Paul Sherratt of Solutions for Sport takes a closer look at the pitfalls facing any new entrants into sports retail.
As the cycle begins again and the sales meetings and trade shows come round I find myself on the road again visiting sports shops throughout the UK & Ireland and pondering what does the future hold for our industry?.
I’ve said many times before in this column that things are changing faster than they have ever done – the bigger are getting bigger, the specialists in many areas are doing well but the “all things to all people” stores are slowly dying – and I seem to be faced more and more with sports shops who are getting further and further away from what consumers except to find on the High Street.
Poor shop fronts, merchandising, point of sale, signage, ranges and more leave many of our sports stores seemingly stuck in the 1980’s, or best the 1990’s!
Of course, its not true for all, but I began to ask myself what does it take to open a sports shop in the UK & Ireland in 2015, what mistakes should one avoid and what best practice can be employed.
At first site there are a number of core areas to consider
Will you be online, bricks and mortar or both?
Understand that if you are launching a transactional website that this needs to be treated the same as if you were opening a physical store.
Time and time again I see retailers investing in websites only to be disappointed with the results when it is complete. The analogy is simple – you can build the best online store in the world with the best product range and prices but if you don’t know how to run it or don’t drive traffic to it it is the equivalent of opening a sports shop if the middle of a field. No one will visit, No one will buy and you will have no business.
Likewise if you are opening a store consider the area. Where is it. What are the local sporting amenities like?
Will you specialise? If so which sport(s)
Its clear the in the past few years the sports retailers that have specialised seem to be generating strong revenues.
Sports such as running, triathlon and cycling have all seen steady growth and sports participation trends seem to indicate a shift from traditional team sports to more individual sports.
Prospective sports retailers could do well to take note of these trends and establish where the future lies, whether there is still some growth opportunities or whether there is a new trend just around the corner.
Don’t underestimate the power of the multiple.
If you have a sports multiple on your doorstep look for a point of difference – alternative brands and different product ranges are a starting point. You will always find it difficult to compete on price and therefore don’t be tempted to go head to head – you will never win.
Instead focus on service and breadth of range and look to build a loyal customer base based on these stronger business development principals.
Consider a buying group?
As the industry consolidates so too do the buying groups. With STAG and Intersport now the only remaining UK & Ireland buying groups any new sports retailer has a clear choice.
Both offer support to in a variety of areas from preferential credit card rates through to merchandising and more.
Yes they have selective criteria for new members and both will consider the financial robustness of your business – admittedly if you are a start up this is something that is difficult to gauge if – however both buying groups will also happily engage in dialogue and may well provide invaluable advice.
Do you have links into local community?
If you are considering opening a high street store then consider closely where your audience are.
If you are providing a specialist offer then make sure that you have, or can create, close links with that specialist community i.e. if you are a racket specialist engage the local tennis, squash and badminton clubs or as a running store link into local running clubs.
These consumers will be the back bone of your local support.
Consider your specialist sports store as the artisan butcher or baker. If you can provide great product ranges and superb service then price becomes less of an issue.
Go that extra mile.
What else can you bring in to encourage the consumer?
Perhaps something to test the product such as a treadmill or gait analysis machine, or an added value investment such as a stringing and printing machine etc.
The more you can offer and the stronger the point of difference the more successful you will be.
How will you merchandise
Todays successful Hight Street stores focus on directing the consumer to core store areas and into core products.
Clever use of shop fittings, signage and point of sale is the key to this – look at some of your own favourite stores and try and apply the same rules.
Make sure you keep things clean. Less is more. Give the consumer clear sign posts as to what you are what you sell and what areas of the shop cater for
How will you connect? Social Media? Website -eCommerce or not
Multiple touch points are key. You customer will expect to find you online so you need to consider a website (transactional or not), your social media presence, local sponsorship/activity, perhaps even local press or radio.
The more relevant touch points you have the more successful you will be.
Use as many resources as you can to research the market.
Read the trade magazines, go to the trade shows, don’t be afraid to pick up the phone – you’d be amazed how much advise you can glean from such activity.
Don’t give up.
Do I believe that opening a new sports store in 2015 is viable? – theres no doubt that there still opportunities out there both and and off line, however the days of the slightly disorganised, old fashion, small and dark sports shop is over.
