Breaking2

Waffle Trainer

Nike co-founder Bill Bowerman was having breakfast with his wife one morning in 1971 when it dawned on him that the grooves in the waffle iron she was using would be an excellent mould for a running shoe.

Bowerman, who was a track and field coach at the time, had been searching for a way to make shoes lighter and faster and was inspired by his waffles!

Several ruined waffle irons later, and after much experimentation, the Nike Waffle Trainer launched in 1974.

Nike was on the way to becoming the multi billion dollar company that it is today.

Nike Air

When one looks back at the history of the brand there are various sign posts along the way when it comes to product development.

The Waffle Trainer indeed sits in the category, however it is perhaps the Nike Air that is the true legacy product.

Back in March 1977 a former NASA engineer, Frank Ruddy, and his business partner Bob Bogert sat in the Nike conference room presenting their new idea – to inject air into a running shoe.

Phil Knight recounts the story in his autobiography – Shoe Dog – “I set down the shoes and gave Rudy a closer look, a full head-to-toe. Six-three, lanky, with unruly dark hair, bottle-bottom glasses, a lopsided grin, and a severe vitamin D deficiency, I thought. Not enough sunshine. Or else a long-lost member of the Addams Family”

Perhaps not the image one thinks of behind one of the worlds best known shoe technologies, but nevertheless in 1978 the Nike Air Tailwind was launched.

As the 1980’s progressed and the global trainer market gained momentum so Nike continued to develop new technologies and, combined with shrewd athlete endorsements, grew to the force it is today.

Many of you, of course, already know this.

So what? I hear you say.

Well maybe, just maybe, the next major chapter in this story is upon us.

Breaking2

As a part time runner I became intrigued recently by the news coming from Nike HQ that they had embraced the challenge to break the 2 hour marathon mark – “Breaking2”.

A huge barrier that, with the world record currently standing at 2:02:57, set by Dennis Kimetto of Kenya in 2014, is no easy task to break.

To put this into perspective, to break the magic mark would mean running at an average of 4:34 per mile for 26.2 miles!

The athletes have been chosen – after more than two years of research, preparation and testing, three top distance runners—Eliud Kipchoge of Kenya, Lelisa Desisa of Ethiopia, and Zersenay Tadese of Eritrea—have officially started their Nike-backed build-up.

The track has been chosen – the Autodromo Nazionale Monza complex, a racetrack outside Monza in northern Italy, where the surface is asphalt and speed is certainly king.

But what about the shoes?

For months there have been rumours about a Nike shoe being created for the event, with suggestions that its sole would contain a special spring, which would circumvent the rules of the athletics governing body, the IAAF.

However, having now been unveiled, its now clear that the new Nike Zoom Vaporfly Elite will instead have an internal gently curved carbon-fibre plate to minimise energy loss without causing cramping in the athlete.

Along with Flyknit, Flywire and other established Nike design features, the major advance comes from a patented carbon fibre insert that is reported to dramatically change the performance and profile of the shoe. The plate acts as a ‘stiffening element’ according to Nike’s design team, yet its impact on the shoe as a whole is perhaps more important. The curve of the plate changes the foot shape in the shoe, placing it more in the toe-off position and this does a couple of key thing; it helps improve on running economy due to reducing the strain on the lower leg thus delaying the onset of fatigue and it allows for increased cushioning in the shoe without a loss of performance.

The foam that covers this increased cushioning in the midsole has been improved too, as Nike’s Zoom foam becomes ZoomX. What does this mean? Well, apparently an 85% energy return compared to the typical 60-70%. This makes a big difference over 26.2 miles.

And then there’s the heel shape. This is the result of aerodynamic testing where a design driven by data has shown the tapered heel is there to improve the way the shoe cuts through the air.

All these elements, Nike believe, will give the athletes maximum assistance in the record breaking quest.

Other factors

Of course, if this barrier is to be broken it wont just be the shoe technology that makes the difference.

Other factors have to be taken into account:

  • Athlete selection:
    No matter how perfectly everything else is planned, there are probably only a few people on earth who have a chance of breaking two hours.

The team started with a pool of the hundreds of distance runners that Nike sponsors—a large group, but one that notably omits the three most recent marathon record-setters, Kimetto who are all sponsored by Adidas. The final selections were then based on a huge variety of parameters following extensive trials and testing.

  • Course and environment
    The Monza race track is relatively flat, relatively sheltered and relatively dry.

There are suggestions that a “drafting” approach where runners are constantly changing positions (much like a peleton within cycling) will also be an approach that could yield rewards.

  • Training and 4. Nutrition/hydration:
    T
    hese are the basic areas that most of us worry about when preparing for a marathon. Nike has a huge scientific staff ready to offer every possible support in these areas; still, over the coming months, each of the three athletes will continue to train with his own coach and in his own environment. Getting this balance right, so that the athletes benefit from extra support without disrupting what has worked so well for them in the past, will be a delicate task.

