Every industry has its own peculiarities. The travel industry is seasonal. The automotive industry runs on planned obsolescence. The computer industry hinges on technology. The fashion industry thrives on design.

What are the characteristics of the firearms industry?

The answer is at once complex and simple, but more involved than I can address in a single blog, so if you’ll follow along with me, we’ll take this in stages and look at the fundamentals of exactly what distinguishes the gun business as an industry.

We’ll start by looking at the industry in a broad historical view and then drill down to look at the fundamental aspects of the industry that make it unique. These basic component – product development, sales channels, marketing, customer service, distribution and brand loyalt – are common to every industry, but they combine in a unique manner in the shooting industry. We’ll look primarily at the U.S. firearms industry, but to a lesser extent we’ll touch on foreign gun companies as well.

Let’s get started with a basic overview.

The American gun business is a mature industry. A mature industry is one  that has passed through the emerging and growth phases which are characterized by rapid product development, leap-ahead innovation and extremely fast sales growth.

A mature industry is characterized by slow growth and stable earnings, although some segments may be declining (hunting firearms) while others may still show signs of a growth phase (handguns).

The gun business has largely shaken the tree and dropped the also-rans back when it was an emerging industry in the early to mid 19th century. Henry (made by the New Haven Arms Company) fell by the wayside, Winchester survived. Volcanic Repeating Arms petered out while its founder, Horace Smith and Daniel Wesson, hit a lick that lasted with Smith & Wesson. Colt made it, L.C. Smith didn’t.

Typical of a mature industry, the U.S. gun business is dominated by relatively few companies with established market shares. These companies compete primarily by poaching market share from their competitors (Smith & Wesson making 1911s, Remington making AR-15s) as opposed to opening untapped sales channels or developing new revenue streams. Why? Because the customer base is fixed or, in some areas, actually contracting.

Although it begs the obvious, the firearms industry is regulated by the government, which in itself is an impediment to free-market forces and particularly to opening new sales channels.

Want to export to the four fastest growing economies in the world – Brazil, Russia, China and India? Guess again. State department clearances are required and ATF export rules have to be followed. The costs of regulation are both overt (an 11 percent federal excise tax) and hidden (record-keeping expenses).

Finally and perhaps most importantly, the product that the firearms industry manufactures is highly durable and exhibits an inverse product life cycle in which the longer the product lasts, the more desirable it becomes, hence the Ruger Collectors Association.

Most goods go through a conventional life cycle in which a product eventually saturates a market and then declines. Not so the gun business. The 1911 pistol is nearly 100 years old and is arguably the most popular model variation on the market today. Guns that were produced 25, 50, even 100 years ago are still functional. I’ll be hunting this fall with a Winchester Model 70 that dates to World War II.

Stay tuned for more blogs that look at other fundamental aspects of the gun business as an industry. We can call this series Gun Business 101.

Industry Insider