Big Box Wholesaler Costco Plays Dirty – Aiming Low Prices on Top Brands to Lure Fly Fishermen

By Steve Schweitzer & Kirk Deeter

For the fly shop owner, there are threats coming from all different angles at any given time.  They come from increased prices from suppliers, new competition down the street, big boxes building the mega-complex across town, and now  from (would you believe) wholesale discounters, namely Costco.

Since March 26, 2011, sixteen Costco locations in the west have been identified as stocking and heavily discounting selected Simms and Sage products.  The products appear to be limited to three varying models of popular Sage Z-Axis fly rod and Simms G4 Pro Stockingfoot waders.  The knee-jerk reaction Is to wonder if Simms and Sage sold direct to Costco. But, in the words of ESPN College Game Day commentator Lee Corso, “Not so fast, my friends.”  It turns out that neither company sold anything to Costco.  In fact, they appear to have been victimized.

In an exclusive phone interview for this article, Marc Bale, long-time director of sales for Sage/Farbank Enterprises, stated: “We are aware of the products impacted and the Costco stores participating in selling our goods.  It is factual to say that we have pinpointed the issue with a freight-forwarder that transferred the goods to Costco.  The freight-forwarder has since gone AWOL.  We continue to investigate.”  According to Mr. Bale, Sage did not sell direct to Costco, nor had any plans to do so.  It appears the vigilante freight forwarder double-crossed Sage without their permission.

Angling Trade also interviewed Diane Bristol, director of marketing and brand management for Simms Fishing Products, and she explained that Simms learned of the issue on March 24, sent an E-blast advisory to its dealers soon thereafter, and then bought the waders from the various Costco locations at full retail price.  Ms. Bristol said that Simms had identified the source of distribution to Costco, and while she opted not to give a specific identity at this time, she assured us that Simms had shut down that account.  “If you are not an authorized Simms dealer, you do not carry Simms products, no matter who you are.  This is an issue we take very seriously,” she said.

The two scenarios in which Costco procured Simms and Sage inventory for their stores appears as two distinct and separate events.  The same players are probably not involved in both sets of transactions – in one case, an AWOL freight forwarder played dirty poker, and in the other, an industry insider acted as a Costco pawn. But behind the scenes is apparently a more crooked and sinister player – Costco.  This situation does beg a closer look at Costco’s seemingly unethical purchasing methods.

Costco has played this hand before.  The pattern: they target hot ticket items and ask the manufacturer to buy direct (with a clear message they will deep discount the item).  If the manufacturer denies selling to Costco, then Costco seeks and buys sizeable inventory from third parties – dealers or shipping agents at wholesale prices, legally.  The practice is called “diversion purchasing.”  Richard Galanti, Costco executive vice-president and chief financial officer estimates 4 percent of the goods in Costco are diverted.  Manufacturers and retailers beg to differ – claiming up to 12 percent is more realistic.   The under-handed purchasing tactic may be legal, but is certainly strays far from being ethical.  Just ask the myriad of companies bit by the Costco bug over the past 10 years: Packasport Car-top Carriers, Camelbak, Crocs, Janzen, Hurley, Lucky, OshKosh, Rollerblade, NordicTrack, Cannondale, Columbia Sportswear, Oakley, Rossignol, Teva and Trek have complained about the practice in the past, with several unsuccessful lawsuits.  The list goes on and on.  There are too many accounts and complaints on the web to cite – just google “costco diversion” and read to your heart’s content.

The bottom line is this purchasing practice is not new and it won’t go away until legal precedence deems diversion purchasing illegal.  Don’t expect that to come anytime soon.   It will take more than just the fly fishing industry to implement corrective action.  In the meantime, awareness and unity are the best weapons to fight unethical purchasing practices.  Simms and Sage are both correcting their value chain to build in stop-gap measures to fend-off and alert them of future guerrilla purchasing by the likes of Costco and others.  The fly shop owner plays a critical part of that value chain alert system to industry VIPs like Sage and Simms of future diversion purchases.  Be alert, be ethical and do your part in communicating suspicious activity.

The industry has just been preyed upon and we’ve walked away with just a scratch or two… and maybe a whole new education on how to fight off retail gorillas like Costco.

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41 Responses to Big Box Wholesaler Costco Plays Dirty – Aiming Low Prices on Top Brands to Lure Fly Fishermen

  1. Pingback: Deep discounts hit premium fly gear makers, unbeknownst to even them | Michael Gracie

  2. Britt Phillips says:

    It wasn’t Costco that wasn’t playing fair, it was an unscrupulous dealer who has been given the Boot by Simms at least. Don’t know the way this dealer got “into” Costco but I am sure they learned a lesson.

  3. Paul Prentiss says:

    Its heartening to see how Simms & Sage/Farbank has responded to this situation. But I think heavy discounting of premium product lines will continue to surface as a consequence of the ever expanding distribution of products beyond the confines of the dealer network. To me its like playing wack-a-mole. Given the dollars involved the temptation is pretty strong and hand slapping does not work.

  4. Linda Collins says:

    Costco needs to be held accountable for who they are purchasing and surely they know if they are talking to the owners of a company or a third party.
    Let the small businesses have their success.

  5. Brendan Mason says:

    They need to do the same thing electronics manufacturers have done to combat sales by unauthorized dealers at below MSRP. Take the warranty away if it’s not purchased from an authorized dealer. People buy brands like Sage and Simms for the unconditional warranties and no matter how good Costco’s return policy is (I doubt they’ll take back a broken rod or leaky waders 2 years down the road), people will avoid buying those products there.

