The Tac SHAC story

Very few entrepreneurial success stories are of ‘greying entrepreneurs who enter a highly regulated, politicised industry that has shrunk by 95% in the past 10 years and quickly grow a successful business’. So when you find someone who has managed to do just that, you need to tell the story…even more when the story involves lifelong passion, a husband and wife team, and a business that deals in military-style guns and ammo.

Enter Paul and Lynette Oxley, owners of Tac SHAC – a Johannesburg-based business that has become very successful at selling what are known as ‘tactical’ weapons – typically high-end semi-auto pistols, semi-auto shotguns and semi-auto rifles/carbines that are the civilian versions of military weapons systems.

Guns and the right to bear arms is an issue that divides people; it’s a sharp fence that doesn’t bear sitting on. So while there may be readers who don’t support the legal right of a person to bear arms, I hope to tell you a story of how an entrepreneur enters a really tough industry and succeeds – please take what you can from the Tac SHAC story.

To set the scene, the South African gun industry has changed a lot over the years, with regulation and politics playing a major role. In the apartheid years it was easy to license a gun (for the white population) and all young white males went through intensive firearms training in their 2 years of national service. When apartheid fell and people feared a civil war, the arms industry boomed: guns for self-defence are very much a fear driven purchase and the white-male market had both the training and in many cases, the fear.

Post the countries surprisingly peaceful 1994 elections and the new ANC government gradually got on top of legislation, making drastic moves to regulate the firearms industry through the Firearms control act of 2000. Implementation started in 2004 and not yet been finalised. This new act made it much harder to become a licenses owner of a firearm, requiring all firearms owners to pass a competency test in knowledge of the law and in the application/use of each type of gun they desired (e.g. pistol/shotgun/rifle/self-loading rifle). In addition to this each gun must be individually justified and licensed, your safe physically inspected and background personality checks done. The process takes months even when things run smoothly. The Firearms control act also put far more stringent requirements on gun dealers, firearms instructors, and the industry as a whole. The challenges of implementing the act have been acknowledged by the Police Ministry who admit that no all systems or procedures are yet in place.

Results of the new legislation were disastrous for the industry: around the millennium, it was estimated that there were over 2000 gun dealers in South Africa. By 2004, when all existing gun owners were required to begin re-licensing their weapons, the industry was in tatters and this number was down to ±800. Nearly a decade later, 90% of those are gone too and now only 70-odd gun dealerships survive. For anyone whose industry exists at the whim of government legislation, the speed of this change bears some thinking about.

Estimates suggest that gun owners who simply couldn’t be bothered to go through the new licensing process handed in over 800 Thousand guns to the police for destruction, without financial compensation and to avoid criminal prosecution. The deluge of applications for renewal by existing owners swamped the systems and meant that almost no new licenses were issued for several years. The uncertainty and delays killed the industry. Over 10 Thousand people working in the firearms industry lost their jobs. Local gun manufacturers almost all closed down.

The few gun shops that survived did so by rapidly diversifying away from firearms and into knives, mace, air-rifles, bows and arrows, and into outdoor gear. Speciality shops died – very few businesses have deep enough reserves to survive a few years of almost zero sales, and while hunting has loyal followers it’s already a highly seasonal business with practically zero demand outside of hunting season.

So that’s the scene over the last decade: an industry absolutely destroyed by a change in legislation. Why then, would Paul and Lynette Oxley decide to enter the market, and how have they made such a success?

The Tac SHAC story starts with Paul – whose parents didn’t have guns but he grew fascinated by them, to the degree that he sold his racing bike to buy his first gun while still at high school. Then came military service after which he started studying law and then philosophy at university, and invested some savings into a gun shop. Those savings disappeared when sanctions effectively blocked imports from the USA and the gun-shop closed.

Along the way Paul met Lynette and he sold some guns to pay for her engagement ring. At university Paul started a shooting club and offered training courses to staff and students alike. He got involved in the founding of SAGA (the South African Gun Owners Association) and became active in the administration of sport shooting in SAPSA (The SA Practical Shooting Association). Over the years they both maintained an active interest in sports shooting, but worked in other industries. Skip forward 20 years and Paul and Lynette are still active sports shooters. Paul is now a main mover behind GOSA (the Gun Owners of SA) and following an attempted armed robbery at their home decide to pivot from their African safari tour-operation business into the world of tactical firearms – something that is clearly a lifelong passion for them.

