How the wireless consumer is shaking retail to its core

Sports retail, and in fact retail market in general, is changing at the fastest pace in history.

For many retailers and brands this is a scary proposition as one of the reasons for change is that the power has shifted to the consumer.

In the 1970′s and 80′s it was the brands that dominated but by the 1990′s retailers such as Tesco had taken control and were experiencing aggressive growth and exploiting increasing connectivity to the end user through data capture and analysis through schemes such as Club Card.

In today’s world the power is firmly in the hands of the consumer and no where was this more apparent than Christmas 2013.

Brian Hume, Founder and CEO of Martec, believes that Christmas 2013 was the first “Omni Channel” Christmas – “Consumers got it and many retailers didn’t”!

 

OMNI CHANNEL

Retailers in general reported good online business throughout the Christmas period as consumers were able to exploit multiple ways of gathering price and product information, however many retailers reported disappointing store sales – they weren’t able to join up online and store sales.

From data analysis it appears that many consumers researched in November and purchased in December.

This was fine for those businesses that could react accordingly, however it was the clicks and bricks retailers that were caught out most by this change in consumer behaviour.

Stores started to stress about poor sales and potentially heavy terminal stocks and some, such as M&S, began their sales period in early December- unprecedented in recent times – leading to margin erosion.

By mid December, having completed their research, many consumers headed to the High Street only to be confronted by long checkout queues thus driving them back to purchase online and further away from bricks and mortar retailers.

The smarter consumers learned to select products in store and order online, using their mobile devices, as “click and collect” orders where the lines at collection points were much shorter.

When it was too late to be sure of on time home delivery the consumers finally switched to buying in store..

 

THE ALL POWERFUL CONSUMER

These shifting usage consumer shopping patterns and, more importantly, the way that technology was used to adapt to circumstances caught many retailers by surprise and gives us some interesting pointers towards future customer shopping patterns.

Consumers now have the power to research product and price seamlessly whether browsing in store (through 3 and 4G as well as wifi) or at home online.

They can choose whether to have home delivery or click and collect and even, through online stores such as Net a Porter decide when their goods are delivered within a one hour delivery slot.

Drop box sites are growing all over the country giving the consumer additional places to collect or drop parcels.

 

IN STORE WIFI

Many retailers are debating the benefits of offering free in store wifi in a bid to embrace these changes and to enable consumers to have an even stronger in store experience. However the jury is out as to whether the greater benefit is for the retailer or the consumer.

From a consumer perspective free wifi allows them to research, photograph and email/upload products to friends/family/ peers for purchasing advice and, perhaps most notably, price compare.

From a retailer point of view they can understand exactly who is shopping in store, where they are in store, can communicate whilst they are in store and also reconnect once they have left the store.

The price comparison element of this issue is perhaps the most controversial and appears to be driving an increasing own label or SMU strategy for many brands and retailers where products cannot be compared and this retail price points and margins can be maintained.

Retailers are also looking at potentially rolling out digital displays where prices can be changed centrally at head office across all stores to react to dynamic online price changes.

 

TWO PRICE MANAGEMENT SCENARIOS

Ultimately this is likely to lead to two price management scenarios:

a) the consumer price checks and item that they want to buy and requests a price match from the retailer.

The sales assistant uses a wireless device to access an internal application which decides whether to price match in full or how far to go using rules relating to CRM data such as is this customer a frequent shopper.

b) the retailers agrees or not to price match and automatically sends and alert to the company pricing manager who can review whether to make this price change across the chain/region in real time through digital displays enabling them to react to price pressures whether they be on or offline.

What is clear, with either of these scenarios, is that the consumer is instrumental in driving these changes and that the speed with which retailers can react to such situations will become ever more vital in this fast paced world.

This type of approach does not need to be limited to a chain however. There is no reason why an independent sports retailer with a solid stock control and margin reporting system, cannot react in a similar way when faced with price comparison information.

