Marketing and selling in the outdoor sports industry can be tricky, especially regarding firearms. Gun shop owners have massive hurdles to overcome, just like those in cannabis, where advertising and marketing restrictions and economic forces hinder their ability to generate profits.
The average sports shop owner makes only roughly 10% profit on new gun and ammunition sales. Many rely on selling additional products like scopes, camping, and fishing supplies that generate high rates of return. Also, selling services can help drive growth – safety classes, gunsmithing (muzzle, brake installs, truing, magazine mods), recreational activities (shooting ranges), or private security (individuals, organizations).
Running a viable and profitable business isn’t for the faint of heart. According to Statista, nearly 53,000 sports shops sell firearms in the US, compared to 7490 for cannabis and 41,531 for beer, wine, and liquor stores. Competition is intense for any business, especially for sports shops selling firearms, as their retail shop numbers are much greater than the other industries.
Typical Expenses a Gun Shop Incurs
Operational costs are plentiful and overwhelming. They can include:
- Labor – probably the most expensive yet the most essential part of your firearms business
- Inventory – hold too much of a particular product, it costs money. Hold too little of a popular product; you lose money
- Licensing – an essential part of legally run businesses
Now add to this the economic upheaval the US is facing – rising interest rates, inflation, and labor shortages that put a dagger in many shop owners’ hearts who are trying to run a profitable business. All is not lost, as readily available technologies like AI can mitigate the effects of the aforementioned problems.
Weaponizing Your First-Party Data with AI
A high-level definition of Artificial intelligence (AI) is getting a computer to think and act like a human. Many think of ChatGPT, which came into prominence at the start of this year when discussing AI. The daily use of AI has been part of our daily lives for the last ten years; Amazon with products and Netflix movie recommendations. AI, regardless of the tool, is about analyzing past patterns to make future predictions.
“Data is the new oil” is a famous saying. AI thrives on data. Nothing could be further from the truth. Tesla is more of a data than a car company. Amazon, Facebook, and Door Dash have treasure troves of data they leverage. All have made billions from their first-party customer data. Now, with the democratization of AI, sports shops, big and small, can take advantage of AI’s predictive power already being used in the alcoholic beverages and cannabis industries.
It starts with leveraging your company’s most valuable asset, your first-party data, in your eCommerce, POS, or ERP platforms to gain a competitive advantage.
Hitting Your Targets
When going to the range, you’re always going for the bullseye.
Imagine using that same methodology when selling or marketing to your customer. What if your gun shop POS has 50,000 purchase orders, 5,000 customers, and houses 500 products? By analyzing past purchases, we can predict that Lisa, a petite 5’2, will likely purchase a Glock 19 while Tom, who has large hands, has the Glock 48. In addition, AI can help recommend appropriate cross-sell items and services.
By helping the gun shop owner know his customers better than he knows himself, he can target his customers with the right product at the right time. Doing so:
- Improves sales
- Increases average order value
- Reduces customer churn
A study by McKinsey shows that AI-driven personalized recommendations can impact sales by as much as 15 percent and reduce customer acquisition by up to 50 percent. Your margins are too slim to waste playing the guessing game.
Infusing AI with Existing Hardware and Software
Embedding AI into your existing tools can turn once mundane, everyday platforms into smart ones.
RFID technology helps with accurate inventory counts. Running the inventory data collected by RFID through an AI engine helps predict how much of each item needs to be stocked for a given day, week, or month using time series algorithms. Already being used in other industries, the AI and RFID combo can give gun store owners a significant one-two punch to address economic issues out of their control.
Having kiosks in your sports shop can help address labor shortages. When customers input their info, AI-powered kiosks can recommend appropriate products and services.
Many firearms shops already use email and text in their marketing arsenal. Now, layer AI on top of it. The marketer can send data-driven, relevant emails or text messages on what products or services they will likely buy.
Pairing AI with Solid Business Strategies
Using AI-related tools for your sports shop isn’t the magic pill to cure profitability challenges. You’ll need to pair that with human intuition. With any business, especially in firearms, you’ll need a well-crafted strategy and technological enhancements like AI. Some things to consider:
- Create a plan that addresses your shop’s unique challenges and goals, determining your target audiences and helping to improve the customer experience
- Use online platforms – combining the data from your e-commerce and brick-and-mortar stores can provide a superior omnichannel experience for your customers
- Develop relevant campaigns – as, with the email and text example above, your customers respond to something they like. Doing so prevents indecision and tells your customer what to do next
AI and the human touch can make your business well ahead and above the competition.
Going Forward To Win in the Sporting Goods Industry Market
We’re in uncharted waters here in a highly kinetic business environment. One wrong step and all your hard work could be up in smoke without the proper strategy, akin to taking a knife to a gunfight.
As humans, we’re often set in our ways. The question here is – how likely are you to take action with something that may be new and different than what you are used to doing? Are you willing to deal with the pain of inaction? Remember, in business, it’s often what you don’t do that can harm. Ask Blockbuster Video, Sears, and Borders Books if they wished they had done things differently.
Overall, many in the business are forced to do more with less. You’ll have to strike a balance between AI-driven platforms and human intervention. By understanding where your profitability gaps lie in conjunction with learning about new technologies, your firearms business can go a long way in building its competitive moat.