Conclusion

It remains to be seen whether the goal is finally achieved – it looks like Spring 2017 is the anticipated target date – and it also remains to be seen whether the Nike Zoom Vaporfly Elite will join the Waffle Trainer and Nike Air as an iconic shoe.

One things for sure technology will continue to evolve and records will continue to be broken…all thanks to a waffle iron!

The opportunities for own label sourcing.

Why?

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 the outdoor sector many retailers have embraced a similar philosophy.

Consumers demand brands for the quality assurance and emotional satisfaction, however it is becoming ever more apparent in the outdoor goods market that these brands do not have to be manufacturer brands.

Indeed there are many pros and cons of undertaking your own private label strategy and perhaps this is the starting point for any discussion;

Pros & Cons

The pros of private label products:
-They are usually lower in price than branded products.
-Multiple private-label product manufacturers will compete with each other to earn a retailer’s business, giving the retailer the opportunity to provide the best balance of quality and price for their customers.
-The product quality is generally good (better than most people anticipate when thinking of private label products).

The cons of private label products:
-Some are just plain low quality offerings made at the lowest price point. These are the things that people will refer to when they say “you get what you pay for.”
-Retailers lack direct control over the manufacturers of their private label products, which can slow responsiveness to changes in the market.
-Private label products tend to be “me to” goods that are trying to match branded product performance. They are rarely innovative. Innovations and product improvements will usually be led by branded products.
-Customers are tied to a retailer to get private label products that they like. You can get branded products almost anywhere.

If you run a successful outdoor outlet then your business is likely to be driven by a combination of “must have” sellers – I.e brands/products that are requested directly by the customer and “sell themselves” and those items that you can influence directly.

It is this latter category where one is most likely to find a private label opportunity for one to source directly.

The good news is that, as a starting point, you will already have an understanding of the potential volume of goods that you can sell and therefore but able to react to any manufacturers MOQ (Minimum Order Quantity).

However, don’t just consider the sales opportunity that may exist for these goods in one channel.

Do some research. Does the opportunity exist online? What about ebay or Amazon?

Many successful sellers find an Amazon niche, source goods and then use FBA (fulfilled by Amazon – effectively the amazon warehouse) to establish a very solid business base.

Looking at these wider opportunities may further assist in assessing the product opportunity.

The next step is how do I source these goods.

How

There are several options available but, thankfully, the process (in theory) is much easier than it was some years ago thanks to the internet.

I) Trade Show

Traditionally the most effective sourcing route was to attend trade shows. Most notably ISPO where the many sourcing halls allow direct access to manufacturers from nations such as China, India and Pakistan.

A combination of the wide variety of goods on show, the opportunity to talk directly to the manufacturer and the chance to “shop around” means that this is still an excellent place to start and one that comes highly recommended.

ii) Alibaba.com

Failing that the next port of call is Alibaba.com. Founded in 1999 by Jack Ma, Alibaba is a business-to-business portal that connects Chinese manufacturers with overseas buyers. In 2012, two of Alibaba’s portals handled 1.1 trillion yuan ($170 billion) in sales with suppliers from other countries now supported.

Think of a combination between amazon, the Yellow Pages Business Directory and a dynamic search engine and you have some idea of the power of the site.

An advanced search engine allows you (in my experience anyway) to literally find any item that you are looking to source.

For reassurance there is a rating system, simple messaging systems and even “off the shelf” products that can be sourced at aggressive prices.

Iii) Sourcing Agent

The third option is to use a sourcing agent. Often specialising in bringing in goods from specific nations or factories many agents focus on specialised areas and become the “go to” resource in their field.

Without doubt they will ensure that the sourcing process is (relatively) pain free and will (usually) find an excellent solution, however this will mean that (since they usually get paid by commission) that the goods will (probably) be more expensive than if you were to source the goods yourself.

The pitfalls

Having found a solution and a manufacturer the next step is to get the product produced.

Invariably, particular with a first time, or small, order this will mean payment up front.

Often this will mean FOB (freight on board or free on board) price (usually quoted on US$) .

In a simple FOB origin arrangement, the seller agrees to pay all expenses related to the transportation of the freight to a specific point. Once the freight reaches that point, the seller’s responsibility ends, and the freight becomes the property and responsibility of the buyer.

Note that this therefore does not include any duty or other fees that may be due.

My advice, before even starting the import process, would be to visit the Government Website www.gov.uk and search “importing goods”. This will provide a solid overview of the processes involved and any additional costs.

Do not calculate your profit based on the FOB as there are other costs to take into account (shipping, duty, customs clearance etc) but these depend on the item being imported and the list would be too onerous to list here.

Once your comfortable with all the implications here its time to place that order.

The end result

So you’ve made it!

Don’t forget the lead time -it can take 6-8 weeks to arrive by sea from the Far East and perhaps 4 weeks to manufacture an item so it is prudent to allow 14-16 weeks.

Don’t forget the design, the packaging, bar codes etc as these also add to the cost and lead times.

But get all these factors right and you could end up with a private label product(s) that fills a niche, provides excellent margin and are a perfect compliment to the branded goods within your store.