Advances in technology mean ever increasing transparency and, for those that can embrace these changes and develop systems to react accordingly, does not necessarily mean the death of the High Street retailers – sport or otherwise.

Where have all the sports shops gone?

For those that have been in the trade over twenty years the memory of Olympus Sports in their flagship 301 Oxford Street store is still one that burns brightly for many of us.

That was the the era of shell suits when brands like Reebok and Ellesse were dominant, and when the UK sports trade began to really take shape.

The sports multiple began to evolve with names like Sports Division, JJB, allsports all dominant High Street players and where the regionals – Giles, Hargreaves, Warners etc – still had a role to play.

In the 1990′s these retailers grew and flourished as sportswear became streetwear and as trainers became the default footwear.

Sports Division bought Olympus with JJB then purchasing Sports Division. Allsports came and went and Sport & Soccer (later to become Sportsdirect.com) came from nowhere.

Roll forward to today and, whilst the UK sporting goods market has continued to grow aggressively the number of retailer has decreased hugely.

Two sports retailers now dominate – Sports Direct and JD Sports – and continue to set the pace but why did these two, in particular, survive when those around them failed in this growing market.

 

Own Brand Strategy

Perhaps one answer is their own brand strategy thus enabling them to create exclusivity and obtain a higher margin.

In Sports Directs case many of these brands are often bought out of receivership or near receivership allowing the business to very quickly reduce costs and leverage the brand name to the benefit of the Sports Direct business as a whole.

Many see their proposition as “discounting” however, if we look more closely at the product mix then more often than not these products are not discounted versus the competition but, critically, there is an own brand offer that offers value versus the branded product.

Even if these “branded” goods are discounted this does not have to be detrimental to the brand – if confirmation is needed here then we only need to consider that TK Maxx is the biggest global retailer for both Ralph Lauren and Calvin Kelin underwear.

As Sports Direct continue to grow revenue each year, and with profits rising even faster, there appears to be plenty of headroom for the business to continue to grow.

JD Sports own brand strategy is perhaps less clear and is focussed more in the “sports fashion” side of the industry – perhaps one of the reasons why, to date, they have survived when others, most recently JJB, have fallen.

However there are distractions in the overall group, such as Blacks and Millets, which may not help when looking to the future of this business.

Interestingly picking up on the demise of JJB the latest overall market date suggests that the massive hole that was left has now been mainly filled by the two majors however there still remained opportunities in the market as a whole.

 

In a market rapidly becoming more multichannel and international the demand for professional marketing is becoming more paramount

 

Three Key Elements to survive

Patrick Woodhall of Pragma Consulting believes that there are three key elements necessary to survive and thrive in the current sports marketplace:

a) Image

Image and saliency are obviously critical with a global approach becoming more and more relevant.

b) Accessibility

Accessibility need not be multi channel. ASOS, for example, flourishes without shops whilst Primark flourishes without online sales.

c) Offer

The offer is crucial, especially online, where service in all aspects has to be superior to the competition.

The Future

So where will we be in another ten or twenty years time?

Intersport continues to evolve a more integrated global strategy and the UK continues to get closer to Intersport International and benefit from this drive.

DW Sports is adopting an aggressive store opening programme and the trade as a whole waits with baited breath to see if Intersport Sporting Pro, a subsidiary of Matalan, can make an impact.

Decathlon continue to battle Sports Direct across Europe and may see the UK as future fertile ground.

The specialist sports retailers are finding space with clicks and bricks propositions and there are still a large number of highly successful independent retailers who continue to offer advice and service levels that sports multiples will always find difficult to achieve – these are the artisan butchers and bakers of our trade.

 

The market as a whole is still seeing grow however we will continue to lose independents as High Streets struggle to find relevance to the end consumer.

Today’s conclusion however is that it is the business that has been built on value that continues to be all conquering and, certainly in the short term, this shows no sign of changing.