The second coming of golf retailer 2nd Swing, which went bankrupt after an ill-fated retail store expansion, proves that online peddling of used and new clubs, plus a few high-touch wrinkles can be an innovative growth strategy against larger competitors.
The original 2nd Swing was founded by Simon Kallal, 42, soon joined by friend Russ Higgins, 40. The two former University of Minnesota golfers opened a small shop on E. Hennepin Avenue while still students more than 20 years ago.
The company grew to nearly 50 stores in several states by 2005 after raising $15 million from national investment firms Oak Investments and Invesco.
Kallal and Higgins, who advocated lower-cost website sales expansion over a far-flung brick-and-mortar business, were forced out by the money guys. The company changed its retail name and broadened its product offerings from golf clubs to clothing and accessories. The firm took on larger national chains such as Golf Galaxy and Golfsmith in an oversupplied market.
“The closer we got to their model, the closer our path to bankruptcy,” Kallal recalled. “They fired me and Russ in late 2004.”
The big-money guys bet wrong. 2nd Shift was bankrupt by 2007, wiping out shareholders, including Kallal and Higgins.
Meanwhile Kallal started over as Golf Stix, opening a tiny used-club shop in the original space he took years earlier on E. Hennepin Avenue.
Kallal, a University of Minnesota business school graduate, paid about $50,000 to buy 2nd Swing’s intellectual property out of bankruptcy. That included the 2nd Shift name and website, 2ndSwing.com, logo, software and a customer database of 250,000-plus names.
Kallal’s dad, Phil, was employee No. 2 of the new company, and Higgins was No. 3.
The 85-employee company expects record revenue of about $10 million in 2016. Nearly two-thirds of sales are online, validating Kallal’s original business model.
The Minneapolis and Minnetonka stores total about 11,000 square feet of space and 10,000 clubs. The warehouse and order-fulfillment center are 30,000-square feet and boast 25,000 clubs.
“The first thing we did in 2007 was to open a website,” Kallal said. “Everything we have in the store and warehouse is available on the website with 12 different photos and the attributes of each club.”
Kallal also has established a relationship with 1,000 country clubs, including a third of the top 100-ranked golf courses. When club members go to the pro shop to buy a new set of clubs, they are encouraged to go to another 2nd Swing website, Golfstixvalueguide.com, and sell their old clubs to 2nd Swing. They also sell excess inventory over that business-to-business website.
“We have a lot of high-end inventory to sell,” Kallal said. “The best new set may cost about $3,000. And very good used sets [we sell] for $700 … up to $1,300. We do complementary ‘fittings’ of all the clubs.”
A recent, high-tech, high-touch wrinkle is the 2nd Swing “tour van” mobile facilities that serve professional golfers and other top players.
“Our Tour Van Fitting Center is really not a mobile unit,” Kallal explained. “Both locations are right next to our 2nd Swing stores in a separate space.
“They are the most advanced fitting center in the world. You have a similar or better fitting than PGA Tour players receive at the manufacturers. The fitting typically would sell for up to $350 alone. It’s free with the purchase of clubs. No other retailer does that.”
That bit of owner bravado may be aimed at last summer’s opening of a PGA Tour Superstore near 2nd Swing’s Minnetonka store.
It leverages a licensing agreement with golf’s dominant professional organization, the PGA, in a former Sports Authority location in Minnetonka and is touted as the largest specialty golf shop in the Twin Cities. The superstore offers more than 20 brands of clubs and accessories, a 1,500-square-foot putting green, 12 practice and simulation bays and a PGA-trained pro to give lessons.
2nd Swing says its tour vans house ball-hitting bays that are equipped with technology that monitors swing, ball launch and more, including a “a one-on-one experience with top fitters, armed with thousands of shaft and head combinations … from all the major golf manufacturers.”
“We have the best technology … great data, including 3-D ‘motion capture systems, which create an avatar of your swing,” Kallal said. “The [profit] margins aren’t that much better, but it allows us to cater to the avid golfer. That becomes a net promoter of our business.”