The modern day consumer expects an environment where they can interact and connect with the retailer and his product range.
He or she does not want to be wading through rows and rows of apparel on clothing rails and to unsure which area of the shop they can find what they are looking for.
Less is more is undoubtedly the current trend and if any new entrants into our industry (or any existing ones for that matter) can embrace this then there may well be a sounds future for them in the sports trade.
As I sit here enjoying my summer holiday I allow my mind the chance to wander a little.
I’ve just read the latest results from JustEat – The company, which listed on the London market in April of last year, said that sales had increased 62pc to £157m as the company processed takeaway orders worth more than £1bn for its 8.1m customers last year.
So whats’ that got to do with the sports trade I hear you ask.
Well, the core issue that JustEat addressed within the fast food market, and the reason why it has grown so rapidly, was the simple fact that whilst most local independent takeaway businesses knew that they should be online to attract a greater share of the market, most did not know how to manage this process or did not have the resources or expertise to implement such a strategy.
Which got me thinking. How many of our sports retailers face exactly the same issue?
I lost count of the number of conversations that I was having with sports retailers who could see that the sporting goods industry around them was changing faster than ever and yet they felt, for various reasons, unable to adjust and adapt to these changes to such an extent that I launched our own Solutions for Sport New Media division to address these demands and now continue to see an ever increasing number of clients come knocking at the door looking for simple eCommerce solutions.
Whilst each new business is different they all share a common requirement – supplier data. They need, as a minimum, images and product descriptions to ensure that their sites are up to date with the latest products.
Of course as we create more and more sites then this data becomes common to an increasing number of clients and as such we are slowly creating our very own in house database of the latest product information from multiple suppliers using this as the basis for site updates and effectively building our very own central database which holds supplier product information.
One giant database
If we think on a bigger scale lets imagine a database that could hold article numbers/product codes, product names, bar codes, images, descriptions, and perhaps even stock availability from the majority of core sporting goods suppliers.
One vast system that represented sports industry data on such a scale that subscribing members could access this data to use for their own purposes whether it be to populate their stock system, or even their own website.
For the forward thinking eCommerce retailers much of this type of information is already being requested and is already being supplied by many within our industry.
Lets take Intersport, for example, who are requesting supplier data to enable them to drive forward their central stock information strategy.
The ultimate objective is for all Intersport members to have an EPOS system enabling Head Office to better analyse, amongst other things, sell through and top sellers, however this system can only be effective if ALL supplier new product information is uploaded to the EPOS system.
And, of course, this is exactly what suppliers are, logically, being requested to assist with.
OK, it does not include product images or descriptions, however if one takes this principal forward and it did include such information, then in theory, each individual Intersport member could tailor an eCommerce offer specific to their store and to the lines that they stock.
One could imagine a website where the marketing of the site would be done centrally (as is the JustEat model) and the actual set up of a site for each individual member would be as simple as checking a few boxes.
In reality this is not the route that this particular business has chosen, instead deciding that a central site would be more effective, however what’s to stop another collective, STAG for example, taking this route and providing an exciting member benefit. Encouraging suppliers to submit this data and members to support the lines that are listed would be mutually beneficial for all parties.
Lets imagine a scenario where a retailer could set up his own online store by simply registering a domain name, adding his logo/colours etc and then choosing from an already preloaded database that has the bulk of all the latest products from his core suppliers.
No time spent uploading new lines – simply choose which price to sell at, select the lines that he has chosen to purchase, and hence have in stock, and amend any other element the retailer sees fit.
As easy as listing an item on amazon marketplace where, by simply inputting a bar code, all the required information is already to hand.
OK- maybe the infrastructure would need to be a little more sophisticated i.e. enable a huge variety of shop fronts, fonts, styles etc to allow the retailer to maintain a point of difference and reinforce their identity, but if the data was gathered then this future could be conceivable.
The biggest hurdle then is data.
Or is it.
As our eCommerce retailers become more demanding will it become every day practice for suppliers to simply provide a .csv file to our retail partners containing everything they need?
If so then a simple upload of these to the central database would provide everything required.
So there you have it.
It all seems so simple when you allow your mind to wander and to think what the future may hold -when I get back from holiday I might just start building that database!
In recent years the own brand, or private label, phenomenon has been making big headlines.
