Hindsight from The New Gun Week February 1, 1998
The 200,000 Missing Gun Salesmen
by Joseph P. Tartaro
For years, a debate has raged in the American firearms community concerning the number of federal firearms licensees.
Many established, full-time, storefront dealers claimed that reducing the number of dealers through higher costs for licenses would help improve and professionalize their retailing of guns, ammunition and related products. Eliminating what they called "basement bandits" and "kitchen table dealers" would, they argued, assure the success of those who invested their savings and full time in the gun business. Those who wanted to reduce the number of dealers believed that the part-time dealers were somehow illegitimately "stealing" a huge share of the total market.
On the other side, the average independent, part-time small FFL, supported by most gunowners, argued that there should be no government tinkering with the market. Further, they resented attempts by other gun merchants to encourage the government to become even more restrictive about the legal commerce in firearms. In the minds of most gunowners, attempts to reduce the number of FFLs were a direct assault on the right to keep and bear arms.
The anti-gunners didn't help. They argued that federal firearms licenses were handed out too easily to anyone. To prove it, people like Josh Sugarmann, honcho at the anti-gun Violence Policy Center, applied for and was issued an FFL for his address in Washington, DC, where there are no legal transfers for any guns not registered before 1976. With his FFL, Sugarmann regularly attended the SHOT Show, not to buy guns but to get new ideas on how to ban them. Sugarmann and other anti-gunners, joined the storefront dealers, in claiming that the part-time FFL did not have regular business licenses, evaded sales taxes and violated zoning laws.
This is not to deny that the Bureau of Alcohol, Tobacco and Firearms (BATF) was extremely liberal with the issuance of such licenses to almost anyone who applied for one, seldom spending any time checking out most people who filed an application. Similarly, there is no denying that a few people obtained FFLs to get guns in compliance with federal law, but sold them in violation of state laws in such places as New York City.
But 99.44% of the FFLs were always scrupulously legal, and continue to be. And many of the others were frequently prosecuted for minor errors and paper violations. Given the reputation of the BATF in some high-profile cases during the 1970s and '80s, the average person would have to be pretty stupid to intentionally violate the law.
During this on-again/off-again debate, I opined in this column that if the storefront dealers had a complaint, it was not with the part-time FFLs, but with the mass merchandisers, who because of their buying power often bought guns below wholesale prices and undercut everyone's price. In those days, hundreds of thousands of "kitchen table" dealers accounted for only about 15% of the total firearms sales in any given year. The other 85% of sales was done by between 18,000 and 25,000 storefront dealers, including the mass merchandisers.
The seemingly large number of FFLs was a direct result of the 1968 Gun Control Act's ban on mail-order sales of firearms. Countless gun collectors, gunsmiths, clubs, related businesses and enthusiasts filed for and received FFLs in order to legally buy and sell guns and ammunition. There were a lot of legitimate, legal reasons for people to obtain a license to trade in guns, even if it was only a few each year. A few years ago, while talking with an elderly surgeon who did not own a gun, I was told that he had an FFL because he sponsored an Orvis dealership for his two sons in another city and wanted the license in case a customer wanted to order one of the pricey Orvis shotguns.
GCA '68 By-Product
Created and encouraged by GCA '68, the number of FFLs has always been related to some government action. When the ban on mail order ammo sales was lifted by the 1986 Volkmer-McClure Firearms Owner Protection Act, many small delicatessens and gas stations in hunting country allowed their FFLs to lapse because they did not need them to sell the few boxes of ammunition they moved each year to hunters in short supply. This reduced the number of FFLs for a while.
But by 1993, when the Brady Act was passed and the Crime Bill was about to be enacted, there were 287,000 FFLs. (These are not just retailers; many licensees are manufacturers, importers, distributors and gunsmiths.) Since 1994, when the BATF was ordered to be sure that every FFL was in compliance with every state and local law, the number has steadily declined. Maybe the photographs and fingerprints discouraged some who were uncomfortable with having to facilitate so great an invasion of their privacy, and maybe the increased cost of a license, up threefold for renewals and much more for new licenses, also made others reach a point of diminishing return.
However, it appears that the single biggest negative impact on the number of FFLs was the requirement that every licensee be in compliance with local zoning regulations. That requirement, which gave a lot of local government anti-gunners and fraidy-cat ward healers a chance to sound tough about guns, has had the most devastating impact on the part-time dealers.
At the end of October 1997, according to the December 1997 issue of SHOT Business magazine, there were 79,224 basic dealer FFLs in the US. That's less than 30% of the total in 1993.
There is no denying that normal wear-and-tear attrition was also at work. Many of the gunowners and dealers who had come to the shooting sports in the boom years after World War II and Korea were dying off. Many others dropped out of the business because the firearms market seemed to go bust after the big buying frenzy at the end of 1994 and beginning of 1995. Worn down by the constant battering in the general media, the disapproval of neighbors and friends, and alarmed by the antics of President Clinton, Sen. Diane Feinstein (D-CA), Sen. Frank Lautenberg (D-NJ) and Rep. Charles Schumer (D-NY), and their narrow successes in Congress, Americans first bought everything that shoots in unprecedented volume, and then seemed to walk away.
What followed has been a long slump in the firearms market. And some observers in the industry attribute some of that slump to the loss of over 200,000 "part-time" dealers, the ones who previously never accounted for more than 15% of total sales.
Some insightful comments on the overall impact of this huge reduction in dealers was contained in the SHOT Business article previously cited.
"The reduction in the number of FFLs has had no positive impact on our business and we never thought that reducing the number of FFLs would help us," Mike Sherman, who operates PMS Firearms in Salisbury, NC, is quoted as saying.
Bob Steger, president of RSR Wholesale Guns, added to the comments of Sherman and others.
"It doesn't surprise me that retailers aren't realizing increased sales. Storefront dealers weren't reaching the customers who bought primarily from private FFLs and they probably still don't see those customers," Steger told SHOT Business.
"When we lost 200,000 FFL holders, we also lost 200,000 salespeople and that has affected some segments of the industry negatively. If someone bought a gun from a friend with an FFL, they still needed ammunition, optics and accessories."
Thus it appears that those who thought they'd have more business when the "basement bandits" and "kitchen table dealers" were driven out have been proven wrong. Clinton made their wish come true, but now it seems a nightmare.
"I think that the decline in FFL holders was a factor in the overall sales decline during the past two and a half years," Bob Scott, vice president of marketing for Smith & Wesson, told SHOT Business. "In many ways, these FFL holders were sales agents for individual companies and for our industry. We have lost that positive impact."
The gun business has suffered at the hands of government intervention as have many other industries. A good example is the phone business. Government promised to help the consumer and ended up making things worseŚmore complicated, more confusing and more expensive. Cable companies are another.
People who want to restore vigor to the firearms industry are going to have to develop new marketing strategies, new products and new sales techniques. Most of all, they are going to have to work together to create a bigger pie for all rather than merely compete for their own larger slices of a smaller pie.
The New Gun Week is published three times a month by the Second Amendment Foundation (SAF) on the 1st, 10th, and 20th. Hindsight is a commentary written by SAF President and Gun Week Executive Editor Joseph P. Tartaro. This commentary may be reprinted so long as credit is given to the author and the publication. For more information or to subscribe, write Gun Week, PO Box 488, Buffalo, NY 14209, or call 716-885-6408 Monday through Friday 9 a.m. to 5 p.m. EST, or inquire on Compuserve to John Krull, Production manager-JohnSAF@Compuserve.com or firstname.lastname@example.org
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