    • Brian Moffitt says:

      Brendan,

      Actually, Costco has one of the most liberal return policies in the retail business. You can return almost anything (more on this in a second) to Costco regardless of condition or length of ownership. Just this past weekend my wife and I saw someone return a child’s wooden playhouse that had clearly been “well loved”. It was extensively faded and clearly had been exposed to the elements for some time. Costco took it back and I’m sure didn’t say boo about it. Now the only exceptions to this policy are electronics (generally TVs and Computers) which can only be returned within 90 days of purchase, this is the only exception to their policy.

      However, I’m completely in agreement that Costco acted unethically when it purchased from a third party after being told “No” by Simms and Sage. Far too often the statement of “it wasn’t illegal” is used by businesses to cover up unethical behavior. Just because it wasn’t legally wrong doesn’t make it morally right.

      Once I’ve finished this comment I’m going to send a strongly worded comment to Costco about this incident and I encourage others to do the same.

      Finally, I’m not in the trade just an angler who supports and works for a small business.

    • John Graham says:

      In the U.S., the manufacturer cannot deny warranty service based on the sales channel, due to the Magnusson Moss Warranty act.

      This is good for the consumer because what often happens is that manufacturers intentionally dump excess inventory through alternate channels then play dumb when the product at ends up at someplace like Costco. Basically, it’s the responsibility of the manufacturer to control their distribution, not the responsibility of the purchaser to figure out how the retailer obtained the product for sale.

      If it was gray market merchandise, not intended for U.S. sale, then it’s a different story. Then you have to depend on the retailer’s return policy. However some companies willingly repair gray market merchandise under warranty (i.e. Canon) and some won’t (i.e. Nikon).

  6. Thom Underwood says:

    Diversion purchasing goes on every day, in all aspects of business from AA Batteries to Medical Supplies…. this is nothing new! This is Free Trade and with the exception of lowering the prices in the USA to the same price that the goods are sold in the International Market…. this will continue. Walmart, Sams Club, CVS, Walgreens, Target……. the list goes all practice this method. In General 10% comes from Diversion purchasing to add to the bottom line.

  7. Great article, but it prompts me to ask: Where’s the harm, and what’s the foul in making public the name of the “freight forwarder” that re-directed the Sage products, and the name of the “industry insider” that did the same with the Simms products? Certainly we deserve to know, and there is nothing that creates civil liability by disclosing the truth. Anybody that says otherwise is just trying to dodge the ball.

    Marc Bale called me personally and indicated Sage was going to follow suit and gobble up the Costco inventory (200 rods +/-) at retail, but congratulations to Simms for setting the standard and responding immediately. We often say that the measure of a man is not his mistakes, but rather how he handles them.

    Historically, there is a wholesaler in San Diego that many major brand manufacturers/vendors use to dump their discontinued and excess inventory on the foreign market so as not to screw up the domestic trade. Is that who we’re talking about? Of course, some (and some of the same) vendors don’t even go to that length to core dump their over-produced, over-distributed products and excess inventory. And as we prepare for the start/best of the season, dealers across the country are having to combat a glut of discontinued high-end fly rods and tackle that flood the secondary (discount) outlets like Sierra Trading Post. While the Costco issue is not of their making, many of these same manufacturers/vendors are guilty of conditioning the finite fly fishing consumer audience to wait a season and get their stuff at discounts ranging from 20 to 70% less than they were offered only a season past. (Imagine being able to buy a new, 2010 Honda Ridgeline for half the price of the current model.) And anyone that tries to make the case that a sale of last year’s rod from a discounter doesn’t translate into a lost sale of a current model from the professional shops that helped establish the brand is sorely mistaken.

    Once great brand names in fly fishing continue to dilute their reservoir of goodwill with these and other antics that are eroding our industry. This is a small business pond, and the argument that it is impossible to police dealers doesn’t hold much water. So, too, should we dealers demand the same from the manufacturers and vendors we choose to support. At the least, as retailers in a very small industry we can insist on credible and complete answers to legitimate questions.
    Very sincerely,
    Mike Michalak

    • John Staser says:

      Well said, manufacturers completely control their distribution and through that control their image and the value of their product. I ended up purchasing 14 Sage rods from Costco here in Anchorage.

    • Kudos, Mike.

      Not that long ago, Simms, Sage, and others were highly sought after product dealerships. Twenty-two years ago when The Trout Shop opened its doors, we had to wait years to become a Simms dealership. Craig, a Montana town of forty people, simply did not draw enough fishermen to warrant a trip by the Simms’ Sales Representative to the now famous Missouri River. Finally, three years after asking, we were awarded a Simms dealership after Simms owner, K.C. Walsh, stopped by to check us out. Since that time, our Simms’ product sales have grown as the popularity of the river and the Simms brand has grown. It was great. We did a good job selling Simms products and Simms, the company, rewarded us by keeping other dealers out of the area. Simms became a dominant force in fly fishing. Being an authorized dealer meant something and had value. Due to our remote location, we managed to obtain nearly all the sought after dealerships in the industry. You name it, we have it – Simms, Sage, Winston, Abel, Tibor, Scott, etc. It wasn’t always easy to maintain these dealerships due to minimum annual purchase requirements, but we did it because the dealerships in-and-of-themselves had value.