There is no doubt that, done correctly, the sourcing of ones own products can be a positive contributor to any business but the additional margin rewards will inevitably come with additional work and responsibility.

Good luck!

Direct Marketing in the Sports Trade.

We’ve all seen first hand the impact of eCommerce on our industry over the past fifteen years and the continued theme of the big getting bigger.

But where does that leave the local independent sports retailer and his approach to the web. To go eCommerce or not to go eCommerce…that is the question.

Or is it?

Perhaps the biggest issue that I come across when retailers are considering a site is that they concentrate more on the design and look and feel and often spend virtually no time on planning how they will actually get traffic.

And of course traffic is key.

For many the oversight is the fact that they already have an audience that they can very quickly turn into core traffic without having to consider spending google adwords cash. In fact this traffic can be built before a website is even constructed.

Its called a subscriber list (or customer database.)

Subscriber List

Building a subscriber list is a super important first step to take when you want to start getting the word out about your business.

You don’t need a website to start building your subscriber list. All you need is a hosted sign up form.

If you already have your web address (URL), or even if you don’t, you can build a sign up page before you even begin your website.

There are many companies that offer this service and set up is often less than 5 minutes.(search “web sign up forms” for a list of suppliers)

A hosted sign up form lives on its own, with a unique URL that you can share anywhere – Facebook, Twitter, your email signature – wherever! It gives you a quick way to start building a subscriber list today without a website.

Social Media

But how do I build this database?

Traditionally the most successful way to collect customer data through, for example, a customer loyalty scheme. The customer completed their details (name, address, email etc) and the retailer communicated special offers etc through mail or email.

In the world of Social Media this whole data collection process is simplified. All you need is Facebook Fans or Twitter followers and these mediums can be used to communicate directly with the end user e.g Special offer this weekend on X.

To collect the data is also relatively straight forward – a sign at the till that says “Like us on Facebook and/or Follow us on Twitter”can be all you need.

Since more and more social networking is being done through mobile devices the consumer can be promoted to “like and follow” whilst they are standing waiting for, for example, their credit card transaction to go through.

No filling out of forms. No production of loyalty cards. No pressure.

Get your followers excited to sign up for your list by telling them about all the great stuff they can expect to get in their inbox. If you write regular blog posts, tell them that by signing up, they’ll never miss a post from you.

More importantly, with your sign up form in place, you can begin to migrate this audience and gather their email addresses.

Once you have the followers and subscribers this becomes your core marketing database.

It is extremely targeted (as the consumer has bothered to like/follow) and its local (since they came into the store.)

Once you have this information begin to engage your customers with regular news, competitions etc.

You have a powerful targeted marketing tool that costs nothing and that is likely to return a much greater level of revenue generation than a local newspaper advert.

Once you are comfortable with building the likes/followers in this way you can become more proactive and begin searching facebook and twitter for local users and their likes.

This requires a greater understanding of the way in which the sites are constructed however the results can be very exciting.

Its important to remember that before “social” became the buzz word we talked about “community” and at the heart of most communities is sport.

If the local sports retailer can tap into this community directly through social media then the results can be extremely beneficial.

Continue to build the list.

Another way to share your hosted form on social media is to reach out directly to friends and influencers who you think could benefit from being a part of your list. Don’t overdo it, though – sharing your form with a bunch of random people will make you look like a spammer.

Add a link to your hosted sign up form in your email signature. You don’t have to go into great detail explaining the value of your email list here, but do make it clear that you are linking to your email list.

If you regularly send emails to business associates, colleagues or anyone else in your industry, make a list of people who you think would be most interested in your email list, then message them directly to personally invite them to sign up for your list.

Keep talking.

If you follow these simple steps you will, in time, begin to build a well qualified and targeted database at minimal cost.

By this time you may, or may not, have constructed a website and begun to consider eCommerce solutions, however the big advantage that you will have is that you have grasped the basics of database marketing and will have a core audience with which you regular communicate.

If you link your list to software such as MailChimp you can easily (and cheaply) maintain the list and, more importantly, drive you customers back into store with special offers and news by regular email communication.

Integrate this within your social media activity and you will begin to access your customer though multiple touch points and benefit from increased brand exposure and increased footfall.

Good luck!

The Future of Sports brands – To sell direct or not……..that is the question

The face of the UK and global sporting goods industry continues to change and evolve at pace.

As the boundaries between sports brands and sports retailers become more and more blurred so retailers become brands and brands become retailers.

But what does this mean for the future of sports retailing and when and how do brands looking to make the transition from wholesaler to direct seller make the shift.

THE BACKGROUND

When Sports Direct purchased Donnay all those years ago little did we know that the evolution of the “in house” brand strategy would influence the UK market place as much as it has.

It is now common place for our leading High Street, and Online, retailers to own a stable of brands and to use them to maximise their margins and to draw consumers in with attractive discounts.

Many of these brands, such as Dunlop and Slazenger, have built global brand equity and,as such, this enhances the value of the sales proposition in the consumers eyes.

