As years go by, the sporting goods industry is improving its retail standards, whether online or off-. But the reality is it does not do it at the speed many of us would like, at least from a experiential and relevance standpoint.
We need to understand why the pace of this retail improvement is slow and sparse around the globe, and what the key elements are preventing it from elevating itself higher. And action this for the benefit of consumers and the sports fans.
When we look at the sports industry overall, some parts of it — events organisation (Olympics, NBA, football World Cup, etc) - have improved dramatically in last 20 years, becoming more interesting, engaging, social and relevant. Some aspects like inaccessibility, violence or remoteness have been mostly addressed.
When it comes to the sporting goods segment, we can safely say that products too have improved dramatically. The developments that Nike, adidas and many others brought to footwear and apparel are profound.
Consumers and sports aficionados have better and more diverse product to chose than even before — and is more widely accessible too.
Nevertheless when we move to the commercialisation of this product we face a different picture. Still, most of the product distribution (as much as 90 per cent) happens in contexts with little value added to the consumer.
As a matter of fact, the most relevant factor remains price in this 90 per cent. Despite all the efforts from several manufacturers to improve the product, to elevate the brand experience and to educate about the different benefits, retail remains obsessively centred on price, rather than value creation.
There are multiple factors that contribute to this reality: as sports footwear and apparel became mainstream during the 2000s in most of the western world, they got closer to a commodity.
Surely, sporting goods is still far from denim, but the overall perceived value of the product went down as it became more mainstream. Today, manufacturers have most of their SKUs placed at entry price points, which means high volumes and low margins, which leads to weak retail.
I believe there is an opportunity to increase the spread of product across price points, finding a balance that preserves volumes and enhances margins enough as to elevate the distribution.
A second factor is retail presentation and visual merchandising. Fast fashion, thanks to a verticalization of the market (and therefore additional margins), has in general improved the consumer experience, mostly in brick-and-mortar but also online in some cases.
A good example can be Inditex, Uniqlo or H & M
Third is need. Everyday fashion is first needed to start with and, second, the industry has managed to create in the consumers the need for expanded wardrobes. Today, the average wardrobe in the US has increased by 65 new pieces a year with an average expenditure of $1,700 a year, with women averaging twice this.
And 50 per cent of those pieces are never worn. Sports are more functional and while the overlap between day-to-day fashion and sports apparel has increased a lot, still sports remains very tied to the use the consumer wants to give to the product.
This entails a different way of showcasing and retailing the product.
There are a number of ways to improve the current retail landscape, and some of them have been action.
When it relates to manufacturers, they have, in general, raised the bar at sports retailing. The current presentation at branded outlets generally exceeds the one of multibrand retailers by far.
We can see how manufacturers push multibrand players to create branded spaces that allow them to fully express their brands and retail concepts.
Another opportunity that has been actioned is in specialised retailing. Cycling stores, yoga stores, running stores, all of them have a higher retail presentation and value creation that relates to the functional expertise of the retailer.
They are knowledgeable about the product they sell and relate to it. They can retail at better margins and more expensive products than general retailers.
The issue of poor retail expression sits in the area of traditional sports retailers that trade multiple brands and categories. The evolution of those concepts — Dick’s, Decathlon, Sports Master, InterSport etc, which represent the largest portion of the market — is the one that defines the future of the industry.
Most of these retailer operate under margin stress, and showing good profitability while sustaining a healthy top-line requires improved and differential management, good HR management and store staff education, a truly responsive supply chain, a technology backbone that enables this responsiveness and a true value creation for the consumer.
This is why we sustain that an approach where the multibrand retailer becomes a multi category specialist and partners with key manufacturers in each category is the only possible long-term future.
Other approaches based on price only and no consumer value creation can lead to a short or mid term volume sales, but lead also to a brand equity loss, wild discounts and lower marginality (bad for the rest of the market) and ultimately to an overall deterioration of the sporting goods industry overall.
We believe a tighter distribution management and product segmentation than we have today is very much needed to continue the elevation — faster — of the consumer experience.
So far, the luxury industry is managing this better than the sports industry.
In my opinion, manufacturers are the key piece in making this happen by more intense partnerships and selection of partners, as well as liquidation channels and stock management policies.
A final reference has to be done in regards of the consumer. While manufacturers hold responsibility in managing the distribution of their goods and segmentation, retailers need to do a deep consumer research with the objective of better understanding the needs to be fulfilled in a multi brand multi-category environment.
Only if and when both elements (the manufacturer and the retailer) do their part and partner to meet consumer expectations we will be in a better position than we are now.
The writer is President for the Sports Division at Gulf Marketing Group.