      Then came Cabelas. K.C. Walsh called me and asked to meet me at The Trout Shop Cafe knowing that I was simply pissed about Simms’ decision to put a 1,000 pound guerrilla on small retailers backs – the very dealers that loyally helped build the foundation to what Simms is today. He maintained that the Cabelas’ Catalog would feature the Simms brand and only serve to drive sales to specialty stores in the long run. Simms controlled the page layout in the Cabelas’ Catalog. I guess having a Cabelas’ Catalog in your bathroom so you can see the Simms brand name while taking a crap has merit. Regardless, it was simply infuriating to hear through the grapevine on the last day of the Fly Tackle Dealer Show that Simms was making a giant step in a new direction. To me, it was the worst day in my twenty-two year career. As Simms went, so went the industry……. They were that powerful. When I confronted our Simms Sales Representative, he swore up and down that Simms’ move would not affect us. It may or may not have affected us financially, but it certainly put a damper on our enthusiasm as a Simms dealer. Ironically, our Simms Sales Representative was fired and was replaced by Simms’ Marketing Consultant who was instrumental in taking Burton Snow Boards to the big box stores. Why the secrecy? Why not disclose who the “freight forwarder” or “industry insider” is? Sorry we’re so skeptical.

      Our reward for continuously growing our Simms sales over 13 years was taken away by a stroke of a pen and Cabelas’ ability to prepay for their opening order. Now, being a Simms dealer has much less value. In our forty-person, two-city-block-town, there are now two Simms dealers. Simms opened the second dealer in our town the very first day they opened their doors. So much for working to be a dealer. It seems that any stone may be a location for a new Simms dealership. Our new competitors are literally two doors down the street from us. To this day, we’re not sure if we were being punished by Simms for being a vocal opponent to the Simms / Cabelas relationship, or if having another Simms dealer in town truly is good for the Simms brand and the big picture. Our Simms sales have remained stable despite our new competitor. We present the Simms products fairly along with the rest of our products. What the customer needs and wants is paramount. For some reason, however, our Patagonia and Arc’teryx sales have grown substantially. You can’t buy these products anywhere else in town. Unlike Simms, these companies are keeping their specialty products special (at least for now).

      To be fair to Simms, Sage/Rio have opened many doors including our town competitors. Really, nearly every company in the industry has bowed to the lure of big box stores. Of course manufacturers sell more product on a one-time basis when they open the doors to Cabelas, Bass Pro, etc. Adding premium fly fishing products to big box stores’ product mix does not drive appreciably more sales within the fishing industry overall. With only $700 – $900 million in annual sales and a declining market, any portion siphoned off to the big box stores hurts the very foundation of the fly fishing industry. Small businesses provide the core to the fishing industry. The small increase in sales the manufacturers receive by selling to the big box stores is not worth the damage done to the foundation. Obviously, most premium manufacturers no longer have a high level of regard for their small business partners. You can’t make the industry larger than it really is. While we receive lip service from manufacturers about how important we are as a vendor, there is enough erosion within the industry where manufacturers must make a sale – no matter where it comes from and no matter what damage it does to the core. When will it all melt down?

      There is no question that the changing nature of how business is conducted in the fly fishing industry was too much for many, many dealers to withstand. How many fly shops do you know that have gone out of business over the last five years? Too many. As small business disappears due the weight of the 1,000 pound guerrillas, the erosion of the fly fishing culture deepens. The next time you need a fishing report for your local stream, who are you going to call? Cabelas?

      In England, retailers have far more power than they do in the United States. They are united and form a formidable front against monopolistic practices. Product sales policies are driven from the bottom and not dictated from above. Perhaps its time to learn something from our British counterparts. It’s doubtful that they would put up with dumping of overstocked inventory.

      We do want to thank Simms and Sage for doing the right thing and taking rogue products off the shelf at their expense. That’s a nice gesture, but the problem is much deeper than a one-time event. Their business models are broken and need repair for the good of them, you and specialty retailers.

      It’s no wonder that very few people purchase the latest goods at full retail prices when all they have to do is wait a year and buy at the same price specialty stores do? The internet makes that easy. Who cares if the desired product is not the latest color, style, or model? All the products made today are top quality. Being able to buy current products at a significant discount because some mystery man managed to dupe the system is simply another indicator of the erosion of the industry. Where is the oversight? Didn’t anybody think these large purchases were suspicious? Where is the common sense? To stay in business, all businesses have to be able to sell at a profit. That’s pretty hard to do these days.

      It’s time for manufacturers to quit making the industry something it isn’t and truly become partners once again with specialty stores. Fly fishing specialty stores have little to no say in marketing products. Manufacturers control the product, the place, the packaging, the promotion, and the price. The same rules applied to specialty retailers need to be followed by the manufacturers at all times or their credibility is lost. Allowing products to be slipped through the cracks is inexcusable. Mass producing products that aren’t needed and turning a blind eye to sales that are “too good to be true” doesn’t do anything towards nurturing a fragile industry.

      Right now, the Missouri is fishing OK. There’s no shortage of fish. Current river conditions are simply not in favor of great dry fly fishing. You didn’t get that information from Cabelas and you never will. They certainly don’t locate in a town of just forty people.

      • ben shafer says:

        Jerry, whether intentional or not, I love the juxtaposition of your “gorillas vs. guerrillas”. Ironic yet appropriate. Cheers.

  8. Pingback: Chi Wulff’s Fly Fisherman’s To Do List 6 April

  9. Robert says:

    “heavily reduced prices?” – is that a joke!?! Don’t know about Simms, but Sage rods have been sold at heavily INFLATED prices for years. It’s about time someone made them available at a price point that actually makes sense.

  10. Chris Q says:

    I am torn by this situation. I like having a local fly shop, but the price of fly fishing merhcandise is part of the problem. Ou r local fly shopclosed down in part because of the bad economy. $700 fly rods and $400 reels are luxury items. Combine that with the inability of small shops to advertise and keep the products in the eyes of the public means that they cannot generate sales, they are the recipient of sales. Two or three shops buck this trend and publish national catalogs, but they take away sales from local shops, too, though not to the extent of Cabelas.