These in house brands are core business drivers sitting alongside the premium brands who draw the consumers in but dont necessarily drive the volume of sales.

So where does that leave these the sports brands who are not retailer owned and how will they compete in the future.

Will they be happy to merely act as the “sprat that catches the mackerel” or will they advance their own retail strategies to wrestle an element of control back.

THE OPTIONS

The large global players are already well advanced in the development of their own retail strategy with, for example, adidas group stating – “Our Retail segment’s strategic vision is to become one of the top retailers in the world……….retail plays an important role for the growth of our Group and our brands.”

However the secondary or more specialist brands are slower to address the issue.

There is undoubtedly an underlying concern from these brands that, by selling direct, they will undermine their existing distribution channels and retail partners and risk losing that business.

The decision is dependent on a number of factors relating directly to the brand including factors such as the strength of the brand in their relevant sport/niche and the brand positioning; whether the approach is via retail and/or eCommerce, and whether the approach is for long term commercial gain or a short term sales and marketing strategy such as a pop-up shop.

We are already very familiar with the approach that many have take in recent years within the Outlet centres where the channel provides additional brand exposure but allows protection of clearance/closeout activity and for the company to still satisfy margin requirements by selling direct.

This is a relatively “clean” approach as, often, the products have been previously offered to retail partners first before they end up in the outlet store.

Another interesting development is the opening stores close to or within sporting events to further enhance the brand links with that sport. Prince, for example, have recently opened a stand alone store in Wimbledon and plan to roll out store openings in every major city where a Grand Slam tennis event is held.

Flagship stores have, in many cases, also been around for a period of time and allow the brands to maximise their marketing messages alongside the retail upside. This strategy is often the precursor to a more aggressive store opening plan

Nike’s global strategy, for example, outlined in 2010 at the company’s investor meeting held in New York, detailed plans to open approximately 250-300 new Nike-branded stores (mix of branded stores and factory outlet stores) worldwide over the next five years

Another interesting factor in the evolution of brands selling direct is the growth of the Chinese market place and the Chinese brands. The “Western world” approach has historically been built on a wholesale basis with, only in recent times, the retail element becoming more relevant. The Chinese brand model however has been historically built on the reverse.

The result is the evolution of brands such as Li Ning with over 4000 stores either directly owned or franchised which has created a critical mass allowing them to expand into the global sporting goods market.

THE DRIVING FORCES FOR CHANGE

Whatever the approach there are some key fundamentals that are driving these changes and key factors that need to be addressed if you are a sports brands looking to role out a “direct sell” strategy:

Margin – First and foremost direct selling allows the brand to realise manufacturer to retailer margin.

Build brand equity – the brand can broadcast the key marketing messages without fear of dilution or competitor intrusion.

Showcase the entire product range – inevitably retailers cannot carry the entire brand product range. A branded store selling direct can.

Retail pressure – as retailers further drive their own brand strategy brands must react by driving their own retail strategy.

the growth of eCommerce – eCommerce allows the brand to have a global platform combining the latest key marketing messages with the opportunity to purchase the latest products and, perhaps, alternative exclusive products.

the challenging economic climate – with some aspects of the global sporting goods market suffering brands are looking to mitigate their risk and be less beholden to retail partners who are looking to further dictate terms and erode brand equity and prices.

the need to get closer to the end user – the closer the brand is to the end user the more the consumer feels engaged with the brand and the easier it is to communicate in both directions.

THE CONCLUSION

The developments we are seeing in the marketplace look set to be with us for a while and thus any brand must consider the implications of these changes.

Our leading retailers look set to continue to grow and brands must review where they currently sit, and where they are likely to sit in the future marketplace and review their direct sell strategy accordingly.

There is no “one size fits all” strategy, however many believes that, in future, brands with a 100% wholesale strategy may become vulnerable -so perhaps it is time that those brands do indeed become retailers.

Trade Show hangover

This time last year I wrote an article discussing the future of sports trade shows, how they are may evolve over time and what place they may have in the sporting good industry of, say, 2020.

Twelve months on and, following the recent STAG and Intersport Shows, some of the answers are beginning to emerge and some questions still remain.

The conclusions are still a little raw but, on reflection, my own view is that things need to change, and already are changing.

Something old something new

I write this article sitting on a train meandering its way through Europe from Stuttgart to Ljubljana. Its a landscape that will change over the next eight or so hours, taking me from a modern efficient Germany with an economy that is still driving the Eurozone, to a more traditional, some would say old fashion, world that is Slovenia.

In some respects these same difference are reflected in our own sports trade – the modern retailer embracing eCommerce, social media and appealing to “today’s consumer” versus the old, perhaps even tired, sports shop struggling to find their way in an ever changing landscape.

Nowhere are these differences more evident than at the trade shows.

The show itself

There are those retailers that plan their trade show activity with military precision. Trade manuals and supplier offers are embraced and a “plan of attack” formulated to ensure they gain the very maximum from whats on offer.

