Post Bankruptcies:What’s Next for Sporting Goods Makers?

Sporting Goods And Retail Space Are Shrinking

By now, most major sporting goods suppliers of apparel, footwear and equipment have taken a significant write-off from the Sports Authority bankruptcy and others, like Vestis Group’s Eastern Mountain Sports and Sports Chalet.

Sports Authority represented about 450 big doors for equipment, shoes and apparel. Under Armour has reported a $23 million dollar charge related to the bankruptcy, one of the largest reported losses. Some will be resurrected by buyers like Dick’s Sporting Goods, but most of these distribution points have gone away forever. This is natural pruning of a diseased tree.

The sporting goods channel is challenged by many factors. They have an over abundance of similar apparel, when the athletic apparel market has exploded in terms of styling, new brands and available outlets to buy. Women no longer need to shop in sporting goods stores for clothes. Young people have lower sports participation rates and more single-sport focus. Millennials are increasingly exercising in specialty fitness clubs like SoulCycle, Flywheel, Orange Theory, Pure Barre, Title Boxing and others, versus traditional sports participation.

Health and wellness are mega-trends, but we just don’t need as much square footage in traditional sporting goods doors. A lot of athletic apparel and footwear has migrated away to other retail doors and we are in a seriously over-stored environment for all types of consumer goods.

Sports & Athletic Manufacturers Must Get Creative

What does a traditional manufacturer of athletic apparel, footwear or equipment do when their available floor or virtual distribution space is shrinking? They have to get creative and take share from competitors. That means business focus, seeking alternative distribution points and sharpening their brand and product offerings. Here are six ways to improve athletic related sales in a diluted market:

Focus Your Strategy – Now more than ever companies cannot afford to dabble in duplicative or pet projects that drain precious resources. This means pruning and consolidating your company’s tree, to concentrate on fewer, but clearly promising categories or businesses.

Find New Distribution Channels – This means potentially selling into a channel, location, market or country that you have never considered before.

Under Armour just announced that they are going to sell the moderate channel starting with Kohl’s. This will help them reach more female, suburban customers. They have around 1100 locations, which could more than make up for the Sports Authority loss.

Sometimes creative distribution creates strange bedfellows, but everyone wins. A great example of this is Nordstrom selling J. Crew’s Madewell product, in their full-line stores. Nordstrom is supporting a retail competitor and J. Crew has become a wholesaler. They both have flipped the script and it is working out very well.

Brainstorm for new opportunities by imagining the mirror opposite of your current strategy and point-of-view. Consider complementary partner brands for co-promotion.

Grow Direct to Consumer –Wholesale brands can no longer count on their traditional retail customers for continued future growth. They need to have a strong direct-to-consumer strategy to sell to or introduce their brands to new consumers. This includes considering every possible format…brick and mortar, pop-ups, retail showrooms for e-commerce, e-commerce, brand ambassador selling, direct mail, shopping trucks, event and festival sales, VIP events, home shopping networks, parties, etc. What are the new ways to bring it to the customer, on their terms?

Think Product First – There is no fooling consumers, they know innovation and creativity when they see it. Marginal product always equals marginal results. Frequently companies pour millions into marketing, when their product doesn’t live up to the hype. Creating growth means product first, as they may never see your marketing messages in a splintered media.

Force Fresh Perspectives and Creative Risk Taking – Stella McCartney, Pharrell Williams and Kanye, put Adidas back on the map. Rihanna is growing Puma’s bottom line. These celebrity or designer collaborations can be game-changing and newsworthy (not always successful) to bring new converts into the brand.

The idea is forcing fresh perspectives and taking creative risks. For instance, this can be done by hiring fashion people to do shoes and shoe people to re-imagine apparel. How do you surprise and delight customers? If you are still working like it’s 2006, you’re probably not on an uphill track.

Great Brand Experience is Key – Clearly defined brands that offer a consistent experience to their customers, will fare best in a lukewarm market. Does you product have an identity that it can be identified without labels? Do your products, stores, website, packaging, marketing and service have a compelling and consistent promise for the target consumer?

When was the last time you went in a sporting goods or retail  store and felt excited to buy? Consumers increasingly want experiences from brick and mortar retail, so stores must innovate with decor, services, restaurants, bars, events, fitting clinics and loyalty programs to attract a consumer bombarded with choices. Own The Moment stores by Bauer is an exciting example of a completely reimagined sporting goods experience.

 

Some other posts you might enjoy:

Decoding Millennial Shopping Traits & Habits

Are Sporting Goods & Outdoor in a Death Spiral?

The New Definition of Athletic Apparel

The Dix & Pond Blog, by Stephanie Bernier is the blog of  Dix & Pond Consulting, a Boston-based, company that consults on business strategy, creative direction, brand experience, trends, product development and merchandising. Clients include retailers, apparel, footwear & consumer companies.  CONTACT US TODAY! 