    “In England, retailers have far more power than they do in the United States. They are united and form a formidable front against monopolistic practices. ”

    This argument does not hold water. Selling to big box stores is the exact oposite of monopolistic practices. Selling only to certified dealers and specifying the exact price (like fly fishing mannufacturers is far more monopolistic. Besides, if you think that their laws are a good idea, think about the impact on prices first. According to my internet buddies from the UK, everything over there costs twice as much. A $700 rod in the US is over 700 pounds in Britain. The exchange rate is a little under $2 to the pound. I have been given specific examples regarding Sage rods. I am sure that would improve your sales numbers in the short term, but would drastically reduce the number of rods sold in the long run.

    This same thing happens in every industry that attempts to control the retail pricing. Gray market cameras have been sold in the US since the 70′s. It is very rare to find any electronics sold anywhere near the MSRP. Good or bad, its the future

    • By monopolistic practices we mean that all retailers big and small are subject to rigid pricing and other marketing practices dictated by nearly all fly fishing manufacturers. Discount pricing on current products is absolutely forbidden. While dealers can sell products under MSRP legally, Simms and others have the ability to quit selling to the dealer if pricing schemes are not followed. Manufacturers have been backed up by court challenges for these practices. Consequently, when manufacturers discontinue products, flyshops discount heavily to clear out old merchandise to make for new. To effectively remove products from retailers inventory, retailers must discount to nearly wholesale prices. Getting your cash back for your retail investment does not keep the lights on.

      Like you, we are appalled at the high price of fly fishing equipment. The cost of quality equipment simply helps prevent new customers from entering the sport. There are ways to buyer lower cost products, but most retailers don’t have the resources to carry the full product line of premium manufacturers. Prices are fixed in England by the manufacturers as well. For example, in Japan, Simms products cost 20% more across the board. Import fees, shipping fees and monetary exchange rates play a key role in the 20% surcharge. Regardless, the cost of a pair of G4 waders is the same at every fly shop in Japan except where dealers cheat on pricing. We personally know the Simms distributor for all of Japan. Guaranteed, he is upset by the amount of bootleg Simms products shipped to Japanese sellers by U.S. dealers. U.S. dealers might think that once the products are out of the country, they are out of sight and out of mind. They are definitely wrong.

      Brand recognition plays a key role in the success of a fly shop. From our experience, most customers want higher-end equipment. We’ve tried stocking lower-end equipment without success. We are destination shop with generally more affluent customers. Metropolitan shops have a different client base and stand a better chance at selling lower cost products. Lower end equipment uses the same shelf space and doesn’t lead to more sales overall. Flyshops are generally small and have to make decisions that if they could do it differently, would. With a small open-to-buy budget, most fly shops with premium dealerships opt for higher-end products for their store. We’ve watched premium manufacturers try to hit lower price points with their products. Point being is that they exist. If your local shop doesn’t carry the lower cost item you want, have them order it for you. In most cases, you can have the item you want within a week.

      We believe that retailers should have the authorization from manufacturers from time to time to discount products. What else can we do to move out commoditized (generic) products? With manufacturer approval, for example, we could run a sale at 20% off on specific products for a specific period of time at a specific place. It would be a good way to give locals a break from tourist prices. Since margins are 40 – 50% on most fly fishing products, we’d stand a better chance at selling our overstock at a small profit and keeping the lights on. Our open-to-buy budget would be larger. And, we would not be competing with every other fly shop in the United States to clear out our unwanted inventory. When a product is finally discontinued, you’d still see heavy discounting by flyshops. However, the supply of discontinued product waiting to hit the market will be much smaller. There has to be a mechanism available to retailers to move out unwanted products without feeling like cheaters in a flawed system.

      At Sage, they feel that every rod they produce will be returned at least twice for repair in its lifetime. When you send your rod in for repair, it costs about $50 for shipping and handling fees. A lifetime warranty doesn’t mean that you will get your rod repaired for free. If you don’t have a lifetime warranty with your rod because you bought the rod used (or forgot to send in the warranty card), the cost of repair is over $125. Each year, we sell our demo rods without warranty. Last year, we sold 75 demo rods and nobody cared about the warranty, but they love the price – about $400. Reducing the cost of a rod by removing the lifetime warranty coverage will put more premium rods in the hands of the average guy. If you really want the warranty, pay for that separately. It is our view that the first rod company to take our advice will turn out to be a winner in at least the hearts of flyshop owners.

      We’re all for lowering the cost of goods for consumers. There are ways to reduce prices, reward patronage, maintain a wider product mix and make a fair profit. With the general marketing practices dictated by the manufacturers in this tiny industry firmly entrenched, we regrettably agree that cheating will continue. It’s time for a change.

  11. Howard Cole says:

    Jerry and Mike, you are spot on. While these companies have created quaility products, the reason why big box wants to carry their products is because of us. Because of the brand recognition off the backs of the specialty fly shops. When it comes down to it, what we are selling is information and knowledge. I want to see big box properly set up a fly reel with line and backing or provide the hot fly for not just our local area but also for Belize or Patagonia. Here is the Forest Service road you take to get to stream X or lake Y.
    At one time, not so long ago it didn’t matter if you were an CEO or a dishwasher, both put a special value on their Sage rod. That is no longer the case. The preceived image has diminsihed when they can now be purchased everywhere. When Sage produced a special run of XP’s that became an Cabela’s exclusive at a reduced price, I was told if we could buy that many rods we could also have them. Now our shop couldn’t purchase that many rods, but collectively the small specialty shop could have. As Larry mentions; some years ago at the the Fly Tackle Dealer Show Simms runs a seminar on how to compete with big box and then at the end of the show annouces, Oh, by the way we are openning up Cabela’s and LL Bean. With this kind of support many small specialty fly shops will go out of business, but the manufactures that are supporting these practices will also have to change. These will be changes that the fly fishing industry will withstand, but over all it won’t be changes that will benefit the fly fishing community.

