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My thoughts exactly!!

I'm not exactly sure Costco is out of the game. They are 15 on the Fortune 500 with almost unlimited purchasing power. It doesn't make sense for them to buy overruns knowing there is a finite supply and sell at cost. They are all about membership revenue not profits on goods. They could buy all the capacity at any ball manufacturer facility and no OEM could do anything about it. I'm not sold that Nassau wouldn't want to produce for one company with unlimited resources at max capacity.

 

 

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Did the Titleist mafia strike them down?

 

 

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I think it looks like that to some people.  Costco sells a ball for 3 times less than the ProV1.  MGS tests and reports that the Ksig ball is as good or better than the ProV1.  Costco sells out of the Ksigs.  On-air personalities supporting OEM ball manufacturers go berserk.  Costco isn't getting any more balls.  What kind of deal did Nassau make?  If it walks like a duck and talks like a duck, ...

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We don’t stop playing the game because we get old; we get old because we stop playing the game.”

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I'm not all that disappointed really. It was fun while it lasted. But, who's to say someone or some other company if not Costco will get hold of this deal and start producing this ball again. Perhaps with a new name? It's not that it can't be done. I've always thought why not WalMart? I'd play any high quality ball regardless whose name is on it. Sams - Members Mark? Walmart - Great Value? Target - Up and Up (kind of like that one) Costco - Signature? Who cares as long as the product is high quality and available.

 

Let's not forget the MG Golf Tour C4. It's a great urethane ball as well and only $20 dz. I like them.

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I'm not exactly sure Costco is out of the game. They are 15 on the Fortune 500 with almost unlimited purchasing power. It doesn't make sense for them to buy overruns knowing there is a finite supply and sell at cost. They are all about membership revenue not profits on goods. They could buy all the capacity at any ball manufacturer facility and no OEM could do anything about it. I'm not sold that Nassau wouldn't want to produce for one company with unlimited resources at max capacity.

 

 

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Playing devil's advocate, there are a number of mitigating factors a company such as Costco would need to address prior to taking on established companies.  Just a few that come to mind quickly............

  • How would established OEM's push-back to a greater degree than they already have should Costco continue to thumb it's nose at the golf OEM establishment?  
  • How would established OEM's punish a supplier such as Nassau as a result?  
  • Do other Costco suppliers have a vested interest in the success those OEM's Costco would be in direct competition with?

 

Costco has gone through this in the past with tire companies, insurance agencies and travel agencies to name a few.  The end result was a partnership to sell OEM products at prices that meets the Costco business model thus, allowing other companies to continue to sell those same products at a significant mark-up.  

 

In my opinion, Costco will come out of this with contracts in hand to sell all sorts of TaylorMade, Titleist and other major OEM equipment.  This will benefit Costco as well as Costco's membership base furthering their reputation as a world class organization serving the best interests of their consumers.

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Playing devil's advocate, there are a number of mitigating factors a company such as Costco would need to address prior to taking on established companies. Just a few that come to mind quickly............

  • How would established OEM's push-back to a greater degree than they already have should Costco continue to thumb it's nose at the golf OEM establishment?
  • How would established OEM's punish a supplier such as Nassau as a result?
  • Do other Costco suppliers have a vested interest in the success those OEM's Costco would be in direct competition with?

Costco has gone through this in the past with tire companies, insurance agencies and travel agencies to name a few. The end result was a partnership to sell OEM products at prices that meets the Costco business model thus, allowing other companies to continue to sell those same products at a significant mark-up.

 

In my opinion, Costco will come out of this with contracts in hand to sell all sorts of TaylorMade, Titleist and other major OEM equipment. This will benefit Costco as well as Costco's membership base furthering their reputation as a world class organization serving the best interests of their consumers.

Understand, my only point is that I don't think that Costco is going to be leveraged by anyone. If they decided that they want to sell golf balls they will. At $116B/year revenue, they dwarf the entire industry. Not saying they will, but they can.

 

 

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Understand, my only point is that I don't think that Costco is going to be leveraged by anyone. If they decided that they want to sell golf balls they will. At $116B/year revenue, they dwarf the entire industry. Not saying they will, but they can.

 

 

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Sure they can but they will not jeopardize what made them a $116 billion company in order to sell golf balls.  

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I don't think Costco made a couscous decision to "thumb their nose" at anyone. I just think they found or were presented with an opportunity to sell these balls for a while and ran with it. I don't believe Costco had an axe to grand with the golf industry.

