Golfers in Southern Ontario should be familiar with Modern Golf, a custom club-fitting business in Mississauga that’s been around for almost 10 years. During that time, the big push in the industry has been all about custom fitting and Modern Golf has been at the forefront of that trend. Lately, we’ve been curious about the impact of COVID on golf businesses and were surprised to find that Modern Golf was in the midst of a pretty aggressive expansion. It seemed like an appropriate time for Fairways Editor Peter Mumford to speak to Modern Golf’s Managing Partner Paul Fisher and find out what’s happening.
(Note: This conversation has been lightly edited for length and clarity)
Welcome Paul. As I said when we set up this call, you guys are doing some really interesting stuff at Modern Golf. First a little background. How did Modern Golf get started? Where did the concept come from?
Modern Golf has been in existence since 2012. The idea came from Mark Elgner. The Elgner Group is behind Modern Golf and Mark is a diehard golfer. He was traveling to Scottsdale years ago and came across a business called Cool Clubs, which was in the custom golf club fitting business. This is going back to a time way before anyone talked about custom club fitting. The industry has come so far. But Mark was down there at Cool Clubs and forged a relationship with Cool Clubs’ owner. Eventually he thought, as a diehard golfer, “Hey, there’s an opportunity here,” and brought the idea to Canada where it launched it in Toronto.
There was a management team in place that has since gone on to do a lot of other things in golf. Hoyt McGarity, who was involved in Modern at the beginning, he went on to found True Spec and be involved in 8AM Golf, which is probably one of the most successful stories of the last decade in golf.
Other partners in the business have since moved on to do other things, but Modern Golf, in a sense, was ahead of its time. It was a hundred percent focused on custom club fitting, but really an incubator for a lot of other businesses that came out of it that are now pretty prominent in the club fitting space. With Canada having a seasonal climate and club fitting not being what it was today, I think Modern went through its growing periods. Definitely, as any startup, there’s wins and losses, probably a lot more losses than wins in the early days.
I would say that was probably why some of the people left to do their own thing. They figured out that there are ways to maybe do things a little bit better and that they could make an iteration to this business model that would make the business stronger. I think it’s so interesting that Modern was one of the first.
When and how did you get involved with Modern Golf?
I actually came to Modern through another business I had started here in Ontario working with a number of private golf clubs. We had about 60 private clubs we were buying used inventory from, and Modern was a client of ours as well. We built a pop-up warehouse sale business where we take all this inventory and sell it off. We had a pretty decent sized monopoly, I’d say, on the pre-owned space. And we started to accumulate a really large email list.
What did you see at Modern that made you want to take on the challenge?
In 2019, I think Modern was probably at its lowest point in the sense that most of their senior management had left to do other things and the business needed another set of eyes. I got the opportunity to come in with my business partner, Travis, and restructure the business.
The first thing we saw was that Modern was an incredible brand. It wasn’t about the club fitting or anything like that. It was just Modern meant something. And I didn’t know what it meant at the time, but it could mean whatever we wanted it to mean. What we realized when we analyzed the business was, “Man, it’s not necessarily just about club fitting, it’s what can you do with the space?” The greatest asset for Modern was is that it had this great, big, huge location.
Our background previous to golf was in commercial real estate and we came up with the idea of using the space. We introduced coaching programs and practice programs so that we weren’t solely focused on custom club fitting, and the business really started to take off. It was a bit of a pivot in the business model to say maybe custom club fitting in Canada is not the business that we really want to be in, but we’ve got this awesome brand. What can we do with the brand?
We’ve got validation from the customer and people want to come to Modern, they want to be associated with the brand. The question became how do we make this for everyone? And how do we make this a capacity play? We’re not very different than a hotel in that it comes down to how busy we can be. As long as the facility is busy and we have great atmosphere, it’s going to be successful.
That was the pivot in business model, and it allowed us the opportunity to expand. Once it really started working, it was like, “Okay, now we can take the chance at growing.”
The business had lost a lot of money previous to us and, well, you’re not going to expand a business that’s losing money. It doesn’t make any sense. So, when we were able to structure it and come up with this business model that actually made sense, it was the perfect time to think about expanding. This is something that we know works. It’s scalable in any market, any major market across the country. It was our “Okay, let’s go” moment.