Conversely there are those that, sadly, appear to embrace a weekend in the Cotswolds rather than an opportunity to develop their businesses with new products and new ideas – despite the intervention of the buying groups to ensure that this is not the key driver behind their appearance at the event.

There are those that hunger for knowledge attending, as nearly half of the STAG members did for example, seminars to develop their knowledge of a particular subject.

There are those that find it hard to change and take on board this new knowledge – as many Intersport members found following their three hour show introduction.

Time for change.

But what is clear is that we all need to change.

Suppliers and retailers alike.

The way we work together needs to be reassessed.

Trade Shows are a big investment for suppliers in financial and emotional terms and its no longer acceptable to be told “I have run out of time to place an order with you” or “that all looks great can the rep come and see me”.

There are very few independent business owners that like to be told what they should and should not buy, however the whole principal of a buying group should be, in my eyes, to embrace this concept for the “greater good”.

Sure, we all know that it is dangerous to have too many eggs in one basket – to be heavily reliant on one major supplier – however if that supplier is driving the global sporting goods industry, and one is able to trade profitably with the lines on offer, then I can see the positives in the argument.

Pre-selection

In the (nearly) twenty five years I have had in this trade one of the major shifts has been the way the retailers buy.

Remember the days when they wanted to swing the racket, try on the glove, or pick up the bat?

Now, in my experience, many are happy simply to buy “off plan”. A CAD or an image will suffice.

Are there reps out there still taking 6 sample bags into each call?

Take this to its logical conclusion and the buyers are, effectively, self selecting their lines, driven as much by the marketing collateral surrounding the product as to whether or not the product is any good.

As a buying group member should I therefore rely on the experts within the group to pre select for me? Take many of the buying decisions away from me? Select my core lines on my behalf leaving me more time to find the elements that will give me a point of difference?

I think thats exactly what we will see.

Certainly if we look to Intersport in many European countries suppliers are not present at the show itself.

The core “pre selected lines” are presented in a core Intersport area (much as we seen evolving over the past few years in the UK) whilst the suppliers simply set up their show stand but are not present during the show itself.

Talking to many colleagues across the continent it appears the general consensus is that this works.

What is clear is that it prevents the negativity of suppliers moaning that nobody has been on the stand and focusses them, firstly, on working more closely with the group to gain a “recommended buy/mandatory buy/core selection” (or whatever the criteria may be) and, secondly, to focus on working with their key partners within the buying group to further enhance their offer.

But what about the STAG environment? Can this work in the same way?

The answer is probably not, not least because the nature of the members is different and there is not the ability to tie into international deals/SMU’s etc in the way that Intersport members can.

So what chance there?

Different venue? Different time of year? More guidance? No show at all?

The questions, I know, are constantly being asked internally – but thats the easy bit!

To find the solution is much harder.

Times are a changing

What is evident is that things are changing and will continue to change.

Market commentators often quote “the cycle of trade shows” and, in conclusion, its safe to say that we are in a part of the cycle where, certainly based on the trade shows of the past, shows are on the decline.

More accurately they are probably evolving.

And as the trade continues to evolve so will the format.

So. Until such time as I suddenly have 2 new weeks to enjoy back in the office every December Ill see you next year.

Same time.

Same place.

A sports trade online hub

Introduction

I was intrigued to come across a business article this weekend announcing that StreetHub, a network of independent retailers, had raised $2.6m (£1.7m) in their latest funding round, led by Octopus Ventures.

The group also received investments from Index Ventures, which has stakes in online retailers Asos, Farfetch and Net-a-Porter, among others, as well as a number of other angel investors.

The element that intrigued me was the phrase “network of independent retailers” and I began to dig deeper to establish whether there was anything in this business model that could be applied to our own sporting goods industry.

Streethub

Launched in 2013 with a $1.2m seed investment round Streethubs aim was to bring together a network of independent fashion retailers into one website. The main targets were those boutiques that did not have a web presence but did have ranges of fashion lines that they wished to sell to a global audience.

The online venture provides world-wide shipping, with click and collect and one hour Shutl delivery available in selected postcodes.

StreetHub co-founder Mandeep Singh said the success of the company’s iPhone app, which launched last year, had shown the firm “the compelling opportunity to also serve people who are keen to discover shops which are a little further afield too, and offer worldwide shipping”. According to StreetHub, now renamed Trouva, the app has been used by over 40,000 customers since it launched.

Trouva is the logical next step for us in our mission to help our amazing independent retailers to reach an even wider audience and help more customers to discover these inspiring, individual collections of products,” added Singh.

Sales Impact

Dan Rigby, owner of home and gift shop Rigby & Mac said: “Trouva is already having a significant impact on our sales.”He added that over the last month, the shop’s sales had gone up 10 per cent “thanks to Trouva”.

Lawrece Roullier White, owner of East Dulwich-based lifestyle boutique Roullier White, said: “Being part of the Trouva community is great, because it brings together a selection of retailers that stand out and offer a really inspirational mix of products, enabling shoppers to find something a bit different wherever they are based.”

