An Innovative Business Solution

Approach

During the past fifteen years the landscape of the UK sporting goods industry has changed dramatically.

With the rise of the sports multiple came the decline of the sports independent and the overall decrease in the number of doors available to sell to.

Many survivors have radically altered their business model and begun to specialise or look to the power of eCommerce to open up to a bigger audience as the number of consumers walking past, and even into, their stores becomes ever bleaker.

The successful sports retailer of 2012 is a far cry from its 1990’s cousin, and yet for many manufacturers and brands their approach to their customer base has not changed.

Traditionally global brands looked to local distributors to penetrate the marketplace on their behalf and many were, and still are, successful. However there are often some inherent issues with a distributor.

Brand product ranges and global marketing messages become diluted as the distributor fails to invest in brand equity and concentrates more on their own margin opportunity.

The distributor model often fails to work from a pure brand building and marketing exercise as the distance between brand and end user becomes too far.

Distributors will often cherry pick, or misrepresent, the available product range either because they don’t see it as relevant to their local market or, more commonly, because they do not have the funds to invest in carrying the widest available product range.

Distributors who find “hot” brands often find themselves in cash flow difficulties as they rapidly expand and do not have the funds to grow with the brand.

So what’s the alternative?

Challenge 

Traditionally, the obvious alternative to appointing a distributor was to consider opening a subsidiary.

With established brands this scenario becomes more logical, however there is plenty of evidence around the UK sports industry of subsidiaries that have been opened for the wrong reasons, in the wrong place, at the wrong time and have not progressed brand sales at all.

In the current climate the investment can be a heavy one with support staff, warehousing, sales teams and senior management all pushing the break-even point further away.

Whilst subsidiaries do ensure that brand messages and product programmes are implemented effectively the brand needs to have a critical mass to make progress. In an ever more competitive market this often proves difficult and the business is unable to be flexible enough to meet changes demands.

The evolution of the Eurozone has made global trading much simpler and, with the development of improved shipping, transportation and tracking systems, progressive brands are now starting to challenge their existing European distribution models and an alternative to the distributor or subsidiary approach has emerged.

One where a manufacturer can offer their whole product range to the market, take advantage of local people with local market knowledge, ship and invoice direct into the UK and manage customer care and operational activities within their existing infrastructure – perhaps even as a shared resource.

We know it today, perhaps, as a Country Manager role. A sort of pseudo MD, Sales Director, Marketing Director, Brand Manager type role but reporting directly into the Head Office, perhaps in Europe.

Typically the sales team is made up of agents and support, operation, IT and finance staff is based in the brands global headquarters rather than the local market.

The brand ships direct from their own warehouse into the UK customer and invoices from their central location. The advantages of shared costs and resources are immediately apparent.

In 2008 Uhlsport, having previously had the distributor and then subsidiary model in place, began to investigate this approach and since that time has seen aggressive growth. Such has been the success that the Kempa and Spalding brands have now been added and Country Managers have been established in other European markets.

McDavid, similarly, has been a supporter of this model 2004 and now penetrates core European makets such as Germany, France, Holland, Belgium and Finland through Country Managers.

Complimentary

In the same way that distributors often carry a portfolio of brands there are companies, such as Solutions for Sport, that bring together complimentary partners that can be taken to market together. The difference is that the entire product ranges of all the brands can be sold and the trading relationship is direct with the brand partner.

This vertical integration is vital and ensures that the retail partner feels closer to the brand source and thus has a greater propensity to buy into the brand activities and philosophy, and conversely the brand has closer ties with its direct customer base and can liaise and react accordingly.

Without a doubt an element of the success of brands represented by Country Managers has been to listen to local market demands and react accordingly – something that is much harder to achieve through distribution partners.

The Country Manager model has the clear advantage that local knowledge is driving the sales initiatives backed up by direct brand resources and direct shipment and invoicing from the brand principal.

It seems that the future of this model looks certain to stay and that umbrella companies, such as Solutions for Sport, can bring huge advantages to allow brands to efficiently and effectively penetrate the UK whilst presenting their entire product range and protecting their bottom line.

Of course the subsidiary model is still relevant and distributors will always be around, however as the global economy continues to evolve brands should consider all options before taking the next steps to enter the UK (or any other) market and may find that there is a new model on the block which might just work

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