    • Howard,
      Thank you for joining in on the conversation. Hopefully we can get the word out to enough fly shops and fly fishing enthusiasts to put some pressure on our industry’s premium manufacturers to change their business policies. What works for the goose must work for the gander. There must be a better way of conducting business other than in dark alleys.

      Best Regards,
      Jerry Lappier

  12. Charles Kadish says:

    I, for one, have never liked the ability of a manufacturer to set prices up the distribution chain. It is, however, legal, so I live with it.

    It is also legal for a retailer to seek to purchase diverted goods. I like the lower price to the consumer in which that results.

    As one commentator above stated, let the manufacturer enforce its MSRP by refusing to warrant its products bought from non-authorized retailers. That will give the authorized retailer a modicum of protection. It will also indicate how much a warraty is actually worth to the consumer.

    Finally, I was interested to read the incident related by Howeard Cole, above.

    “When Sage produced a special run of XP’s that became an Cabela’s exclusive at a reduced price, I was told if we could buy that many rods we could also have them.”

    If I am not mistaken, Sage’s conduct there most likely was in violation of the Robinson-Patman amendment to the Clayton Act, which, among other practices, seeks to prevent price discrimination between competing customers of a given manufacturer. Its hard for me to feel too sorry for a company that complains about a retailer’s legal purchase of diverted goods while thhe manufacturer itself may be engaging in illegal pricing pricing practices.

    Just my quick $0.02.

  13. How is it that simms and sage were with the same freight company? Cabelas fo sho

  14. Rod says:

    I try to support my local shops when possible, but I work hard for the modest income I make, and have to stretch a buck the best I can.

    I am also of the philosophy that owning 2-3 quality rods (i.e. Sage rods) trumps having a dozen average rods. I think highly of Simms and have used their waders/boots over the last 12 years.

    If I was thinking about a Sage or Simms purchase and stumbled across a nice discount at Costco would I buy? Yeah, in a heartbeat.

    Not really seeing the “dirty” tactics that Costco is supposedly employing. I do see offering quality products at a more competitive price. I guess if I was the owner of a flyshop I would have a different take. Cheers

  15. Mike Hogue says:

    I am a fly shop owner and was contacted by one company and told I had to stock the product, when I mentioned it was in the Bass Pro up the road, they said well we will ship direct to your customers. I laughed and mentioned that you need to call on your customer, Bass Pro and if it was in their store, it wouldn’t be in mine. I don’t care what it is.

    I have taken a serious approach to this and I won’t deal with companies that don’t support me. I’ve never been a Sage or Simms dealer and frankly don’t care to deal with either because they sell to Cabella’s or Bass Pro. I don’t sell Umpqua nor do I sell Ross either. As far as I’m concerned the whole deserves each other.

    I import my some of my own goods, import my own flies, create fly patterns that are sold locally and I seek out clearance to offer my customer deals. I can undersell prices that the boxes use and give my customers a better value by creating my own products. I also buy in bulk, pack my own items and label my own goods. I also seek out items they don’t, won’t or can’t stock.

    The big trouble those boxes have is that the same person that buys dog beds and tires is the person ordering fly rods and doesn’t have local products, products of regional interest or products that have extra value. They are also so slow it amazes me how they stay in business. By the time Cabella’s adds an item to the new products section, I’ve already cycled it out and I’m adding something else.

    Their strength is their biggest weakness. Service also sells. I rig rods, add backing, tie knots and set rods ready to fish and neither Cabella’s or Bass Pro does that. I also publish a newsletter, offer demos, do club talks and donate to club raffles. I also give articles to various newsletters and a regional magazine. Does Cabella’s do that? Think twice where that next big prize raffle might come from if I’m gone. I’m sure that that would love to send you a few hats or some 7x tippet for that big prize instead of that rod, reel or line I donated to your local TU/FFF club.

    Better prices, local selection, better service, more interesting items to sell, that’s how you beat this lot. Would like to buy a fly rod from a company that sells dog beds or a professional that can take of you and understands the local and region you fish in?

    If you want a dog bed, egg sacks, shoes or deer scent, I’m sure Dick’s would be glad to help.

  16. JohnT. says:

    A comment from the UK. I was put onto this string by an irate specialist fly shop owner with whom I hope to be fishing on the Missouri in a few week’s time. I buy tackle from him because I get honest and extremely knowledgeable advice, and know that should anything go wrong there is back-up. However, why don’t I buy it in the UK? Chris Q was right, everything over here is outrageously expensive in comparison with the US – not just fishing tackle, but also cameras, computers, electronics etc. So, by buying in the US am I as bad as those who go to Costco? I suppose it is just personal and market economics, but I know where my sympathies lie and where long-term value is to be had, if specialist fly shop owners fail, Costco won’t be there with Jerry Lapier’s and many other dedicated owner’s advice. Really looking forward to seeing and fishing Montana again soon!

    • John T,
      I’m super happy with the common thread in this forum – specialty stores add value to your purchase. We work hard to make every customer satisfied. Going the extra mile is a local fly shop’s standard method of operation. Knowing that people recognize the effort and go out of their way to reward it is simply awesome.

      Fly fishing customers are the greatest. Where else can you find a group of customers that gladly put back more than they take every time? It’s a fine line between whom our customers are and whom our friends are. Somehow, through the goodness of fly fishing, our customers understand that we need to make a living and can’t give away what we do for a living. The conflict that can exist between friends and business is not an issue in fly fishing. Thank goodness that they want us to be open next season and don’t shop exclusively for a deal that only revolves around price.