Could it work in sports?

So, so far the principal is clear. Bring a network of independent retailers together, provide a simple platform for them to retail from and open up their product range to a wider audience.

However if we look a little closer its not that simple.

The success of Trouva is the fact the these individual boutiques have differing and unique product ranges that often cannot be found in other towns or cities. They may feature local designers, small companies and small product runs – a proposition not dissimilar to those products brought to market by notonthehighstreet.com.

With our sports retailers there are often common product ranges from the same suppliers and therefore a trouva environment would, arguably, only be driven by price – much as the amazon marketplace is driven and often to the detriment of the brand and the detriment of retail margins.

But hang on.

Perhaps it could work from the brand supplier side.

Sportshub

My work brings me into contact not only with large leading brands such as Uhlsport and Spalding, but also with smaller sports brands, start-ups and sporting goods manufacturers looking for a route to market.

Often my advice is simple – the wholesale route is becoming increasingly difficult; in each category there are many competing products; the consumer is demanding lower and lower prices; many retailers don’t want to take a risk on new brands/product etc etc…..

But imagine there was a credible alternative.

A place where new, niche, innovative products could be brought to market. A hub where these “artisan” brands could showcase their wares. A place where sporting goods products with limited distribution (and therefore not found on the High Street or the big online retailers) but with unique propositions could be found.

An Aladdins Cave of specialist sporting goods.

Challenges

Of course there would be some challenges. However one could imagine some strong PR driving initial growth as the platform would allow small businesses the chance to showcase their ranges and be a strong traffic driver.

Logistically the brands could simply create new product listings and all fulfilment would be done by them also with the hub simply taking a commission.

Not only could this provide a new revenue stream for these brands but it could also act as a shop window for, the wider trade to see new products – acting a little like a virtual trade show.

The future

We are not short of new brands coming into our industry but we are short of retailers to stock all of these new ranges forcing many new brands to sell direct either from their own website or through third party channels such as amazon.

Maybe, just maybe, a sportshub could create a new environment bringing them all together under one roof.

A simple way for the consumer to find the latest new and exciting thing in their sport.

A specialist environment but where the brand is in control of elements such as pricing and the way that the product is presented rather than the retailer.

An opportunity to ensure brands and product messages are not diluted.

I’m off to raise my seed capital if anyone fancies joining me….!

One giant sports trade database.

JustEat

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.

Intersport

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.

Online Store

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.

Data

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!

The potential pitfalls in football sponsorship

As I settle down to pen this article there is one topic dominating the news in the sporting world – the FIFA debacle.

At all levels the game of football has been moved firmly into the spotlight and, as part of this focus, some parties are now looking towards FIFA sponsors for comment and pressure.

This got me thinking about the potential pitfalls in sport sponsorship and what, if anything, can be done by sponsors when events such as those happening in Zurich hit the headlines.

A little research soon brought up some interesting conflicts that have arisen in the sporting world over the last fews years.

But first some statistics;
In 2011, the worldwide total revenue generated through sport sponsorship was $35.13 billion (according to PriceWaterhouseCoopers) and was predicted to steadily increase to over $45 billion by today.

The principal of sports sponsorship is to transfer the goodwill that supporters feel for the sport to the benefit of a brands equity and therefore any dilution of this message is not welcome from a sponsors perspective.

Not quite perfection.

Lets take, for example the winning goal in the 2010 FIFA World Cup?
Germany’s Mario Gatze 113 minute winner was a dramatic conclusion to the event but bitter sweet for the sponsors – wearing adidas kit but Nike boots, neither brand was able to fully capitalise on this captivating moment and therefore exact images of the moment were not subsequently used by either brand.

Of course it would have been a very different story if Gatze had poked in the winner wearing Predators or if Germany had been wearing Nike kit.

Sticking with football, it comes as no surprise that most sponsorship conflicts tend to occur between player agreement and team agreements.

Premier League
The Premier League model player contract (Form 26) contains provisions which obliges players to take part in official club events and promotional activities and attempts to anticipate how that should interact with the player’s own private endorsements.

One would anticipate that this ensures that the position is clear and that the player, whilst on club business, should wear the apparel relating to the club apparel sponsor, however in reality something as innocuous as a team photo can lead to direct conflict if a player has a separate apparel contract under their own commercial terms.
Neither party is in breach of contract, however there is no doubt that brand dilution and consumer confusion can occur in such circumstances.

Coca-Cola v Pepsi
Setting aside player versus club issues a 2013 Manchester United pre season friendly in Australia highlighted the importance of commercial sponsorships in football.
It appears, according to the Australian media, that Manchester United were willing to disappoint over 80,000 fans in Sydney in row over fizzy drinks.
Just 20 minutes before kick-off at the ANZ Stadium, United were refusing to take the pitch as long as the stadium’s giant screens were flashing up ads for Coca-Cola.
This was unacceptable to Manchester United’s commercial department who were on the brink of signing a multi-million pound sponsorship deal with Pepsi in the Asian-Pacific region.
The deal does not even include Australia, but United were not going to take any chances about offending Pepsi.
“Man U’s commercial department threatened that the team would not run out if the Cola-Cola sign stayed on the big screen,” an ANZ Stadium spokesman confirmed.
Coca-Cola are one of the main backers of the stadium which complicated the issue.