“Okay, let’s go” involves some pretty aggressive expansion plans.
For sure. We added a Calgary location in 2020 and Calgary was an incredible thing for us. We added some great talent out there. Craig Dale, who’s my right-hand man in the business, is an extremely well-respected industry professional.
Southern Calgary is such a strong golf market as well. And now, we’ve got the three new locations under construction here in Ontario: Oakville, Vaughan and we’ve got a new concept store, which is going to be an outlet in the Mississauga Heartland area. In part of that outlet area, we’re going to expand on parts of my previous business, which is in that off-price world, but to continue to open the Modern brand to everyone as well.
Tell us about the off-price concept?
We understand that a lot of golfers are looking for great value and we see it as a huge category for us. I think we continue to evolve. I think we continue to expand, but it’s going to be under a very different model, more focused on the off-price, value driven golfer. The fact that we don’t necessarily have to sell custom either, that’s one thing that we saw with Modern Golf, not every customer is going to spend $1,200 on a driver, nor should they. We’ve got to show value to customers, and you can’t lie to them and say, “This $1,200 driver is right for you” if it isn’t helping them improve. We’ve also been big sellers in the youth space. We’re huge believers that demo product is just as good as new product.
Over the years, we’ve seen a lot of off-course retail shops come and go. What sets Modern Golf apart? How do you survive where others didn’t?
I don’t know if anyone in golf has figured it out to be really honest. No one’s really just printing money; the golf space is hard. Golf retail is hard. It’s really hard and very low margin. I think there’s such a problem in the industry because green grass shops don’t pay rent. Consequently, the gross margin of the equipment’s really been driven down because they don’t have the same operating cost as a traditional retailer, and now there are not that many retailers left in this space.
If there’s a template we really like, it would be Urban Golf Performance out in L.A. We took a trip out to see their space and what Mac Todd’s done out there. It’s very LA and the lifestyle of Los Angeles, but what they’ve been able to do with the integration of coaching, fitting and building, which are our three tenets, to me, it makes sense. And we’ve added a couple different iterations of the model with more emphasis on practice, and also on the retail side with demos and off-price options.
Do the manufacturers like what you guys are doing or do they see you as unnecessary?
Here’s two things. One, we’ve mandated that we want to hire PGA of Canada Professionals. That’s something that means a lot to us, and we have some deep relationships with the PGA of Canada, PGA of Ontario and Golf Ontario. I think the manufacturers respect the fact that we’re looking to hire PGA professionals, pay them well, create career opportunities that allow them to be in the industry and not necessarily have to work at a golf course.
I think the manufacturers like our brand. They know that we’re a hardworking team, we’re honest and we’re authentic. I would say we’re pretty blue collar. My start in golf was starting that distribution model of warehouse sales and pop-up sales. We would rent parking lots and do pop-up sales in parking lots.
We’re still very, very blue collar and roll up the sleeves and get the work done. I think the brands really respect that and that’s from the top down. So, we have a lot of support. It’s overwhelming the support that we get from the brands. And I think, to that point, they need a number two. Golf Town wiped out most of the mom-and-pop retailers. The Canadian golf retail climate needs a number two. It’s healthy for there to be a number two. And I think they are respectful of the fact that we’re taking a lot of risk right now. We’re going through a pandemic and we’ve got three stores under construction. That’s pretty stressful. They look at that and they say, “Wow, good on you guys. We thank you for doing that. We want to be a big partner of yours.”
That speaks to the traditional relationship between a brand and a retailer but in 2021, the OEM’s put a lot of effort into driving digital traffic directly to their own websites. Obviously, they want that traffic so they can sell them their clubs. You guys are essentially brand agnostic. So, I was wondering in that respect if they saw you as somebody that might be steering a potential customer away from them?
It’s definitely a concern. When we look into our crystal ball, we recognize direct to consumer is a pretty big problem in the industry. We would be ignorant to think that it’s not coming. I think what PXG is doing right now is super disruptive. I get it. Bypassing steps in the supply chain is more profitable. But I think it’s dangerous, I think it’s really dangerous. I fully believe that at the end of the day brands realize that if it was apples to apples testing, no one would ever come out with 14 clubs from the same brand. It would rarely statistically happen. They understand that being agnostic is important, and I think that that’s always going to be something that allows a Modern Golf to exist, the fact that we’re agnostic.
