I’m intrigued with knife company history, as you probably know. While I wasn’t much of a student of history back in school, now that I can relate it to something, I love it!
History is not everyone’s cup of tea and I recognize that, but today we need to take a bird’s-eye view back regarding knife companies and their sales methods to see how things have changed….and continue to.
Quick Look Back
Union Cutlery Co saleman's case
In the mid to late 1800s knife companies used jobbers and traveling salesmen (drummers) to peddle their knives. Then large wholesalers and retailers came into the picture. These firms often promoted different knife brands in their catalogs- often boasting over a 1000 pages. Eventually, the traveling salesmen died out and then came the age of advertising & merchandising. Local hardware and general stores were also primary sales outlets for the knife companies.
Even today, you can still find the local general or hardware store scattered around the country. These retailers and dealers still represent, for several knife companies, their primary sales channel. Next time you travel and run through a small community stop in- you will often find several brands available, like Case, Old Timers, Buck and Gerber knives, to name a few.
For many of the knife companies gone are the day of having thousands or tens of thousands of local sales outlets. Today Big Box Stores- the Wal-Mart, KMart, Home Depot, Target and Lowe’s- monopolize sales. These national chains have tremendous buying power too, providing them significant leverage when negotiating with the knife companies.
The speciality knife stores, like Smokey Mountain Knife Works, are the exception rather than the rule. There are very few stand alone knife stores out there today.
Big Box vs. 20,000 dealers
With fewer mom and pop stores across American many knife companies are faced with the dilemma of courting these Big Box Stores
Last week, we saw a revealing article about Buck Knives in the Wall Street Journal. C. J. Buck was interviewed about his decision to relocate their company in 2004. The bottom-line was Buck’s move was an effort to lower operating costs, and thus allowing them to maintain their pricing (in other words, they were faced with potentially needing to raise their prices due to their costs).
Mr. Buck points out- “We (had gone) from having over 20,000 small cutlery dealers like Don’s Hardware store and some chains to a few big accounts like KMart, Wal-Mart, JCPenny and Montgomery Ward. We saw tremendous volume increases… But price became a big factor and our margins began to get squeezed.”
Knife companies like Buck, who use the big accounts as a way to volume sales are directly impacted by lower margins, while the companies still relying on the small dealer network have higher overhead to facilitate thousands of accounts and these dealers are being directly impacted by customers pulling in their spending reins. Many of these stores are now struggling to stay in business.
Online Knife Sales
Today, the World Wide Web plays an important component in knife sales too. Most every small retail and hardware store at least promotes their store online. The majority of them have some aspect of e-commerce too- allowing their customers to order direct from their site. Their challenge is, however, in order to command any measurable web sales they either have to have a very loyal customer base or continued marketing. Moreover, these stores simply can’t get the page rankings to compete online against the big boys- Amazon, Wal-Mart, etc. And at times their online stores compete with their physical location.
Here’s an example- Main St. Supply Company- a 100 year old general store. Its web site offers hundreds of products, in addition to knives from Case, Buck and Old Timer.
Then what about each knife company’s own website? I can’t think of a single knife company without an online presence today. They realize the benefits of online promotion of their firm and their knives and yet, they are faced with the decision of whether to have direct online sales from their websites or to remain loyal to their existing distribution network- their dealers and retailers- by not competing directly against them.
Interestingly, a quick review of 16 top knife companies, nine offer direct online sales. Of the seven that don’t, they point buyers to their dealers list provided from their site.
Business Model Changes?
Are the knife companies in the middle of a paradigm shift (sorry to use that worn out phrase) from the tried and true dealer network of physical locations to more web oriented sales? The majority can’t count on landing a big box account or national retailer.
Wouldn’t you be interested in seeing the total number of online knife sales compared to the total sold for the last few years?
I would guess that number is going to increase to a point over time. Does that fact, coupled with higher profit margins for direct to the pubic sales, influence knife companies to increase their direct online sales efforts? And if they do, is that move helping or hurting their dealer network? Only time will tell, but the majority of knife companies already do. The question then becomes, will they keep their dealer networks?
Closing Point to Ponder
Recently I asked one of the most popular knife companies about whether they would allow a dealer to only have an online store. The answer was “No. We require our dealers to have a physical location.” … sounds like a bit of 1980s thinking, now doesn’t it?
Photo Credits: Buck Knife – The Wall Street Journal; Main Street Supply Co.