Whilst both Paul and Lynette share an almost evangelical belief that society is best served by a well-armed and trained civilian population, and they live out their belief by drawing ‘non-traditional’ sectors into sport shooting, it is Lynette who is often sought out by would-be gun owners precisely because its so rare to find a lady so immersed in shooting and the gun culture.

Now back to the market: As opposed to the USA market, where there are ±1.5M background checks per month (i.e. roughly 18M new gun licenses being issued each year), the total licensed gun owning population in South Africa is around 2M people, half of whom have 1 gun only and the others on average have 2, giving 3M licensed guns in total. (Recent research suggests another 5-10Million unlicensed guns in SA, which is far more the worry). The type of long guns that Tac SHAC sell are mostly semi-automatic (or self-loading) – each pull of the trigger fires the gun that ejects the spent shell and reloads the weapon by itself. To get a license for these guns is not easy: in addition to the normal competency and license application you must have and maintain what is known as a ‘Dedicated Sports’ or ‘Dedicated Hunter’ status. This means you have to prove regular participation in sports shooting or hunting and be certified as such by an accredited industry body. The process isn’t expensive but it takes many months to get right: if you want a semi-auto rifle or shotgun in South Africa you can get one, but you’ll need to be patient. A rough estimate is that there are less than 5 Thousand dedicated sports shooters in South Africa, most of who will have a pistol, shotgun and rifle. In other words, Tac SHAC entered an industry that had been destroyed by legislation and then, when almost every other gun shop had survived by diversifying into a wide range of outdoor gear, they specifically targeted the smallest, most hard-core section of the industry.

It’s a counter-intuitive strategy that has served them well. Tac SHAC focus on the core, dedicated sport shooting market who can get a licenses for the kind of guns they sell and by the vary nature of their sport and far more frequent buyers of ammunition, which is about half of Tac SHACs business. In other words, each customer is more valuable, by far, than the typical gun owners who will never practice fire his only gun. Sports-shooters will blow through hundreds of rounds in a weekend, (whereas hunters will do less than 10) and will spend R10 Thousand or more on a pistol, and R20 Thousand or more on both a rifle and shotgun. Not as much as a typical cyclist spends, but enough to build a business.

Tac SHACs sniper-like focus on a market segment hasn’t been all they’ve done right. Paul subscribes to the philosophy of being “long-term greedy”. In other words they keep margins down and focus on volume not mark-up, to the degree that other dealers have described them as being the ‘Robin Hoods’ of the industry. They’re able to support the lower margins by operating out of an owned house in a residential suburb, rather than rent expensive retail space. Their active role in promoting the industry means strong industry contacts, good relationships with regulators and suppliers, and this has translated into a strong foundation for Tac SHAC. Marketing is almost entirely word of mouth – Paul and Lynette both spend a lot of time on the shooting range, mixing it up with their customers, drinking coffee with them back at the shop. Their marketing budget is spent by sponsoring shooting competitions and clubs, across different sport-shooting disciplines across the country. Rather than a fancy website they simply have a Facebook page. One with nearly 800 likes…which is probably 15% of their market…which is simply phenomenal.

Tac SHAC also sell to private security companies and anti-poaching units who also need semi-automatic weapons. These B2B sales amount to about half of their firearms business and help them secure the volume that keeps their prices lower in the consumer market, and keep relationships with the importers more exclusive. Lastly, being in a highly regulated industry has some benefits – the requirements to store and sell weapons are tough to comply with and the same legislation that killed the industry for most now acts as a barrier to entry for anyone thinking of rushing in.

So, in summary, the Tac SHAC story is one of a couple who believe in guns and their role in society, who are active in the sport, entering a market that has been destroyed by legislation in the preceding decade and then focusing on a very particular niche. With strong industry relationships to ensure supply and a low cost approach its meant that have the stuff their market wants at an attractive price. On top of this they marketed via direct relationships with a very passionate bunch of dedicated sport-shooters (who are a small but very valuable market segment)…with some fantastic success.