But there’s no doubt about it, there are major changes coming. It’s a bit of an arms race, I think, between all the brands as to what exactly they do, what they can get away with online before all of us retailers start putting up our hands and saying, “This isn’t working for us.”
I think just as easily, a Modern Golf and a Golf Town could get in a room and say, “We don’t like what’s going on here. We’re not selling your product anymore.” That’s the risk on the other side as well. It’ll be interesting. I totally get it, it’s a supply chain thing. E-commerce is super on point right now. And if you can keep the margin, I get it, but golf is one of those weird things. It’s both suppliers going direct to consumer and still having retailers. There’s not a lot of industries that are like that. There are probably some big conversations to be had in the next couple of years as this all shakes out.
When clients come to you, do they come in predisposed to a specific brand or do they come in with an open mind?
I think it’s about a 50/50 split. I think the equipment business reminds me a lot of the car business, where there’s definitely loyalty built into certain brands. If you’re a Titleist diehard, Titleist player, it’s pretty hard to shift some people away from that. And I think it’s the same with cars. People build this attachment to a certain brand; it creates validity and trust. So yeah, I think avid players are probably the ones that are more prone to having built up trust within a brand, whereas the new golfers or maybe the recreational players that are getting into it a little bit more, they’re probably the ones that are a little bit more open to wanting to try everything. And it’s still very, very rare, about 1% of the time, that we see someone and be like, “We want 14 of the same club.” It’s truly very, very rare that that would happen, but there’s definitely a predisposed loyalty for some people.
Tell us a little bit about the coaching side of the business.
As part of our strategy to hire PGA of Canada Professionals our thought is that a PGA professional is a trained industry person. They’re just as apt to be able to fit equipment as to teach lessons. We have two instructor models.
One is our team that fits and teaches. They’re probably a little bit more catered to new golfers, and we are seeing our lesson program is appealing to a lot of new golfers. It was actually pretty amazing to see how many people came into the program this past year. I wouldn’t be shocked if, from an academy perspective, we may be, outside of GolfTEC, the largest academy in the country based on lessons taught. It was incredible the growth that we had. But a lot of that was driven by people that were relatively new to the game. So, for us, it makes our team more functional, the fact that they can teach in the winter and then fit in the summer. It just it makes them dual purpose.
The second instructor team is one focused on avid players and high-performance junior players. We have that as an avenue that’s available to golfers as well. We want to be able to provide options because not everyone wants one thing. You almost have to have a menu when it comes to this type of stuff. We’ve done a good job with that. Our avid player instruction team, it’s elite. We’ve got instructors like Sean Burke, Chris McClure, Brad Kinvig and Mark Brennan. They are a couple of guys that were previously at Glen Abbey Academy. We’re actively searching for a female instructor to come into our business. We think that there’s huge opportunities in the women’s space, and we want to be very active in that space to design programs to help grow the game.
It seems to me that Modern Golf is what pro shops were 30 or 40 years ago, before they got killed by Golf Town. It’s like the old style with modern technology applied to it.
We might need to use that as a tagline. I like that. I think you’re right. The model wasn’t working. The reality is that what was previously done, it wasn’t working. Times change and you have to be open to change. It’s still Canada, it’s not a huge market. There’s a lot of diehard golfers, but it’s not the US where you’ve got year-round climate in some areas and a massive population. We really had to look at something that leveraged some of the assets that we had in place. We’ve got these little orange machines, these TrackMans. They are great assets, so we want to make use of them. They’re not cheap and so we need to use them. That’s been the model, to just use what we’ve got.
The stats coming out for 2020 show that rounds were way, way up in just about every aspect of the game. Whether it was private clubs, public courses, short courses, whatever, everybody had full tee sheets pretty much all year long. And now the sales stats for equipment show that 2020 was a huge increase over 2019 and ’18 and so on. Does your experience indicate that the increases were from new golfers or was it the same avid golfers just playing more and investing more in their game?