In grocery Aldi and Lidl continue to make huge strides with their combination of a small targeted number of branded products sitting alongside their own private label offerings.
In our own sporting goods industry many of our successful retailers follow a similar model.
Over time Sports Direct, for example, has grown its own label strategy by purchasing distressed brands and then selling them at a discount within the stores thus making a manufacturer to retail margin (as opposed to a manufacturer to wholesale margin).
Decathlon (still the worlds biggest retailer of sporting goods) uses exactly the same strategy but this time has simply pushed its own brands so much over time that they have in their own right become brands.
The trend can be seen right through our trade with the likes of JD Sport, MandM, the Intersport group, DW Sports and others all finding the right mix between the international brands and their own brands to boost margins and to provide a point of difference to the end consumer.
Online retail specialists, such as Wiggle and StartFitness are also getting in on the act
Consumers demand brands for the quality assurance and emotional satisfaction, however it is becoming ever more apparent in the sporting goods market that these brands do not have to be manufacturer brands.
The Decathlon Approach
For twenty years Decathlon followed a single brand policy with great success.
Today, the Decathlon Group has moved on from this approach and created specialised brands each one of them positioned on a precise sporting branch of industry: b’Twin, for example, specialises in mountain bikes and road bikes; Wedze in boardsport on snow, and Kalenji in walking, running and cross-country running.
Together, these “passion-brands” make the Decathlon group one of the first ten world’s manufacturers of the sector behind Quiksilver, Nike, Adidas, Timberland, Columbia, Salomon, The North Face and Patagonia
Interestingly this strategy has also allowed Decathlon to not only compete at the “mass market” end of the market but, by siting these “passion brands” in the areas where the product development teams can embrace the sport (e.g. in the mountain or by the sea) they have been able to create technically excellent products at higher price points with higher margins that can credibly compete against the international sporting goods manufacturers.
The Sports Direct Approach
If we compare the SDI approach with Decathlon the “passion-brand” approach has been developed not by stating from scratch and building up the brand through in house teams but, predominately, by acquisition.
This results in the lines between “international brands” and in-house/private label brands becoming blurred – arguably a good thing as the consumer is often presented with a “branded” product at an exceptional price unaware that the brand is, in fact, owned by SDI and to all intents and purpose is thus a private label.
The challenge and opportunity facing SDI is to develop the higher margin and higher price point end of the business by producing more technically acceptable product. This is easier to achieve if the acquired brands (e.g. Dunlop and Slazenger) have a heritage that allows price points to be pushed, however Decathlon appears to have a distinct R&D advantage over its rival in this area at present.
The Independent Retail opportunity
With this approach of private label business sitting alongside core branded lines set to continue in the near future the question is whether the smaller sports retailers are able to take advantage of this trend.
Clearly there are several areas to explore when considering an own label approach and these factors are often the main barriers to the smaller independent retailer looking at the topic more seriously:
Problem: You have no experience at all in dealing with factories, product design, importing etc.
Solution: Use a reputable agent or company that has expertise in this area, a proven track record and can site examples of the work that they have done and provide testimonials from past and current clients.
Minimum Order Quantities (MOQ’s)
Problem: As with any product line MOQ’s will apply based on a variety of factors such as material used, size of factory, type of item etc etc. Often these MOQ’s can be very high compared to the sale opportunity and thus the project cannot proceed.
Solution: Club together with fellow minded retailers and spread the MOQ amongst the members. This results in all the advantages of improved margin, points of difference etc but without the excessive cash flow risk.
Problem: small retailers do not often have the storage space to store large quantities of products and are used to operating a “little and often” business model.
Solution: rent some small space for a limited period time using cost effective businesses such as Big Yellow Storage.
Problem: lead times, particularly from the Far East can be as much as 4-6 months depending on factors such as time of year, type of product being manufactured etc.
Solution: Often this issue can simply be solved by improved planning. Once you get into the mindset of long lead times the business can be planned accordingly.
As my own business has begun to address these issues on behalf of clients we have seen for ourselves not only the ease with which many of the issues can be overcome but, more importantly, the additional revenue and margin gains that these businesses have experienced through developing their own brand strategy.
Some clients have progressed from taking generic branded products (such as a basic t-shirt or hoody) and adding some branding and changing the back neck label to trial the idea, whilst others have taken the leap having the confidence to commit to, for example, 1000 sock tri-packs knowing that, based on past sales history, that the stock can be sold.