      We certainly do not fault customers for shopping at Costco for discounted fly fishing items. Shopping around for commodity products is smart. Why pay more than you have to? A Sage Z-Axis is a Sage Z-Axis no matter where you buy it. A pair of Simms Pro G4 Waders is a pair of Simms Pro G4 Waders no matter if you buy them at Cabela’s, Wal Mart, or The Trout Shop. If we could, we’d match Costco’s prices on the Z-Axis rods. Unfortunately, we can’t discount from MSRP for fear of losing our Sage dealership because we broke their sales policy. Hence, the grumbling.

      When we open our doors to dealerships of any kind, we’re making a bet on the company’s brand drawing more customers through our doors. The dealer agreements we sign place rules upon us and also state the manufacturers obligation to us. We’re suppose to present products professionally and in accordance to the rules and they’re suppose to supply us with product at a given price and build the brand’s image. If we all do our part, all goes well.

      It’s too bad that retailers don’t have any voice in the manufacturer’s distribution policies. As once coveted brand names find their way into big box stores and every fly shop under the sun, our dealership bet goes sideways without any action on our part. When nearly all the premium manufacturers enter the mass fly fishing market, the value of product branding for a fly shop is simply gone. What’s next? Wal Mart? Don’t laugh….

      Demographics are hard to argue with. Fly fishing is a declining market because our customers are aging and retiring from the sport. The gap between the baby boomers and the next generation of affluent anglers is large. Yet, fly fishing equipment continues to increase in price at all perceived quality levels (rods are approaching $800) and there is no clear path towards capturing the youth movement with less money that’s on it’s way. Rather than producing products in the United States, most everything is made in China in an effort to increase manufacturing profits and keep prices down. I’m not so sure about the latter. The fly fishing industry continues to chase the high end. Marketing efforts by manufacturers focus on their premium equipment. Customers that can’t afford to buy premium equipment have to “settle” for what is perceived as inferior products at a lower price. It seems like everyone wants the best. For fly rods, cutting out the lifetime warranty and allowing manufacturers’ authorized sales from time to time are two simple ways to put premium equipment (that the customer truly wants) into customers hands. Giving people options and rewarding loyal customer behavior should be encouraged, not shoved under the carpet.

      The strict price controls that are prevalent throughout the fly fishing industry, stifle a fly shop’s ability to sell product. Nearly all, if not all, premium fly fishing manufacturers have strict marketing policies. What’s scary is that there are very few differences in policies between companies. It’s as if they copy each others’ policies. It’s their way or hit the high way. The 5 p’s of marketing are: product, price, place, promotion, and packaging. We do not control the manufacture of the product, we can’t deviate from MSRP one bit, where we sell manufacturers’ products must be approved of by the manufacturer, we rely upon the manufacturers to promote their products (brand building) and manufacturers control their own packaging. From time to time, you will find a fly shop bundle a fly line with a fly reel at no extra charge. Technically, this is discounting. Most reel manufacturer’s look the other way and allow the practice. Sage expressly forbids bundling of products just to give you an idea of how strict the rules are. When manufacturers increase their distribution (to a declining market) and continue to demand the same terms of sales with their dealers, the balance of power is broken. With mass distribution of products, the ability to sell products and meet manufacturer’s annual purchase requirements becomes very difficult. At best, the same amount of product is sold through to the consumer regardless of the number of dealers. Consequently, there is a glut of product out there to sell with the same or fewer buyers. If we have little to no control over the 5 p’s of marketing, what are we supposed to do with unwanted inventory? We can’t send it back to the manufacturer without paying a 15% restocking charge. Only big box stores can send back dead inventory. All fly shops, whether they will admit it or not, give discounts to loyal customers. There are three other ways that I can think of to get rid of dead inventory: sell it at wholesale when it’s finally discontinued by the manufacturer, wear it ourselves, or give it to a fishing club. The final three do not yield a profit that can be contributed to overhead costs.

      Basic economics disclose the inherent problems with fly fishing manufacturers pricing polices on dealers. I assume that manufacturers want dealers to survive. Their marketing policies don’t walk the walk.

  17. Howard Cole says:

    This conversation can go on and on with really no real answer. I cannot blame anyone from purchasing a fishing product at a reduced cost. That is just basic economics. But as the old adage goes; Be careful for what you ask for. The typical comsumer was and still is in favor of a lifetime warranty on rods, and many actually purcahse a rod because of it. Not whether the rod really suits them, but because it has a lifetime warrranty. Well for the people that are complaining about the cost of higher perfomance rods, before the lifetime warranty came into play, performance rods retailed between $350.00 and $400.00. So, you can look at it however you want, but the consumer is paying for their lifetime warranty. Falling right inline with the Kmart/Cabela’s mentality of the preceived deal. Not really buying an item because it is what they really wanted and actually suits their needs, but because they are getting some kind of alleged deal.
    As Mike Houge alludes to, most of time when one adds it all up (service, support, knowledge, etc.) the real deal is with the specialty fly shop. And as far as how Mike runs his business, most shops do many of the things he talks about. We have to or we wouldn’t be in business, now more than ever with the current state of the economy. The generousity of most small specialty fly shops amazes me. Especially when most can’ t afford to be as generous as they are. Just remember when you need your reel properly set up, the information on a specific location, or possibly would like to have some flies tied explicity for you, and your little shop is no longer there, tell me where the deal really lies.

