Is the Kirkland Signature a market changer? That is the question people in the golf industry have. Dean Snell, the founder of Snell golf, thinks it has no chance. First a little background on the K-Sig.
About 5 months ago Costco, yes Costco, came out with a golf ball. This ball was named after their exclusive supplier, Kirkland, and called the Kirkland Signature, or K-Sig for short. The K-Sig came in 2 dozen packs which sold for $30 each. Initially the ball was deemed just your regular old ball and was sort of dismissed. People bought it but it didn’t have the hype that it has now. What bred that hype? A simple article by My Golf Spy. This article stated that the Kirkland Signature was actually just as good, if not superior, as the Titleist ProV. Immediately the ball sold out with the second hand market exploding. People were reselling 2-dozen packs for over $100, more expensive in some cases than the ProV market. This ball was taking off. Costco sold out but then came back with another run. This second run sold out, even after limiting each customer the ability to buy just 5 packs total. Then they came with a third run, which sold out in about an hour. Costco attempted to limit the supply to 2 packs per customer but that did not work and customers could still buy up to 5 still. This sale actually crashed the Costco website and it took 30 minutes or more to check out, with some customers not being able to checkout before Costco was out of stock.
Snell guesses that the price-point on the K-Sig, $15 a dozen, was way too low and only achieved because of leftover inventory. He proposes that Costco can no way produce and sell these balls but there are advantages that Costco has that golf ball companies don’t. Snell seems taken aback by their success and predicts that it was no more than a situational deal. Why is Snell possibly wrong?
Costco doesn’t have to spend any money on marketing. Costco’s marketing is that it has great products for an extremely low cost, it’s service speaks for itself. Costco has an advanced logistics/transportation/supply network across the world. Logistics is one of the reasons that Costco has the best prices on not only the Kirkland Signature goods but also other products from other companies. Costco makes a large portion of their Revenue from subscriptions and usually only employs a 5-14% mark-up on items. They max out at 14% because they want to retain value for their customers. Companies like Snell or Titleist don’t have the same economies of scale so they need to up the margins to cover things like storage and inventory, Costco has so many products that they don’t have the same issue.
There has been a lot of information, to where Costco was supplied, to how much it may cost, and to would the K-Sig ever be back on the market or would it fade and only be remember in the annals of time. It is guessed that Costco sold as many that Titleist sells in a day, but now that the K-Sig is on the USGA conforming list that must mean it is coming back. Does Costco have steady supply? If they do watch out because there will be a lot of golfers looking for an affordable high performing ball.
The Kirkland Signature has the same results as the ProV but for 25% of the price. What is going to happen in the golf-ball industry? Well here are a few things:
Nothing. Costco doesn’t move the needle and Titleist/Calloway/Bridgestone still has their brand loyalty.
Lower Pricing. Maybe the main golf ball manufacturers come down on price to a more reasonable level.
Mergers: The smaller ball manufacturers like Snell and Vice merge. They already are having a tough time competing with the big dogs and are trying to gain market share by having the same high quality ball but at a lower price. They also often do bunk sized deals where its 6 dozen for a reduced price. They are spending money on marketing and cannot be happy with how things are going. Snell seemed annoyed that Costco was trying to break into the Golf-Ball game with such a lower price. It definitely took money out of his pocket when that happened.
Costco becomes a golf giant: Probably not likely anytime in the future. They have so much on their plate that it doesn’t make sense for them to specialize in the golf-ball world. They won’t spend R&D on products, rather use what is already out there either publicly or purchase designs from other firms. It was rumored that this ball was a TaylorMade design that costco purchased.
So what about the K-Sig: All signs point to it being back. There are two names on the USGA conforming list and I would guess the first is the one that was already out for sale and the second is going to be their new ball. I would suggest that any pricing up to $25 would still make the K-Sig a good buy for any casual golfer.
I love playing the K-Sig and will buy as many as possible when they get back on sale and suggest anyone who is reading this do the same.