European Sporting Goods Trends – 2015 and beyond

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

dollars.

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.

 

The Trends

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:

 

1. Outdoor 

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.

2. Running 

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.

3. Cycling

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.

 

Conclusion

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-

plus group.

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

sports.

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.

The impact of flash sale sites on the UK Sports Trade

Every sports brand has close out and every sports brand looks for the cleanest way to liquidate their close out stock with minimal market impact to protect both the core customer base and the brand equity.

Often European based stock lines are moved to other business units in “less sensitive” markets in the world and/or the stock is diluted across many markets and many customers.

Certainly sports retailers, in any market, are willing to embrace close out stock as a way to enhance margin and to offer the consumer substantial savings off RRP without margin erosion.

 

From the brand perspective however there always remains the trade off between the value of in-line stock commitment given and the close out business taken (where, of course, brand margins are massively eroded).

Certainly there are pure play close out specialists that are incredibly successful and where this trade off is less relevant. MandM Direct are one such example where, by working closely with selected brand partners and targeting end users by leveraging their database, catalogue and web presence they can provide an excellent solution for sports brands looking to move large volumes of excess stocks.

What started from placing newspaper adverts adversing close out has now grown to a multi million pound business working across sport and fashion.

 

Flash Sale

However, in today’s new world, this traditional approach is being challenged by a new phenomenon – flash sale sites – which are not only taking close out products and pushing to a new audience but are also bringing wider sales opportunities to sports brands.

Flash sales are exactly what their name suggests – sales in a flash. With an air of exclusivity and luxury brand names, flash-sale websites host limited-time sales for members only.

How these websites work is simple. They order stock from brands after the sale has closed, enabling them to pass on the biggest savings. And with free membership and discounts of up to 80pc, shoppers are now logging on in the thousands.

The only drawback from these sites is that delivery can take up to four weeks, but many shoppers will think it is worth the wait.

 

Groupon

Perhaps the most prominent of these sites is Groupon. Launched in November 2008, to target specific cities and their surrounding areas with special offers, Chicago was targeted first followed shortly by, Boston, New York City and Toronto. By October 2010 Groupon served more than 150 markets in North America and 100 markets in Europe, Asia and South America and had 35 million registered users and was offering flash sale opportunities across a wider range of goods and services including sports equipment.

As the number of registered users has grown in the UK Groupon has captured the modern consumer who, despite the recent tough economic times, love to spend money. They especially love to spend money where they get a discount or a perceived bargain. Groupon works because it provides motivating choices for its motivated group of consumers.

Secondly, Groupon can easily become viral, and its daily discounts spread quickly through email. Groupon subscribers like to forward the deal-of-the-day as recommendation links to their friend. In a world of social media and online personal suggestions, an email suggestion carries a lot of clout.

The initial success of Groupon, and other sites such as Wowcher, was initially driven by deals in local businesses such as restaurants, beauty salons and hotels however as the databases have grown so the opportunity to target these deal hungry consumers with almost anything has grown.

In the same way that consumers get swept along by a bargain within the likes of Sports Direct they are now getting swept along by sporting goods deals offered by Groupon.

From a brand perspective the appeal is growing – where else can you shift 20,000 units with a week long promotion?

 

Sports Pursuit

For some brands however the Groupon environment it not where they want their products to be seen- something that didn’t go unnoticed. Sports Pursuit, launched in August 2011 and within the space of less than two years has grown its membership base to over 1 million users and continues to grow apace.

Initially targeting triathletes with limited time discounts on new gear the business has evolved to embrace over 600 brand name suppliers across sports in general.

A key business driver has been the use of social media with a high profile Facebook and Twitter presence allowing Sports Pursuit to gain traction very quickly and to take advantage of word of mouth referrals and to tap into the sports enthusiast.

From a psychological perspective consumers love to refer and recommend a new deal or an offer and uncover something that their peer group are not aware of.

Sports Pursuit takes full advantage to this.

Such was the immediate success of the business that within 12 months they had secured £1.4 million in a Series A funding round from angel investors such as Peter Draper, former marketing director of Manchester United football club, Zoopla CEO Alex Chesterman and Lovefilm co-founder William Reeve.

By February 2014 a further £5 million had been raised and many sports brands have now begun targeting the company for core strategic growth.

The proposition too has moved beyond clearance deals with core suppliers already developing SMU programmes and special activities to reinforce this air of exclusivity and “secret deals”.

Conclusion

Spots Pursuit are driving change within the sports trade and have certainly used social media to great effect to enable them to build a core database. They have then used more traditional direct marketing techniques to continue to grow new users and connect with existing users.

As the customer base for sports brands continues to evolve it is clear that flash sale sites do offer a new channel opportunity and, one would imagine, is an area that will continue to grow over the coming years.

Businesses such as The Clymb in the US have proven the model can be incredibly successful in the sporting and outdoor goods arena and Sports Pursuit, and others, will continue to offer new opportunities for the brands.

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.