The Football Federation of Australia were even called in to help mediate proceedings and a compromise was finally reached where all Coke ads were replaced by ads for Mount Franklin water – another Coca-Cola Amatil product, but not a direct rival to Pepsi.

The Tiger Woods Scandal
In recent times the Tiger Woods scandal further highlighted the perils of brand association with disgraced athletes.

The Bedford Group recently reported on a US study following the breaking of the Woods story and the direct commercial impact that it had on two of the key sponsors that chose to stick by their man – EA Sports and Nike.
The study, conducted by Bruneau, C. & Crawford, A.(2010) concluded that, at initial release of the scandal, these two companies suffered the greatest cumulative stock loss of 5.55%.

The study shows that these two companies experienced the biggest initial negative impact from the scandal than the companies that chose to end their sponsorship deals with Woods.

In spite of this though, the study also shows that Nike and EA Sports appear to have recovered from those initial losses and that stock price reflects the perception of future profits and growth.
The case demonstrates that an athlete or team facing negative publicity can be forgiven by U.S. consumers in a fairly short time and overall, that the U.S. consumer public is relatively forgiving of companies that sponsor athletes or teams that incur the negative publicity.

Conclusion

Its clear then, that as sport and leisure becomes increasingly important, that sport sponsorship looks set to grow even further.

Being involved directly in the sport, many of us can recall the benefits of having the right athlete at the right time – think, for example, Freddie and KP for Woodworm or Nadal & Roddick for Babolat – sport sponsorships can clearly produce innumerable benefits but companies have to recognise that there are inherent potential risks.

Who knows what the FIFA fallout will be and it the likes of VISA, McDonalds, adidas and others will be forced to rethink their football sponsorship strategy.

What is clear is that companies should be sure to have a risk management strategy before entering a sport sponsorship agreement and be fully aware of the pitfalls that may arise.

Adidas v Nike – Different Strokes

Having spent the last few months “on the road” I have found myself in many retailers discussing the trade in general and, in particular, the changing fortunes of “the big two” – Nike and adidas.

Whilst Nike were recently reporting revenues up 15% to $7.4 billion, adidas Chief Executive Herbert Hanier was admitting “We had to accept in late 2014 that we’d not met all our financial ambitions which we’d set ourselves in the light of the strategic business plan Route 2015 five years ago”

Similarly as adidas roll into a 10 year £750M deal with Man United, Nike, who had been given a period of exclusivity to negotiate an extension with United and also retained the right to match any other offer, decided not to exercise either option, claiming the terms “did not represent good value for Nike’s shareholders”.

Are these isolated examples or are they part of a broader change in the way that the two brands are approaching the markets?

For years the development and marketing strategies appeared to share some common ground for both companies, however it does seem that we are starting to see a noticeable strategic shift in terms of marketing and business development strategy.

Getting closer to the market
One of the areas where the approach is certainly changing is within the manufacturing processes – driven not least by a desire to get new products to market quicker and to be closer (on all levels) to the market.

Adidas is to move the manufacturing of some goods from Asia back into Europe alongside investing in talent and marketing in Los Angeles, New York, London, Paris, Shanghai and Tokyo

Whilst the “act global, think local” drum has been banged by many a business historically, Roland Auschel from adidas underlines this approach commenting “Global brands are created in global cities. If we win running in New York and Los Angeles, we will win running in the US.”

The brand is also testing automated production units that would speed up manufacturing and allow customers to personalise their purchases.
The latter element of this strategy is certainly gaining momentum across the UK retail trade and High Street brands such as Zara are undoubtedly benefitting from increased production speed.

More is doing less
From a ranging point of view the adidas approach to 2020 is “More by doing less” and aims to carve out efficiencies from a stretched product range that was eating into margins due to surplus stock and muddled lineup.

As Eric Liedtke, head of global brands at Adidas, explains: “The place we wanted to cut down on is models. If we do a hoody and it’s black that’s one product. If we do it in 30 colours then that’s 30 SKUs but it’s still one model. That’s what a consumer wants, they want to see variation of a single model. That cuts [things] down from a workload perspective so that we can make more efficiencies as a brand because it’s just one hoody in a factory with different dyes.”

Adidas also plans to make the cuts to its product line by 2016 and will repeat over and over until it gets the right balance to be competitive with things that drive the market.

Future plans cost money
Nike, on the other hand, continues to invest with their spending plans higher than ever.

Its push to drive higher retail revenues through bricks-and-mortar stores has resulted in higher expenditures. The hi-tech premium image that the company puts across also means a higher investment on store rollouts.
The digital experience and e-commerce – The company spends considerably on enhancing the digital experience for customers and increasing e-commerce sales.
Research on innovative manufacturing technologies– This would ultimately result in lowering the cost of production, but requires on-going investment.
Capex expenditure is set to rise from just above 2% to approaching 4%.