My Sun Mountain bag currently includes:   TWGTLogo2.png.06c802075f4d211691d88895b3f34b75.png 771CSI 5i - PW and TWGTLogo2.png.06c802075f4d211691d88895b3f34b75.png PFC Micro Tour-c 52°, 56°, 60 wedges

                                                                               :755178188_TourEdge: EXS 10.5*, TWGTLogo2.png.06c802075f4d211691d88895b3f34b75.png 929-HS FW4 16.5* 

                                                                                :edel-golf-1: Willimette w/GolfPride Contour

 

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Not seeing how they would be jeopardized by buying capacity at a factory to produce a proven product.

 

 

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It depends on many, many other mitigating factors.  As I said earlier, do existing Costco suppliers have vested interests in major, established golf OEM's?  If they do, those OEM's could easily jeopardize many existing Costco products.  Costco isn't dealing with one or even two supply chains.  A company of that size is dealing with thousands on a daily basis.  It stands to reason several of those suppliers would also have relationships with companies that have a vested interest in Titleist or TaylorMade.  

 

The bottom line is a company like Costco isn't going to jeopardize 30 other established products in order to sell golf balls and likely wouldn't find it worthy of their time and considerable effort.  Especially when they can use the leverage they generated by establishing the ball they have sold for the past few months to get them a considerable inventory of OEM equipment to stock shelves with.

 

I don't know what Costco will ultimately do.  I just don't believe it's simply about selling golf balls for them either.  The Kirkland Signature brand has thousands of products.

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Not seeing how they would be jeopardized by buying capacity at a factory to produce a proven product.

 

Don't just think of Costco ; they are a bit player in this. If they did buy overruns they now need to acquire their own ball formulation to manufacturer. Since there are limited manufacturing plants that produce balls. The other manufacturers could put pressure on ball plants by stopping their production in those plants.

 

As a result Costco has considerable startup costs and would potentially be charged more per dozen since the plants would have less production due to other manufacturers pulling out.

 

Probably not going to be a $15 ball anymore and if you are paying equal prices people will go with brand name

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Driver:  :ping-small: G400 Max 9* w/ KBS Tour Driven
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I don't think Costco made a couscous decision to "thumb their nose" at anyone. I just think they found or were presented with an opportunity to sell these balls for a while and ran with it. I don't believe Costco had an axe to grand with the golf industry.

I agree.  I didn't intend to imply the contrary.  But following the push-back Costco received from Golf Channel and other avenues, it is being perceived that way by the golf industry establishment.  Profit is king and Costco's foray into the golf ball business hurt major golf OEM's as a result.

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It depends on many, many other mitigating factors. As I said earlier, do existing Costco suppliers have vested interests in major, established golf OEM's? If they do, those OEM's could easily jeopardize many existing Costco products. Costco isn't dealing with one or even two supply chains. A company of that size is dealing with thousands on a daily basis. It stands to reason several of those suppliers would also have relationships with companies that have a vested interest in Titleist or TaylorMade.

 

The bottom line is a company like Costco isn't going to jeopardize 30 other established products in order to sell golf balls and likely wouldn't find it worthy of their time and considerable effort. Especially when they can use the leverage they generated by establishing the ball they have sold for the past few months to get them a considerable inventory of OEM equipment to stock shelves with.

 

I don't know what Costco will ultimately do. I just don't believe it's simply about selling golf balls for them either. The Kirkland Signature brand has thousands of products.

I understand your logic but you have it backwards. Those companies rely on Costco more than Costco relies on them. The golf OEMs have zero leverage. Costco owns its supply chains. They created the Kirkland brand for a reason.

 

 

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Don't just think of Costco ; they are a bit player in this. If they did buy overruns they now need to acquire their own ball formulation to manufacturer. Since there are limited manufacturing plants that produce balls. The other manufacturers could put pressure on ball plants by stopping their production in those plants.

 

As a result Costco has considerable startup costs and would potentially be charged more per dozen since the plants would have less production due to other manufacturers pulling out.

 

Probably not going to be a $15 ball anymore and if you are paying equal prices people will go with brand name

There seems to be a Nike void to fill. Those balls were produced somewhere.

And you seem to think that Costco looks for profits on their goods. They get most of their capital from member fees. They were selling the ksig at cost or very low margin. The big OEMs are producing their products at that same price and marking them up at huge margin.

 

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I understand your logic but you have it backwards. Those companies rely on Costco more than Costco relies on them. The golf OEMs have zero leverage. Costco owns its supply chains. They created the Kirkland brand for a reason.