  18. Charlie R. says:

    Anyone who would buy Sage and Simms from Costco just to get a good deal on it is effectively $%^king our industry. There is no argument that could justify this sort of selfishness. Cant afford Sage and Simms because of your “modest” wage? Here’s a bright idea, SAVE YOUR MONEY!!! How many cases of beer/packs of cigarettes/cans of chew/dinners out did you buy in the last six months? These, and many other unmentioned expenses are all “luxury items” that could be sacrificed if one actually wanted a Sage rod or a pair of Simms waders. The price you pay for these brands helps protect the quality of the materials and craftsmanship that go into the rod, gives you an unconditional lifetime warranty and not to mention excellent customer service. Down the road the margin that small retailers make on these rods allow them to provide you with exceptional service and staff whose knowledge and advice help you catch more fish. You want an inexpensive fly rod and waders? Go to Cabelas and tell me if the guy selling you the rod even knows how to cast it. Then you can bring it over to my house and we can compare your Cabelas rod to my Z-Axis while casting on my lawn, although the difference will be easy to see before even putting a line through the guides. Next we can go fish for winter steelhead on the Olympic Peninsula for a week in February and test out your waders. Three days in when you are standing in a pool of water shivering with hypothermia and I am snug and warm in my G4′s you can tell me how the discount was worth it….
    My point is, buy quality products at discounted rates and eventually the quality will be nonexistent in the product. If Sage and Simms were forced to lower their prices you can bet that the quality would drop significantly. You want Cabelas pricing you get Cabelas quality.

    • Rob says:

      Both companies have already recieved their $ for their goods previous to being sold to Costco or wherever. So the price a consumer pays has no basis as to what Sage or Simms recieved for their products so should have no effect on their quality… They have already been purchased. Talk about a luxury item. You don’t think a $700 rod is a luxury item?
      I paid 8K for my watch later saw the same one at Costco for $4600. I would have bought it there if I had known about it.

      The effects would be on the small retailer not the vendor.

      Pretty rude to knock a guy for not making enough to be able to go out and drop that coin on a rod. The issue is about the small retailer being hosed not whether or not someone can afford it.

  19. Ward Wulf says:

    All I have to say is that as a purchasing/fulfillment director for a popular discount auction site, I’ve been able to get absolutely no response from anyone in the fly fishing industry with respect to purchasing goods and moving them at a discount. They’ve ALL been crazy protective of you fly shop owners and won’t let us touch their product, regardless of the millions of dollars in annual sales I can guarantee them.

    Maybe I haven’t been speaking with the right people at Sage/Simms, but I’m inclined to buy the bad distributor excuse. Don’t think they’re trying to stick it to you here…

    • Ward,
      We do not believe that Simms or Sage is trying to “stick it to us” either. Simms acted quickly to remove their rogue waders from Costco’s shelves. Sage has stated that they are following suit and will also buy up the “remaining” Z-Axis rods found at Costco. The Trout Shop has been authorized to buy the Z-Axis rods found at the Helena, MT, Costco. It’s really unfortunate that large orders approaching $100,000 were able to slip through the cracks. While it should not have happened in the first place, we are confident it won’t happen again.

      The Costco issue opened the door to debate regarding the rigid sales policies of nearly all the premium manufacturers found in fly fishing. When these manufacturers greatly expanded their domestic and international distribution chains (Cabela’s, Bass Pro, LL Bean, many more fly shops, etc.), they did not relax the terms that fly shops have to live under. The crux of the problem lies in the fact that fly fishing is not a growing market, yet fly shops have to live under the same rules that have been around for 20 years. The requirements placed upon the original dealers that built these companies’ brand names needs to be relaxed to reflect the current selling time – you can’t expect fly shops to sell as many products in their stores when there are many more dealers carrying the same products. Some of the new dealers are major corporations that simply have a ton of buying power. Small fly shops do not. Back door discounting is technically not allowed by the manufacturer’s sales policies. Cabela’s does it all the time through the use of their credit cards. Each time you swipe a Cabela’s credit card, you earn points towards your next Cabela’s purchase including premium fly fishing equipment. If you have a Cabela’s card and you wonder why fly shop’s only reluctantly accept them, it is due to this obvious conflict of interest. Due to Cabela’s buying power and marketing strength, they can buck the policies without worries.

      We believe that pricing of premium fly fishing products needs to be protected. The hard and fast rules of the past, however, simply don’t apply to today’s mass distribution and internet driven market place. It’s time for a change for the sake of preserving the fly fishing culture as we know it. If you’re not a fly fisherman, you may wonder what “culture” we are talking about. If you are a fly fisherman, you know exactly what we’re talking about and we are hopeful that you agree with us.

  20. Jake Hood says:

    The mere notion that a customer has any responsibility to a retailer is pure hogwash. Over and over again the arguement is made that customers MUST support the local fly shop to keep the industry alive. To be fair it’s almost never presented by a retailer. The product lines offered in any given fly shop in the western US is , quite frankly, usually identical. The dealer model created by manufacturers is so distinct that the only difference is address and personnel in most cases. As a customer I don’t have any obligation at all to these retailers. I’ll spend my money when and where I desire and you can jam that self important guilt trip BS where it will grow fruit.
    The quality retailers in the fly industry would no sooner approach a customer with that attitude than they would sell worms.
    They treasure the customer base they EARN and go over the top in the service they provide to maintain and grow annually. Imagine the reception at your local shop if you enter the door and the staff says ” If you don’t buy this rod/reel/etc. you don’t deserve to shop here”.
    Seriously?
    I don’t visit Craig Montana without a stop at the Trout Shop, I hope that never changes . The shop next door reportedly carries some of the same stuff. I wouldn’t know, I’ve never been in
    there.

  21. Capt. Bill says:

    I commend Simms for their proactive role in removing their product from Costco (at their own expense) as quickly as they did. Their support for their registered dealers is unmatched. By leaving their rods in the Costco stores, Far Bank/Sage has tarnished the credibility of their brand as well as hurt their pricing structure with their dealers moving forward.