Conclusion
So where does this leave us?

Five years ago Adidas presented an ambitious Route 2015 which targeted sales of €17bn by the end of 2015. While it ultimately failed to hit the target, it gave the brand a footing in emerging markets and increased revenues by more than 40 per cent since 2010.

However did they lose the consumer connection along the way?

Nike, have seen market share and revenues rise during that same period.

Are we at a crossroads in the evolution of our two most powerful brands where, whilst still some common ground, their areas of focus are moving in different directions.

What is clear is that how the consumer connects with these brands in the future will change – whether a forced change through technology, or a change through strategy – and with the industry moving faster than ever its difficult to predict who will benefit most.

The digital touch points will be critical but most importantly the consumer must be at the heart of everything that the brands do.

Consumers want to shape their preferred brands in a way that they have never been able to before and the brand that empowers us to do so, whilst maintaining their clear development objectives, will be the brand that ultimately succeeds.

Are adidas on track for Route 2015?

Route 2015

In November 2010 adidas unveiled a business plan that the brand hoped would make it the biggest sports manufacturing company in the world by 2015.

Called Route 2015, the plan aimed to grow adidas Group business by between 45-50 per cent by 2015 to €17billion.

Based on the group’s strong brands, premium products, extensive global presence and its commitment to innovation and the consumer, adidas aspired to outperform total market growth (both GDP and the sporting goods market) and to continue growing its bottom line faster than its top line.

In addition, the group planed to lay the foundation for leadership in the sporting goods industry by outgrowing its major competitor, Nike, in the next five years. Adidas targeted a compound annual earnings growth rate of 15% and wanted to reach an operating margin of 11% sustainably by 2015 at the latest.

At the time the strategic business plan was the most comprehensive plan that adidas had ever presented.

4 Years on

Roll forward to 2014, nearly four years into the five year initiative, and things aren’t quite going to plan..

2014 announcements see gross margins forecast to decrease to a level between 48.5% and 49.0%, having previously been between 49.5% to 49.8% and operating margin to be at a level between 6.5% and 7.0%; previously it was between 8.5% and 9.0%

Projected earnings were reduced to €650 million after the German company had expected profits of between €830 and 930 million.

So whats gone wrong?

Its clear that the challenging golf market (massive declines in participation at the expense of the “MAMILs”(Middle Aged Men in Lycra creating a cycling boom) has not helped the Taylor Made side of the business and, likewise, the problems in Russia and other former Soviet republics as problematic.

However some commentators are suggesting that these broad issues hide a more fundamental shift in the attitude of the brand towards its retail partners and a lack of focus on its R&D and marketing initiatives.

The move towards more direct sale business (through online and mono stores) has put them in direct conflict with their core retail partners – one only has to look at the Chelsea shirt issue with Sports Direct – as well as opening the battle grounds on selective distribution.

At present it appears that both of these battles are being lost leaving Chief executive Herbert Hainer vowing to unleash Adidas’ “most ambitious” brand campaign to date, with an increasing focus on digital media spend.

It is true that Adidas has confirmed it plans to boost its marketing investment to about 13% of sales in 2014 and to 13% to 14% in 2015, however anecdotal evidence, certainly from the UK/European market, suggests that some retail sentiment has been lost over the past few years and that increased spend alone will not kick-start the targeted growth.

The competition

Nike, meanwhile, continue to go from strength to strength with first quarter revenues up 15% year on year and a rising share prices that underlines stock market and, arguably, sports market confidence.

A successful World Cup campaign for the brand has helped bolster confidence versus its German rival and has further compounded the issues that adidas faces versus its stated Route to 2015 objectives.

Under Armour too continue to mount a global challenge and, particularly in apparel, may begin to fill the hole that adidas may be leaving.

The future

Its too early to say that there is a changing of the guard particularly as, perhaps, the biggest question facing the “mega brands” is the speed at which market change is occurring and the shift from wholesaling to own brand strategies.

One only has to visit the Sports Direct Shirebrook store to see the investment that Nike have made in trade support. In contrast adidas appear as the poor relation. If, across Europe, the strategy is similar then it is clear who the short term winner will be.

However lets look forward 5,8,10 years. Will it be the wholesale or the direct sale business which will be the driver for sports brands.

Certainly the Asian and emerging Russian markets are driven by the latter approach – will we see a shift West as these strategies demonstrate increased brand control and increased margins.

To drive a global strategy for direct sales is relatively straightforward. To drive a global wholesale strategy, when you consider the effect of ecommerce and the emerging European/Global retailers, is more complicated.

With no major sporting events in 2015 the marketing efforts of the major brands and, perhaps more importantly, the co-operative support that they provide, is likely to be the difference between adidas moving either closer or further away from their development goals.

Adidas management have already admitted that the group is not on track for its business plan called “Route 2015″ and that these targets will be met “later than expected”.

It remains to be seen when, or if, that day will arrive.