Last year was probably twofold. It was probably some level of retail therapy for avid players that they weren’t spending as much in travel and eating out and things like that. They were working from home and had more access to being able to sneak out and play. That’s definitely a percentage of the growth. If I had to guess, I’d say it was probably about 30% of the growth. But from a retail sales perspective, the numbers are astronomical in growth for most retailers year over year. That’s got to be attributed to new players, or people coming back to the game. I definitely think there was an element of people that probably left the game after the Tiger boom, potentially even young professionals that got super busy with their careers and decided I don’t have time for golf, or maybe I’ll just play once or twice a year, very recreationally.
Work from home changed everything though. It gave so many more people the opportunity to come back to the game. I think a lot of people realize golf is an incredible walk in the park. There are so many mental health benefits to golf, and it was one of the few things we could do to see our friends last year. You get out on the golf course, you could socially distance and it was in a time where there wasn’t a lot to be excited about. Golf was actually the one thing that you could feel relatively okay doing and seeing people because you were outside, and you were distanced. I think that created a surge of demand on the retail side because people, they just realized that it was fun, and it meant something to them.
Whether the game can keep that up or not, I’m not sure. I don’t think it does completely. My guess is at the end of COVID, golf will be up 30% over 2019. It’s going to slow a bit because work from home won’t last forever. When people have to go back to the office, it’s going to hurt rounds played. It’s going to go back to some semblance of 2019. But I think there’s a lot of people that have decided, “This game is pretty awesome, and I really liked the social element of it.” And I think golf is doing a better job of saying it doesn’t have to be so serious, that there is an entertainment element to golf. Canada doesn’t have TopGolf or anything like that, but it doesn’t have to be so serious. There is a counterculture movement within golf realizing it can be really fun and really social.
I agree. And once COVID is behind us, you’ll see the social element increase even more. But on the flip side, you’ll also see people able to do non-golf things that they haven’t been able to do during the pandemic.
Yeah, and people will go back to softball or soccer, other sports. There’s no doubt about it. But I do strongly believe, I think we’re going to keep a lot of people. I think one of the biggest problems is actually that golf maybe was too busy last year. If you’re new to the game and you can’t get a tee time for a month, that’s a pretty big deterrent. And I don’t think that that was a problem as much maybe outside of Toronto, but for Toronto, it was a bit of a problem. Going to a driving range like Centennial and having to wait 30 minutes to get a stall, people are going to get tired of that. So maybe a reduction is actually a little healthier than running at what it was all of last year.
Finally, where do you see the golf retail business 10 years from now? How do you see it evolving?
I think there’s going to be some green grass continue to leave retail. I think that there’s definitely going to be an optimization of resources. There’s going to be more people leave the industry in terms of PGA professionals. Unless salaries start increasing, I think the PGA’s got a problem on its hands right now…it’s hard to earn a livable wage right now for a lot of people, particularly in Ontario.
I think as a result of that, there definitely will be less resources at some green grass locations, so that means probably some green grass shops shrinking their operations on the retail side. I see some outsourcing of third-party services, similar to what we’ve done at Country Hills in Calgary, but also potentially a company coming in and saying, “We’ll merchandise all of the pro shops across Ontario.”
It’s not necessarily a job that a PGA professional needs to do. There could be some level of merchandising that’s outsourced. So, I think the industry will continue to optimize and become more efficient. I think that’s just the way the world’s probably going. I think e-commerce will probably continue to grow, but e-commerce is definitely driven by off-price options.
I don’t believe that there’s going to be this overwhelming growth in people buying custom equipment online. People want to get fit. It’s part of the experience of buying new equipment that you go through this fitting process and there’s some level of validation. So, I think traditional brick and mortar with a bunch of golf clubs sitting on a rack, I think that’s a pretty challenging business going forward. I think that’s going to continue to shrink.
On the experience side, I definitely think for people in the custom space, it’ll probably continue to grow. There’s a lot of people out there that are doing great jobs of, from a media standpoint, growing the business for everyone, to be honest. The more and more content that’s out there saying go get custom fit, it’s actually just growing everyone’s business. So that’s a good thing.
But ultimately, I see the industry a lot healthier. You’d probably agree with this, 10 years ago, anyone in the golf space was probably thinking, “Maybe I should get out.” I think now, for the people that stayed, we’re on a 10-year run that’s going to be really good.
Paul, thanks very much for your time today and for sharing your insights.