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Feb 23, 2018

Sneakernomics: Sports Retail in the Internet Age, Part 1

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In 2017, growth in the U.S. athletic footwear and activewear markets meagerly improved. While sales in physical stores declined, online sales grew in the high single-digits. We can expect this pattern of online sales driving industry growth to continue.

At retail, a record number of physical stores closed in 2017 and it’s expected that even more will close over the next two years. Some have predicted that there will be 25 percent fewer malls in the U.S. Sports retailers are facing a very challenging time, especially in the brick-and-mortar channel.

Of course brick-and-mortar sports retail will continue to exist, but the industry must accept the fact that there will be fewer physical stores in the future, physical stores will contribute a smaller portion of total sales, and that profits in physical stores will get squeezed.

In this downsizing, which doors will close? Retailers must look towards building models that predict which stores are the likely closure candidates and move swiftly to get those units behind them. Stores that just break even today are never going to make money again. Stores that are in malls with vulnerable anchors will likely not survive. We cannot expect stores that are not growing now to return to growth. Closing marginally profitable or unprofitable doors improves the health and profitability of the remaining smaller companies. Retailers must be ruthless in their rationalization strategies.

Retailers must respond to this new normal. To compete in this new world order and hold onto their territory, they must elevate the shopping experience.

Today we have the ability to make the shopping experience more personal than ever before. With contextual marketing, retailers can know what their shoppers bought and can find ways to add on to or enhance that purchase. Consumers want to shop at retailers that know their needs and desires, sometimes even before they know themselves.

Shopping must also be easy and frictionless. Too many steps and too much time wasted are all negatives for today’s consumer. In addition, all shopping is social today. A consumer’s most important influencers are his/her peers. Retailers must make it easy for shopping to be more social.

Part of making shopping easier is to bring the internet into the store. Physical and virtual shelves need to be more fluidly intertwined. Retailers should arm sales associates with devices that can easily access inventory. These devices can also be great training tools for the sales associates.

Physical retail also needs to elevate the quality of their sales associates. With a tight labor market and increasing minimum wages, we can now demand more from our sales associates. If we pay peanuts, we get a different level of quality than if we pay top dollar and can demand the best.

Not all of these suggestions are easy. Many are complicated and expensive, but retailers must transform shopping into a unique and cohesive experience if they are to survive in the age of the internet.



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