  22. Tyler Palmerton says:

    This debacle was relayed to me last night from a good friend who owns a fly shop in AK. I was in utter disbelief that a manufacturer from the likes of those two would stoop to the level of selling to Costco to clear out inventory. After reading Deeter’s story I get it now, but I don’t have to believe it. I own an operate a small sales agency here in the NW specializing in outdoor and hunting products. My background stems from years of guiding, working for a rod manufacturer, running a retail fly shop and as a sales rep. Granted I don’t sell anything in the fly fishing world anymore but I still patronize local fly shops whenever I can, it’s ingrained in my psyche. I like the banter between locals and out of staters in the shop, the young guide trying to earn his keep stocking flies and the owner engaged selling products he believes in.
    In a comparative sport like archery, dealers have protected regions from big bow manufacturers like Hoyt and Matthews and they are “Specialty Only”…I want the comfort of buying in a shop with actual techs working on the bows behind the counter, dead animals from the locals adorning the walls and better yet the brands they sell that “No Big Box Can”!!

    I vote for the retailers in standing up an holding the manufacturers feet to the fire when it comes to Big Box, because without Independents I am out of business myself. As shop owners you can buy and sell whatever you choose, maybe you should look for other brands? Also in reference to marketing and discounting I have numerous outdoor online shops that consistently have to get patrolled for discounting, yet it’s against the law for the manufacturer’s rep to suggest holding them to MSRP. There reply is usually well REI does it , just not upfront and you can actually take the cash at the end of the year for your dividend. So I say” become a member base store” charge $5 to the customer an then offer all members in store merchandise at %5 off retail. Just don’t advertise it outside on the internet etc..etc…If manufacturers are going to allow the big box chains to use that kind of system with redeemable points then the small retailers should be allowed to do the same thing. Costco did this with Maui Jim Sunglasses some years back when I was rep for them and they were sued immediately. Costco didn’t care that they were not making much money on the glasses, but wanted the esteem of having the brand. Well they struck a deal and agreed to sell all outdated and discontinued models to them from then on going froward.

    In likes of SAGE not knowing where there rods go and for a huge account like MV Sports to purchase the rods himself just to clean up the mess is despicable. Kudos to John….

    Cheers,

    Tyler

  23. Troutguy says:

    Specilty Shops for Specialty products, I see the trend in this industry to open more and more doors from manufactures just to make a buck. What ever happened to a Flyshop that sold product on its merits? The fact of the matter is most flyshop owners came into a business as a love for the sport. They carried the lines that they believed in and sold on the facts. There still is a few and proud manufactures that have stuck to these morals and have helped shops by not playing into the big box arena. Compinies like Scott Rods and Nautilus reels have stayed true to the heritage yet barely get attention from Shop owners as they carry more of the same down the street and big box inventory.

    Wake up people, if you dont like what these companys are doing than vote with your dollars. I heard all last year about XP being sold in Cabelas, yet the shop owners I talked with shrugged there shoulders and asked the customer if they wanted paper or plastic with there purchase.

    Yes, I am a Rep in the industry and work for the products above. However those companys have worked hard and stayed loyal to there dealer base. Its getting harder and harder to find product that is not sold to big box and where it will go from here nobody has the answer.

    But the question I have is ” What are you going to do Mr Shop Owner?”

    • Trout Guy,
      We’re going to buy more Scott Rods and Nautilus reels. We are willing to put our money where it matters. Scott Rods are as good if not better than any other Rod on the market – and they are made in the U.S.A. Why wouldn’t we stand behind them. Nautilus Reels have the best price point reel on the market that is likewise made in the U.S.A. Our only issue with them is delivery. It’s great to see a company as busy as they can be without the help of the big box outlets. We’re a fan and will adjust our buying behavior to reflect our distaste for what once used to be specialty products and are now commoditized (generic) because you can get them seemingly anywhere. Don’t worry, we’ll encourage our friends in the industry to do the same.

      Tight Lines,
      Jerry Lappier

      • Malvika says:

        I love these brownies, they are a slpate in my pantry! My problem is that I make them too often – lol.Anonymous, don’t think yourself shameless. I always give away baking at Christmas to my friends, in fact we have even done baking exchanges in lieu of presents.

  24. Pingback: Simms Waders and Sage Rods .... At Costco?! - The North American Fly Fishing Forum

  25. Don h says:

    While I understand the frustration with industry problems, saying that someone who buys a rod or waders at costco is screwing the industry and they should save their money is piss poor. When a guide form gets you 60% off your highly coveted rod and half those get back doored so we can put your new model in our customers hand, I have no problem with what costco did, and support anyone who buys those products there. I remember my local fly shop when it started couldn’t sell anything because a shop within x miles already had it, that was pretty lame, but now without those brands the shop has expanded and thrived. Service sells, and the snooty attitude that some have make the chance of a wallet opening that much more unlikely.

  26. Amazing issues here. I’m very glad to peer your post. Thank you a lot and I am looking forward to contact you. Will you please drop me a e-mail?

  27. joe says:

    If im not mistaken, Scott fly rods were sold at Cabelas for a while. Also, how do we feel about Simms now that they are selling direct?!?

  28. Pingback: Can't compete with Costco: Sage Blowout Sale - Page 2 - The North American Fly Fishing Forum

  29. Ryan says:

    Since when should concern EVER be less about the consumer and more about corporate profits. If there is a consumer market desiring premium products at a discounted price, why should this be taken away? To me it is more disgusting that sage wouldn’t allow the initial sale to Costco. It should be the consumers choice to buy wherever they feel.

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