Whatever your approach it is clear that, when done effectively, the own brand strategy can reap rewards.
I don’t know why, but in recent weeks I seem to be having more and more conversations with sports retailers about “checkout candy”.
Maybe its because many are online and understand the concept but for those of you that don’t, let me explain.
Put simply the phrase refers to “temptation at the checkout”. You know the sort – sweets around the till. In fact in the grocery industry there has been considerably pressure for retailers to withdraw from this strategy as it is too successful!- apparently consumers are simply unable to walk by a row of sweets without purchasing them thus affecting their health!
In simple terms checkout candy is recognising the ability to upsell which, according to Dr Jon M. Hawes, director of Akron University’d Fisher Institute for Professional Selling “spells the difference between ‘just getting by’ and having a very profitable year,” “Revenues from upselling are usually over and above a store’s break-even point, so the extra sales quickly turn into profits.” Retailers commonly enjoy sales increases of 20 percent or more when they start upselling.
OK. But are there simple ways to implement this strategy in the sports trade?
The surest upsell is to offer additional related items for something a customer is already purchasing.
If the customer is buying athletic shoes then you might like to suggest insoles. Why not place an insole in one shoe and not in the other so that when they try them on they can feel the difference.
This is a strategy that Footlocker employ incredibly successfully incentivising staff and ensuring that conversion rates remain high and that incremental business levels are maintained. You might also suggest things like shoe care products – a classic shoe shop upsell.
Consider the things you would want if you were the customer making this purchase – if you bought a camera, you would want to buy an extra battery, a case to carry it in, extra flash card and a card reader so you could get your pictures off to your computer, all the things necessary to create the best possible experience with the product.
In a wholesale setting, try and find out everything you can about the customer’s business and offer other related products. Appeal to most wholesalers desire to simplify and give them the option to get everything they need from one place–your place.
The accessories element of any retail business should be one of the most profitable areas.
Online retailers thrive on the “you may also like” or “customers viewing this also bought” prompts within their sites. If you are a bricks and mortar retailer use the same strategies.
Group your products
Group relevant product areas together – tennis rackets next to balls, bags, headbands and vibration dampeners rather than simply a wall of rackets.
Running shoes next to socks and insoles, hockey sticks next to grips and balls, goalkeeper gloves next to glove wash and glove bags – the list go on but all can lead to incremental sales.
Look for future events or to tie into local activities. For example many rugby retailers are driving steady business already from Rugby World Cup 2015 pin badges and keyrings and we are still some eight months out from the event.
As well as placing the products in relevant areas alongside upsell lines look at using the till space as effectively as possible.
In front of the customer works. Tucked away behind the till doesn’t.
But its not just about having additional products to upsell alongside the purchase. Don’t forget that the initial purchase itself is an opportunity to upsell.
Not all products are equal, and especially in the sale of higher-end items, it’s good to guide the customer through different features, highlighting the benefits of more-expensive items.
Make it practical for the customer.
In a wholesale setting, you might consider different size orders that would give the customer the same product at a better deal. Bulk items generally come with a benefit, so it’s a good idea to highlight the long-term price benefit in making the bigger buy now instead of waiting to come back for more.
Upping the ante
Upselling isn’t just “extra” pounds in your till—it’s vital to the long-term profitability of your sports retail business and, perhaps more importantly, is the reason why the specialist sports retailer can continue to grow and thrive in the face of stiff multiple retail competition.
According to the experts, here’s why:
Customers may believe they are shopping for price, but they really want value. They will return only if what they buy meets their needs.
Customers feel suspicious of a pushy salesperson, but at the same time they need shopping guidance from a sales staffer who is focused on their needs.
With more stores advertising huge markdowns and discounts, you have to keep your margins up by upselling with better merchandise and cross-selling with desirable add-ons.
So next time you are looking through a trade magazine, or walking through a show, don’t forget to spend some time looking at the accessories and upsell lines.
Pick them wisely, and to complement your product offer by category, and you might just find that additional sales lift you’ve been looking for.
When Nike ID was launched in 2006 we witnessed the first tentative steps that allowed the end consumer to customise their own products and bring an added element of cache and personalisation to the sporting goods market place.