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Are Sporting Goods & Outdoor in a Death Spiral?

Vestis Retail Group Files for Bankruptcy

Another one bites the dust. The Vestis Retail Group, owner of  Eastern Mountain Sports, Sport Chalet and Bob’s Stores of Meriden, CT is filing for bankruptcy. This follows the high-profile bankruptcy filing of Sports Authority of Englewood, CO and the recent closure of Boston-based City Sports stores. Prediction, the sporting goods graveyard will have more big-name corpses by year-end.

I also believe the outdoor, wood beam and hunter green team, Cabela’s, Bass Pro ShopsL.L. Bean and Dick’s Sporting Goods are seriously challenged these days. Because of the uniformity and proliferation of these outdoor/active mega stores, they are no longer the hot destination stores they once were. They’re surely feeling competitive headwinds from many directions. Dick’s will benefit from Sports Authority closures, but you can’t really say you’re a good student, just because the class average goes down.

In my view, the outdoor and sporting goods channels have reached saturation point and every niche has a ceiling. They will have to get smaller and find serious points of differentiation to thrive.

They also have an aging demographic and won’t have the same appeal to Millennials. 45% of this important demographic belong to a minority group (according to the US Census) unlike the Boomers and Generation X before them. The Millennial generation has more varied taste and less money to spend on apparel and accessories.

Apparel on clearance at EMS.

Apparel on clearance at EMS

What’s Happening in The Sporting Goods Channel?

Why is this happening in the sporting goods channel when sneakers are red-hot and athletic apparel has been biggest bright spot in apparel for almost a decade?

1. Amazon is an elephant in the room. According to a Slice Intelligence survey of 3.5 million consumers Amazon had a 43% share of all online sales last November and December. Their enormous selection, comparative deals, fast speed and free shipping are hard to compete with. According to Cowen & Co They are also on track to become the largest seller of apparel in the US, probably beating Macy’s by next year.

2. Sporting goods stores are no longer a key destination for women to buy athletic apparel. As the “athleisure trend” grew, so did the sources women and men have to buy these looks. Lululemon and Under Armour were the pioneers that challenged the category with fashion, quality and higher prices. Now the competition is fierce with traditional retailers increasing their assortments, specialty retailers like Athleta, brand-owned stores, online specialists and many wholesalers adding active to their assortments. Since women buy 80% of all consumer purchases, there is lot less traffic in sporting goods stores.

3. “Athletic inspired”, lifestyle apparel is far more important than performance apparel. The big expansion of active is wearing these clothes out of the gym. Many sporting goods stores and some apparel brands seem to think it is primarily about functionality and sweat reduction, not fashion and compelling design. Frequently, their lifestyle apparel offering is only the classic “outdoor” brands.

Many sporting goods stores devote enormous square footage to apparel and they generally don’t have the fashion chops to compete in a brutally competitive, rapidly changing apparel sector. Who needs another purple mock half-zip?

4. Sporting goods stores used to be the preferred place to buy sneakers. Performance sneakers,” sport-inspired” vulcanized cousins and fashion variations are the trending casual footwear today. Sporting goods retailers have not kept up with sneaker specialists and have treated the category as important as golf equipment. Women can buy “athletic-inspired” footwear from any of their favorite retailers from Forever 21 to Nordstrom today.

5. Youth participation is down trending for many sports. See this chart from Sports Business Journal in August 2015. There are many things going on here from the cost participation, fear of injuries, lack of interest, over specialization in one sport, etc. The drop in participation naturally creates less demand for equipment and related apparel:Youth sports participation rates.

What Should Brands do to Survive in This Climate?

What is an apparel, footwear brand or store to do in this highly competitive market? It demands creating real brand value, innovation, differentiation, targeting and understanding your competitive advantage in the market.

Competing just on price is a fool’s game. Fashion is emotionally driven by fantasy, hope or self-fulfillment, not just technical features or price. Wearable tech optimists, be warned.

Consumers want simple and exciting shopping experiences from brick and mortar or online stores. It’s time for the sporting goods and outdoor retailers to reimagine their stores for today, with nothing being off-the-table. Well conceived and executed brand experiences will turn this negative outlook positive.

 

You might enjoy these previous posts:

The New Definition of Athletic Apparel

Sports Authority Teeters on Bankruptcy- See The Reasons

Decoding  Millennial Shopping Traits & Habits

 

The Dix & Pond Blog is the blog of  Dix & Pond Consulting,  a Boston-based, company that consults on trends and creative direction, brand experience, business strategy, product development, merchandising and provides executive coaching for retail, apparel, footwear & consumer companies.  CONTACT US TODAY! 

Thank you for liking and sharing this, if you enjoyed the post! 

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