shop. All those shiny rods, reels, waders, and clothing were all bought at wholesale prices, paid for by the shop’s previous sales. Until the inventory is sold, the fly shop is operating at a loss – the fixed costs (e.g., utilities, taxes, salaries) continue to accumulate.
Let’s have a little fun with numbers using the 2012 data and applying it to the present period.
The number of fly fishers was estimated at 3.83 million. Based on the total industry revenues, each angler would have spent an average of $195. For the sake of argument, we’ll assume the numbers hold true to today.
A fly shop owner has to do everything possible to get a customer into the shop because that shop needs roughly 1,600 sales transactions per year to generate the average annual sales of $314,789. Each day, every day, a shop needs over four sales transactions, averaging $195, Granted, there are peaks periods and slow periods, but the inexorable calculus is that a good deal of daily foot traffic is needed through the shop, and a percentage of that traffic must be converted to sales.
Looking out the window and hoping someone will stop in is a path to going out of business. If your local fly shop isn’t actively promoting the sport and itself (except perhaps in destination locations), it’s on at best a slow spiral on the same path.
Conversely, every time you go to a fly shop, at the end of the free information exchange about the hot fly or what’s fishing well today, buy something. That fly shop can’t do anything about the price of the Scott Radian or the Simms G4Z waders; all they can do is sell at the established price.
What they can do is share their knowledge of an activity we all love – if they can stay in business.
You can read the article here.