Eight years later and the innovation trend of customisation is now reaching critical mass. From breakfast cereals and decorated cakes, to vitamins, sporting goods, and luxury automobiles, customers can now create a product that they can truly call their own.
In the case of Nike ID it now has an entire floor in London’s flagship Nike Town store dedicated to this topic.
In the past, retailing and manufacturing was predicated on scale, with companies mass producing goods to achieve efficiency. Customisation was rarely an option – as Henry Ford famously said, “You can have any colour you want, as long as it’s black!”
Customisation has been around for a long time now, so why is it continuing to appear as a key innovations trend?
Customisation is a way for retailers to fulfil the ultimate product of a customer’s fantasy. It’s not what you want to sell them; it’s selling them what they’re asking you for. Nowadays, consumers are fulfilling their ultimate product fantasies from designing their own shoes (www.shoesofprey.com.au) and creating handbags of their dreams (ethreads.com), to mixing their own organic cereal (mymuesli.com).
Thanks to digital technology, operations efficiencies, and advanced manufacturing capabilities, more and more retailers are in the position of satisfying customised product orders.
Todays retailers are closer to their end consumer through social media and are moving their customisation capabilities from clicks to bricks and creatively harnessing social mediums to procure feedback, interest and brand advocacy.
The result of these changes mean that the ability to offer such as service can now be done at a much lower cost but can create an exciting point of difference.
Many specialist sports retailers are seizing this opportunity and applying customisation principles to give their customers enhanced value. Customisation of, for example, football boots and goalkeeper gloves are now core added value elements for football specialists.
Of course this is just adding items such as names and initials to the product. At manufacturer level pure customisation is available in terms of selecting colours and design allowing the consumer to create a true fantasy product.
It was, in fact adidas, not Nike, who were the first to investigate the customisation opportunity within the sporting goods market. In 2000 a pilot programme was launched called miadidas with its sole aim being to identify the feasibility of having a customised adidas product line. Today the miadidas range offers over 5000 product lines!
Since the initial launch of miadidas, its fulfillment process has been improved continuously and, arguably, this is one of the greatest challenges in developing a mass customisation offer. The miadidas process starts with a configuration process between the consumer and Adidas via some form of consumer interface. A customer order then has to be processed by Adidas’ order management system. This process triggers a respective manufacturing process within a corresponding production facility. The process ends with the distribution of the final product to the end consumer after manufacturing has been completed and the product has been shipped to the customers’ order.
All these elements bring their own challenges, however it is feasible that even the smallest brands can embrace them and develop a core customisation strategy.
The Sales Channel
I have covered, in previous articles, the current trends within the European Sporting Goods market and the challenges facing brands whether to sell direct or not. Within the adidas strategy the clear published goal is to drive increased levels of direct to end consumer sales (mono stores or online) and therefore customisation is a perfect companion to this approach.
The process of customisation not only brings the end consumer emotionally closer to the product and brand but also enables data capture and the subsequent ability for the brand to reconnect directly with the end user at a later date – ideal for new product launches, special offers etc.
In fact the emotional element of customisation, in terms of connection, can be a key driver even for those brands that want to use the approach from a marketing driven exercise.
It can be the first steps for a brand to develop their direct to end consumer strategy but without effecting current distribution channels, or it can be complementary to a selective distribution strategy.
In the second example a brand may decide that they want to create a customisation programme but for the transaction and delivery to be completed by a specific retail partner or partners.
The end consumer can therefore customise his product, the retailer can offer a point of difference and the brand can drive targeted marketing activity through the project.
It is clear that customisation is here to stay – whether it be at independent retail level with the use of embroidery/embellishment machinery offering the ability to add names, initials etc – through to a fully customised product designed and created exclusively for an end user.
As part of a future brand strategy (and perhaps for the brand to begin to explore direct selling to the end user) it can provide a strong marketing platform and point of difference from competitors as well as creating enhanced emotional attachment for the consumer towards the brand.
As manufacturing and fulfilment processes become ever more sophisticated customisation will undoubtedly become more important within the sporting goods industry and thus those brands and retailers that embrace this trend today will very likely be the beneficiaries tomorrow.
Make more money,save more money, be more competitive
For many business the start of the year is the time to take a look back at the previous year and begin to plan for the new year ahead.