 

 

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You seem to be back-door proving my point.  If I "have it backwards" and Costco indeed owns all of it's supply chains as you suggest, how is this even an issue?  If Costco owned all of it's supply chains, Costco would own Nassau.

 

The following seems to suggest Costco owns very few suppliers.  http://vendorco.com/costco-supplier

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You seem to be back-door proving my point. If I "have it backwards" and Costco indeed owns all of it's supply chains as you suggest, how is this even an issue? If Costco owned all of it's supply chains, Costco would own Nassau.

 

The following seems to suggest Costco owns very few suppliers. http://vendorco.com/costco-supplier

You are confusing supplier with supply chain. Costco leverages suppliers to put products through their chains for distribution to the consumer. If a particular supplier does not play by Costco's model, they, Costco will find an alternate source of supply.

 

 

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You are confusing supplier with supply chain. Costco leverages suppliers to put products through their chains for distribution to the consumer. If a particular supplier does not play by Costco's model, they, Costco will find an alternate source of supply.

 

 

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Depots receive truckload or container-based shipments from manufacturers

Goods are allocated and then shipped to stores , generally in less than twenty-four hours.

To the greatest extent possible, goods are handled through the depots in full pallet quantities meaning that a forklift handles a full pallet of merchandise at receiving and at shipping without the need for people to touch individual cases.

While this is not possible for 100% of the product lines (e.g. high dollar value items with low movement are generally the exception), the emphasis is definitely on minimizing touches.

At the warehouse stores, forklifts move pallets into racks such that the first time an item is physically touched is when the consumer reaches into the rack to pick the item and place it into their cart.

Thus the first time that a Costco employee touches product is at the cash register for most (but not all) of the items being sold.

 

I believe we are awash in semantics!  The above is copied directly from the Costco website.  While it isn't clear who actually owns the "depot" it is industry standard for the chain to own their own distributorship.  However, this doesn't get to the heart of the issue.  Semantics aside, Costco doesn't actually manufacture anything. Why would they start with a golf ball?  It doesn't seem logical for a company as successful as Costco to go against a tried and true business model in order to sell a cheaper golf ball.

We can agree to disagree.  I'm not going to argue with you anymore.

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Depots receive truckload or container-based shipments from manufacturers

Goods are allocated and then shipped to stores , generally in less than twenty-four hours.

To the greatest extent possible, goods are handled through the depots in full pallet quantities meaning that a forklift handles a full pallet of merchandise at receiving and at shipping without the need for people to touch individual cases.

While this is not possible for 100% of the product lines (e.g. high dollar value items with low movement are generally the exception), the emphasis is definitely on minimizing touches.

At the warehouse stores, forklifts move pallets into racks such that the first time an item is physically touched is when the consumer reaches into the rack to pick the item and place it into their cart.

Thus the first time that a Costco employee touches product is at the cash register for most (but not all) of the items being sold.

I believe we are awash in semantics! The above is copied directly from the Costco website. While it isn't clear who actually owns the "depot" it is industry standard for the chain to own their own distributorship. However, this doesn't get to the heart of the issue. Semantics aside, Costco doesn't actually manufacture anything. Why would they start with a golf ball? It doesn't seem logical for a company as successful as Costco to go against a tried and true business model in order to sell a cheaper golf ball.

We can agree to disagree. I'm not going to argue with you anymore.

Buddy, they don't need to manufacture them. I never implied or said that. All they need to do is find a source that can. My original point was that they have the resources to do that if they were so inclined. Not saying they will, or that they care to but it's an option.

 

Your cut and paste talks about distribution, which is another facet of a complex chain that relates to transportation and distribution. There is also acquisition, disposition, inventory management, and many other complex factors in a supply chain.

 

 

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  • 1 month later...

check out the Dean Snell article on the blog about the KSigs.  He went into great detail about the behind the scenes stuff.  I never realized so much went into creating a golf ball!

very good article and this guy knows golf balls

I got something to say then I'm gonna say it. 

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Yes. and the new article Covey posted in very interesting also.

My Sun Mountain bag currently includes:   TWGTLogo2.png.06c802075f4d211691d88895b3f34b75.png 771CSI 5i - PW and TWGTLogo2.png.06c802075f4d211691d88895b3f34b75.png PFC Micro Tour-c 52°, 56°, 60 wedges

                                                                               :755178188_TourEdge: EXS 10.5*, TWGTLogo2.png.06c802075f4d211691d88895b3f34b75.png 929-HS FW4 16.5* 

                                                                                :edel-golf-1: Willimette w/GolfPride Contour

 

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