Paintball finds lifeline at mass

Discount Store News, Sept 6, 1999 by Mike Troy

Pursuing, attacking and ultimately capturing that which belongs to an adversary is a human behavior once called upon for day to-day survival. The continued existence of those deeply rooted instincts may help explain the popularity of paintball, a leisure activity with a small but growing group of devotees.

The number of people playing paintball has surged to more than five million in just a few years, and more growth is projected as a broader base of participants take up the activity and more playing facilities become available.

Access to equipment is also helping increase the sport's popularity, and Wal-Mart and Kmart can take much of the credit. Roughly two years ago, both retailers began stocking an assortment of paintball markers, protective gear, paintballs and other accessories, and subsequently the availability of gear at mass market retailers gave paintball increased exposure and spurred increased participation. Previously, participants relied upon catalogs and small specialty shops for equipment needs.

"Initially, paintball was looked upon as a little flaky, but it has become pretty mainstream," said Tom Doyle, vp of research with the National Sporting Goods Association. NSGA counted 3.7 million paintball participants in 1994, but hasn't counted participants since then. Doyle said paintball participation is again being tracked this year and data will be available next year.

The Sporting Goods Manufacturers Association for the first time in 1998 tracked paintball participation and determined there were 5.9 million participants. "It was something we were hearing more and more about so we started keeping track of it," said SGMA spokesman Mike May. Despite the recent growth surge, and the real possibility that paintball will end up as yet another sporting goods fad, May and others believe there is still more growth to come. "I don't think it has peaked," he said. "It will continue to rise."

A study supporting that position was conducted by the Little Rock, Ark.-based research firm Flake-Wilkerson Market Insights. A spokesperson for the firm said the results couldn't be released because it was conducted for Brass Eagle, the largest supplier of paintball equipment. But Brass Eagle ceo Lynn Scott stated the following in a study published in early July when he sought to quell investors' concerns that a second quarter sales decline at the publicly held company might be an indication of weakening demand for paintball: "Participation rates will increase 20% to 30% per year over the next few years, and total retail sales for paintball product will reach approximately $750 in 2001 vs. $450 million in 1998."

Brass Eagle's sales last year were $75.1 million, compared to $36.1 million in 1997 and $13.8 million in 1996. The company's sales have grown rapidly, thanks to Wal-Mart and, to a lesser extent, Kmart. Wal-Mart accounted for 63% of Brass Eagle's sales last year and was named the retailer's sporting goods vendor of the year. Kmart accounted for 15% of Brass Eagle's sales last year. The previous year, Kmart sold more Brass Eagle merchandise than Wal-Mart, accounting for 31% of the company's sales, compared to Wal-Mart's 28%.

The shift in the company's sales mix illustrates what can happen when Wal-Mart decides to emphasize a category. The retailer promoted paintball during the fourth quarter last year with a pallet display produced by Brass Eagle. Meanwhile, Kmart lost three key hardlines executives, Bill Anderson, Dan Head and Jim Potter--all early proponents of paintball.

Wal-Mart remains committed to paintball and has devoted at least 8 ft. of space even m smaller stores. Kmart's position, on the other hand, is less clear. Brass Eagle didn't specifically mention Kmart as the reason for a 10.7% second quarter sales slowdown. Instead, the company blamed "a shift in the timing of product expansion at certain retailers."

Brass Eagle's share price suffered, and since the success of such a company serves as a barometer for the entire paintball industry, uncertainty was cast over future growth of the sport.

Some retailers who cater to outdoor enthusiasts and extreme sports participants don't even bother with paintball. For example, 53-unit Seattle-based Recreational Equipment Inc. doesn't stock paintball gear at its stores. The Gander Mountain chain, with 30 stores in the Midwest, doesn't stock paintball gear either. However, the Galyan's chain emphasizes many of the same outdoors categories as REI and Gandor Mountain, and it had a sizable paintball department at a new 122,000-sq.-ft. store in Atlanta. The retailer positions the category as a destination department, and high-end markers, such as Brass Eagle's Rainmaker, were enclosed in a wood and glass display case similar in style to a vertical case in the center of the store's hunting department.

The spotty approach retailers take with paintball and bellwether Brass Eagle's weak second quarter have deterred analysts who follow the manufacturer from counting on future growth. "The weakness of the stock reflects peoples' concern about whether paintball is a fad," said Justin Mauer with McDonald & Co. "People want to know that [Brass Eagle's second quarter] is an anomaly."