Inevitably part of this process will involve a “look at the books” and, more importantly, a review of the bottom line. In simple terms every business strives to make more money, save more money and be more competitive since these are the driving forces behind performance and business growth.
If you can address these aspects of business then your can reap the rewards in 2015.
The theory of “aggregation of marginal gains” has been a buzz word in the sporting goods industry since Dave Brailsford used this theory to great effect to bring British cycling onto the global stage as a highly successful competing nation – The principal being that a multitude of small changes can have a large overall effect.
In practice, this theory has been around for years.
In the 1980’s, for example, American Airlines removed a single, unnoticed olive, from every salad served to passengers and the airline saved $40,000 per year!
But can you apply the same rules in your business -whether you be sports brand or sports retailer?
The question is, when it comes to efficiencies, cost-savings and competitive edge in your business, where’s your olive?
Five simple factors
So what are the simple factors that can be multiplied to deliver stellar bottom line profits?
The total number of people who have been contacted, visited your store/website, communicated with during the year
The percentage of people who actually make a purchase e.g. if ten people walk in your store and 3 purchase that is a 30% conversion rate.
Average selling price £ sale (ASP)
The average £ amount per sale, estimated over the course of the year i.e. annual revenue of £350,000 divided by 10,000 individual sales = £35 ASP
Average number of transactions
The number of purchases the average customer will make over the course of a year.
The profit percentage on every sale. i.e. if a business sells something for £1000 and profit was £250 then profit margin is 25%.
So how does this relate to top-line revenue and bottom-line profit? Lets see
In your sample company, we use a very simple formula to multiply the factors we’ve discussed. Note that since this formula uses multiples factors, instead of just adding them, the cumulative impact is massive.
The “5 Ways Formula” looks like this:
leads x conversion rate = customers
customers x ASP x number of transactions = revenue
revenue x profit margins = profit
Lets say we have estimated or fully determined the following numbers:
4000 x 25% = 1000 customers
1000 x £100 x 2 = £200,000 revenue
£200,000 x 25% = £50,000 profit
What does all this mean?
In simple terms you are running a business that converts one out of four prospects into paying customers. Those customers average two purchases at £100 per purchase each year and your company enjoys a 25% profit margin on revenues of £200,000
It also means your total profit for the year is £50,000.
So what would happen if, over the course of the next year, you were able to change one (or all) of these factors?
Lets say that they all changed by 10%;
4400 x 27.5% = 1210 customers
1210 x £110 x 2.2 = £292,820 revenue
£292,820 x 27.5% = £80,526 profit
Examine the numbers closely and you’ll see that the 10% increase is incremental, which means that you could easily nudge numbers up by that amount over a period of months – or even weeks.
The bottom line is that the new bottom line looks very interesting.
Even though we’ve increased each factor by just 10% (including top line revenue) we were able to boost bottom-line profit by 61% – or a total of £30,526.
Think these results are impressive? Do some maths on your own and see what the numbers look like if you increase each factor by 30%, 50% or even 100% down the line or even just increase one element.
The key is that we are multiplying factors – not adding – which has a massive impact on profit. The “5 Ways” isn’t a complicated numbers game. Its simply looking at your business in a different way and working with numbers that should exist in every company.
As part of your review process do some further work with your own numbers and brainstorm ways in which you can increase the numbers in each category:
Increase leads: use local marketing, contact clubs/schools; drive your social media activity, build your customer base
Get more customers coming back: introduce a loyalty/voucher scheme e.g. £10 off their next purchase.
Increase the amount they spend: think about “checkout candy” impulse purchases – learn from the supermarkets.
Raise your profit margins: buy better/smarter. Push you suppliers for better terms.
Remember “profit is sanity, turnover is vanity”.
Use your time reviewing your business effectively and you’ll be more than happy with the ultimate results.
For many sports retailers, selling to local teams/clubs is a critical element of their overall revenues.
Historically these retailers have used traditional methods to connect with, and service, clubs however technological advances are now enabling them to service these clubs more effectively, more efficiently and, importantly are opening up incremental business opportunities.
Perhaps the most powerful advance is the ability to drive teamwear business through online team shops.
Once the preserve of the large professional clubs, affordable software has now enabled sports retailers to build and run online club shops for even the smallest of sports clubs.
Sports retailers offering these services are winning business against those that are unable to by providing this additional service element.
