Thursday, March 29, 2007

What is 2nd Swing Up to Now!!!

Like the Phoenix rising from the ashes, 2nd Swing is back in business. According to a feature story in my local paper Star Tribune, the new 2nd Swing has got one store open in Minneapolis and a second is slated to open in Minnetonka on April 2nd.

Before the internet, eBay and sites like www.callawaypreowned.com, 2nd Swing had a lock on the used golf equipment market. But it didn’t last long. To keep ahead, 2nd Swing added new equipment to it offerings and expanded like mad until it had opened more than 50 stores. As quickly as it grew, it also added debt at an alarming rate. By the summer of 2006, the chain was gone. A victim of overzealous expansion and $10 million in debt.

According to the article, founder Simon Kallal is back in the saddle again as well as much of his original management "Kallal and a group of five other investors stepped in earlier this year and bought 2nd Swing's intellectual rights for $50,000. The purchase gave them the right to use 2nd Swing's name, logo, website, software and customer database consisting of more than 250,000 names."

As well as wash its hands of any misdeeds, missteps or screw ups by previous management.

I wrote a posting in early September that the company had been liquidated and 17,700 customers with credit balances got screwed. Well, things haven’t changed. If you check the website www.2ndswing.com, they already have a disclaimer that says "If you are seeking information regarding the old 2nd Swing, including credit or gift card balance redemption, please seek claims through the bankruptcy court. All balances were handled through the closing of the company. Zero balances were transferred to the new 2nd Swing."

Let’s do some math. If we make the assumption that the average credit balance was only $50, then 2nd Swing was able to dump $885,000 worth of credits for only $50K ($50/customer X 17,700/customers = $885,000).

Meaning, tough luck Mr. Former Customer.

Although they have modest goals this time around, I don’t believe that the new 2nd Swing has any more chance of being successful as did the old one. The company is going back into the used golf equipment market when the market stinks. Real growth in golf equipment hasn’t occurred for six years and doesn’t look to do so very soon.

One of the chain’s former rivals, Golf Galaxy, was quoted in the Star Tribune article as saying "the pie isn't any bigger than it was a year ago," said Randy Zanatta, chief executive of Golf Galaxy. "It's all a market-share game, now. It's about how big of a slice you can get." Now owned by Dick’s Sporting Goods, in 2003 Golf Galaxy sold almost no used clubs. Now they represent 7 to 8 percent of the chain's overall business.

In addition, the threat of used equipment showing up on eBay and all over the Internet is very real. One online retailer I spoke with said that he buys directly from Titleist, TaylorMade and others and sees new equipment show up on eBay at retail for less than he pays for it at wholesale. Also, online websites like those operated by Callaway and others sell used or refurbished equipment, thereby competing with companies like 2nd Swing. When they first opened in 1996, none of these competitive factors existed. Today, all of them combine to make this a much different market than before.

For a paltry $50K, 2nd Swing gets to rise again and hopefully, not get themselves into the same mess as before. I remain a big skeptic.

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4 Comments:

At 2:19 PM, Anonymous Dale Bertsmith said...

I was in one of there new stores a few days ago and my biggest reason I am a faithful customer there is their customer service. Their sales people also seem very knowledgeable and enjoy just talkin golf with you. They may have had a few hickups recently but from other things I've read, it didn't have much to do with the current management. If they can keep up the friendly service they gave me last week, I'll keep going back.

Also, rarely do companies go into backruptcy just to clear customer credit- Although your argument may be mathematically correct, it most likely is not justification for a company to go into bankrupcy. Many worse factors come out of a bankrupcy.

Anyway, we'll see what happens this time around.

-Dale

 
At 11:25 PM, Anonymous Anonymous said...

I know the founder and he was always out to make a fast buck and get rich quick.

He was involved in it the first time it went belly so what makes people think it will be any different.

I am amazed that after screwing people over by filing bankruptcy and not paying your debts that people will continue to support the businesses especially when its the same founder/owner.

 
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