Companies in the sporting goods business are now coming out with their growth plans, many of them 3 years or more. These plans are aggressive and this signals a change in the landscape. For at least ten years the sporting goods business has been consolidating. This means that stock holders and stake holders want healthy and sustained growth from the new larger company. And it’s up to senior management to plot that growth.
Here’s the challenge.
Where will that growth come from? The traditional sales channels are specialty retail, large specialty retail (REI, EMS, Dicks, Cabela’s,etc.), and huge retail (Walmart).
Specialty retail is averaging growth of between 3-5% over a six year period ending at the beginning of 2010. Large specialty and the big retailers are growing, on average, in the area of 8-10%. These numbers won’t change much. It takes a lot for any of these channels to plan for the explosive growth demanded by the brands. A lot of money will be needed for expansion, inventory and salespeople.
Brands realize that traditional retail can’t supply the lion’s share of the growth, unless many of the brands go to the very big boxes and most brands still believe that Walmart will dilute the authenticity of their product offerings.
The explosive growth will come from two relatively new channels, branded stores and online sales. Online sales have grown, on average, about 20% a year in the last 4 years.
New Balance, Nike, Columbia, The North Face, Merrell, Icebreaker, Marmot, and many others, have announced they will be opening retail stores across the country. Why? Because they can offer wider selections and fulfill inventory faster, which means a bigger upside.
Same thing with the Online Sales Channel, aka, the company web store. Brands are selling merchandise at full price, can replenish inventory instantly, and offer the entire collection. There is a lot of profit margin here.
So, online sales and branded retail stores will be joining the landscape of Channel Management.
Here’s Channel Signal’s guess as to how Brand’s will position the Channels.
- specialty retail will be used to create momentum and maintain authenticity.
- large retail…less of the same but bigger numbers for the brands.
- Walmart, Kmart, etc…look for the brands to open this channel in limited amounts to move merchandise that is lower end. Numbers are good here.
- Branded stores…good margins, good selection and success will fuel more stores across the country.
- Online stores… great margins, great selection, and more money pumped into the web site to make it more of a shopping experience.
One thing we haven’t addressed and that is social media. My guess, the brands will find ways to build this channel as a sales channel or use it to drive traffic to the other sales channels.
Channel management will be critical moving into the future. And so will tracking what channels are generating the buzz and how that translates into profit.
Thanks to Leisure Trends for the growth stats.