Crucially an online environment allows the retailer to offer a much wider range of club products but without additional stock investment.
Retailers are offering team kit (shirt, short and sock – home and away) alongside training wear, bags, caps, scarves, mugs, pens and anything else that you would find in the club shop of a professional team.
Images are mocked up (or single samples purchased) with club logos, badges etc and presented with the relevant lead times associated with sourcing such lines.
With this approach club members can visit a unique team shop created for them by the retailer and purchase their club lines conveniently.
This ecommerce strategy is not open to the same issues affecting a more generalised ecommerce approach (pricing etc) and allows the sports retail to enhance his current proposition.
Click and collect
The “click and collect” trend has added an additional element to the club shop proposition as it now allows the retailer to offer, within their club shop, the choice to collect their order in store.
Experience with our own clients in this space shows that this acts both an additional business driver as well as helping to establish a deeper connection between club members and the “partner” retailer.
Typically club members order their kit online and come to store to collect the order. Whilst in store additional purchases (boots, shin guards, mouth guards etc) are often made bringing incremental sales.
Technological advances have also changed the way in which businesses can connect and prospect.
Social Media such as Facebook, Twitter and Instagram have created a perfect environment within which independent sports retailers can connect with their prospective club/team audience and drive them directly to the online club shop.
This can be particularly relevant and useful for teamwear dealers as they can begin to connect with those clubs that themselves are active on social media.
Begin to follow and comment on your local club activities and pretty soon you will begin to build a database of likes and follows which can then be used to market your teamwear services to.
Furthermore if you are already running and managing an online club shop social media can be used to drive special offers and calls to action directly back into the shop.
Interestingly the principles involved in building, running and operating an online club shop can also be applied to developing school shop strategies.
Many parents are now requesting that there school uniform be available online and, if you can offer this service to your local schools, this can both counter the threat from the national companies providing this sort of service as well as providing an improved local supply offer – the choice to either purchase online or locally is a powerful element in the decision making process for many schools considering their school wear supply partner.
An interesting retailer advantage running an online school shop is improved cash flow. School wear purchases can be spread across a longer period, rather then, as is often the case, a small window just before the start of term – this enables the retailer to bring in schoolwear lines across a longer period by “back to back/just in time” ordering thus helping cash flow.
As already discussed click and collect can also bring in additional business – the school uniform has been purchased and thus the parent has more time to focus on the additional sports wear required such as boots, shinguards, mouth guards etc etc.
The clever retailer can package these lines online within the school shop should they wish to or incentivise those purchasing school wear online early with an additional money off voucher or incentive once they visit the store for collection.
There is no doubt then that a targeted ecommerce team or school shop strategy can be a welcome business driver and business winner for the independent retailer who is looking to enhance their business proposition.
The set up and running costs are not prohibitive – many software providers offer a monthly fee that can cover anything from a basic website and hosting service through to a full service offering of product uploads, maintenance, email database marketing, social media strategy and more.
Without doubt when pitching for local club teamwear or school business the retailer who can offer an online club shop is more likely to win the business against the traditional retailer who is unable to provide this same service.
Society is looking for convenience in all areas of life and sports clubs/teams where kit is a required purchase is no different. The experience of our own clients underlines this shift in consumer demand and those retailers at the forefront of offering these services can certainly develop an interesting new business opportunity.
The European Market
The 27 countries of Europe form a common market with a combined population of over 500 million people.
In reality, there are 27 different cultures, national purchasing idiosyncrasies and differing living styles that make it difficult to develop an integrated strategy across Europe as a whole. However, despite these issues, there are sporting goods retailers who are embracing these challenges with relish and expanding accordingly.
Decathlon have established a strong European foothold, Sports Direct are attacking the market aggressively and, forced to come together, independent retailers under the buying group umbrellas of Intersport and Sport 2000 are gaining traction.
The overall picture is not, however, as simple as first appears due to the “split” between old Europe and new Europe. The Old Europe, predominantly in the East of the region, has seen growth in alternative channels most notably sports brands driving an own brand /mono-store strategy as, historically, this approach carried less risk and was more easily managed.
The Buying Groups
Two large organizations spearhead the field of multiple brand name suppliers in Europe, whose turnover in sports goods and sports fashion hovers between 35 and 40 billion Euros – Intersport International based in Switzerland and Sport 2000 International based in Germany.
