Feb 7, 2017
Sneakernomics: Sports is Catching the Disease that’s Killing Retail
My colleague Marshal Cohen recently wrote a blog, “An
Urgent Message for Retail,” and in it he states that during the holiday season, “…consumers appeared to have grown numb to the early and constant promotions” and “[w]e have witnessed the demise of promotion’s reign as king of shopping influencers.”
The sports industry has been relatively immune to the cancer of relentless promotions – at least until Holiday 2016.
Sure, there has been discounting in the sports categories that are in systemic decline. Golf and fitness equipment like treadmills are two that come to mind. For the most part, though, the sports industry has been able to avoid counting on deep discounts to drive sales. Until now.
Holiday 2016 will go down as one of the most aggressively promoted years in sports retail. Here are some examples as to why, and what it means for this year.
While the massive sweatshirt category has been in decline for more than a year, brands and retailers seemed to think that it would magically bounce back. Instead, it took “40% off” pricing to produce a meager sales result and clear distressed inventory. With such deep discounting this leads me to think, what will it take to grow the business in 2017? Also, mid-market footwear retailers began boot promotions with “Buy One, Get One Free” starting on Black Friday. No one makes money with deals like that. Some brands also began to weaken or ignore their own “Minimum Advertised Price” policies in an effort to spark sales and clear stocks. This led to a free-for-all discount environment, which will continue into 2017.
On another note, NPD has found on several occasions that consumers are not purchasing products, including clothing and accessories, adorned with giant logos the way they used to do. Yet, sports brands and retailers trotted more of the same, in the hopes of achieving a different result. This caused markdowns to ensue.
In addition, an athleisure “bubble” was created as more fashion brands and retailers tried to grab a piece of the still strong category. Hundreds of new brands tried to jump in on the performance apparel boom. As they fail in 2017, the market will be flooded with deep discounts on poor imitations of activewear.
Of course, the ongoing retail rationalization has yet to improve this toxic situation. We won’t see any relief for this in 2017 either. More sports stores will likely close in 2017.
The sports industry is headed down the path of the teen retailers, where steeper discounts are no longer effective in clearing stockrooms, let alone driving sales and profits.
So how does the sports industry avoid this slide? We must get back to the core principles that built this business.
The sports industry is an inspirational and aspirational business. We inspire others to get fit and to improve their sports. Participants aspire to make themselves better. A race to bottom on price does neither.
Unrequited demand is another fundamental strategy in the sports business. If demand is not met, there is no need to promote.
Innovation has always been a cornerstone of the sports industry. Even in the distressed sweatshirt category, innovative and more technical products sold well this holiday and posted big increases. We must find ways to keep innovation strong. This will help fend off the athleisure bubble as well.
The sports industry has always been about premium and exclusive products. We must emphasize the premium nature of our business and avoid trying to grow by the lowest prices.
Segmentation has also been a core principle in sports. We must double down on having clear and distinct lines for different categories of retailers. Brands must also intentionally rationalize the number of retailers in the space, buy elevating the winners and letting the others improve or fall by the wayside.
Finally, the sports industry must stop chasing artificial targets set by Wall Street. Driving to an arbitrary growth target is a recipe for disaster. Brands and retailers must do what is right for the long term health of their businesses, rather than a short term and inconsequential goal set by the stock market.
If the sports industry can return to its core values, it has a much greater chance of being healthy once again.