In the UK and Ireland Sports Direct are “under the Sport2000 umbrella” (although what that actually means is difficult to establish) and Intersport have a strong presence with over 300 doors.
Intersport is, in fact, the world’s largest corporate group in the specialist sports goods trade, and accommodates
5230 retail locations in 40 countries inside and outside Europe under its trade. With revenues of over 13.7 billion dollars the group’s market share amounts to 37 per cent in Germany, and to 20 per cent in Europe.
Sport 2000 International is the number two among Europe’s corporate groups. It is home to 3800 independent sports retailers in 25 countries recording sales of more than 6.5 billion US
Finally we have the French based Decathlon chain who, in 2011, recorded a turnover or more than six billion
Euros (7.8 billion US dollars) making it the largest specialist sports goods retailer in France, Italy, Spain and Portugal, but also one of the largest sports goods
manufacturers with a market share of 60 per cent of French sports goods production due to its own label strategy.
In the UK Sports Direct reported sales of £2.186billion in 2013 and with an aggressive 20%+ growth rate, future acquisitions and organic growth we are likely to see the retailer featuring more and more on the league table.
So, having established the background, what are the trends that are likely to affect the growth of these businesses into 2015 and beyond? Peter Thurl of Sportpress, Germany believes that there are currently seven key trends:
Exercise and fitness in the open air has a widening appeal and its popularity looks set to continue.
Whether it be trail running, outdoor gyms, indoor and outdoor climbing, nordic walking, skiing or just generally enjoying the great outdoors this trend will undoubtedly feature in the future growth of the sport industry.
Enjoying a similar boost to the outdoor sector, running looks set to continue on a steady growth curve. Once again the open air appeal looks set to drive growth albeit in, perhaps, more niche areas such as trail and off-road running as well as more extreme events.
The close links between the running and “health sports” market is also likely to ensure that the running boom seen across Europe will continue for some years to come.
Also on the back of the outdoor boom and, particularly in the UK on the back of high profile professional successes, Cycling will remain an interesting sector. The rising demand for electric cycles will help fuel this growth as will the relevant clothing – whether it be specific or more lifestyle driven.
4. Multifunctional clothing
A noticeable trend developing is the multie-use clothing. In particular generic walking/running/outdoor/cycling apparel will see significant growth in the coming years across Europe. This may well bring more sports fashion brands into the mainstream sports trade as, in future, the sports/fashion lines become more and more blurred.
The specialist brands will continue however with full-range suppliers playing a major role for leisure and mass sports products. The more individual and technical a sport is, the more frequently the ideal product will be supplied by a specialised business.
5. The Women’s Market
It is a criticism that has been frequently put forward in the time that I have been in the trade that there is a lack of good product for women.
This, however, does seem to be changing where women’s product is driving an ever increasing boost to sales.
Since this evolution is relatively immature this trend looks set to grow accordingly.
6. Team sports
Team sports still benefit from the positive development of soccer, above all the rising popularity of women’s football will drive increased revenue opportunities and further drive the women’s market.
7. Innovation & Smart technology
Across many industries technological advances are driving consumer demand – the sports industry is no different.
The innovatory boost coming from outdoor textiles, footwear and hardware will continue unabated in the future. New high-tech materials and technical improvements will involve a further optimization of the equipment’s functionality for the ambitious outdoor sports enthusiasts. Hence, it is certain to remain the most essential criterion for outdoor clothing,footwear and hardware to 2020 and beyond.
In summary we can certainly predict: In future, the sports market in Europe will not decline, since older people remain active and sports-minded for a far longer time today than in previous generations.
Many European nations will experience an ageing population which will, in turn, directly effect the growth drivers within the trade. In the forthcoming years, sports may well be determined by the 40-
In the longer term the generation of over 60-year olds are likely to drive change in the sports industry as sport becomes seen as a health provision. Employees may well encourage this activity to keep employees healthy and maintain the number of staff on sick leave
on a low level, thus driving the infrastructure of European companies to become increasingly geared towards
What is in no doubt too is that at retailer level there will be further consolidation and that eCommerce will become increasingly important.
The successful brands and retailers of 2020 and beyond will be those that are already considering this longer term picture and creating the most effective business model to react to this market evolution.
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”!
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.
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?
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.
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