SGB Question Asks: ‘What Happens When Industry Brands Go to Mass?”

 

In response to a monthly question to SportsOneSource Network Members, the majority felt the shift to selling to mass channels was unhealthy for the industry. The primary reason: brand perceptions are lowered in the eyes of consumers.

“I have experienced weakening of brands when they choose to sell through mass channels – most especially branded clothing,” wrote Randy Ruch, CEO, Schuylkill Valley Sports in Eastern Pennsylvania. “The prime customer, 15 to 28 years old, see the distribution and it turns them off. They feel the brand is no longer authentic as an athletic brand. For the manufacturer, this added volume via the mass channel is a short-sighted plan and it kills the long-term success, mystique and power of the brand.”

Many feel only the service and promotional support available at athletic-stores establishes credibility for athletic brands. Moreover, a few feel the poor service at mass turns consumers off to the whole sporting goods industry. At the same time, many admit that they can't compete with the prices at mass. And some almost feel betrayed that brands they launched and nurtured over the years have become virtual loss leaders for many mass chains.

“The small business and the boutique style shops are very important in my eyes to these manufacturers,” argued Sue Heether, president at Sports Her Way in Maryland. “We tend to offer something that you generally do not find at the big box retailers, customer service based on product knowledge. I know it is a business move on their end to hit a greater market, but they need to realize that the market is seeded by small businesses and boutiques. We take the customer in. We tell them what is new and hot and trendy. We create the buzz.”

And although some vendors argue that these often more promotional channels reach a different audience specialty retailers are not buying it.  “It’s hard to compete when you have to sell at 40 to 60 percent markup and Costco is at 15,” said Stuart Snow, a VP of merchandising for the buying group, Nation’s Best Sports.

But others felt the stigma around selling to mass has been significantly reduced over the years. Helped by bargains easily found on the Internet, the consumer knows he or she will find the better gear and experienced sales staff in specialty shops and get the more price-targeted, watered-down product at the larger stores. A few also noted that the electronics and camera industries have been healthily selling to both mass and specialty for years. As long as it's fairly exclusive, product can be sold to mass while shoppers upgrade to specialty for the larger selection and better service, they argue.

For brands, mass looms as a bigger opportunity because more and more shoppers are heading to Wal-Mart, Target, Costco and Kohl's as these chains have expanded. In the most favorable light, some argue that selling to mass helps increase exposure for many of the industry's brands and the entry-level price points often provides an entry point to get people started in sports.

Keith Baker, co-owner at The Trailhead in Buena Vista CO, believes the industry could look to the success many fashion players such as Ralph Lauren have had in creating “diffusion labels” to reach lower-priced channels.

“I'm all for democratizing the outdoors and for getting more people involved in the outdoors,” said Baker.
Moreover, some believe it's a natural evolution for brands to be introduced to consumers in specialty channels and then shift to more mass channels to reach their next level of growth.

“You can't have a brand such as Nike without the mass merchant volume,” said Dan Smith, co-owner and vice president at NBC Inventory, a closeout wholesale company. “Tiger Woods doesn't come cheap. The independent sporting goods retailers must continue to reap the benefit of a few years of exclusive distribution and be prepared for the inevitable change in distribution, while constantly looking for the next new brand.”

Finally, even some brands that would rather remain in specialty concede that given the current difficult times, sales to other channels are necessary.

“With the difficult economic challenges all brands have, the only way many have to flush excess inventory is to sell at the discount/mass market stores,” said a VP of global production at an outdoor apparel company who wished to remain anonymous. “Is this what anyone would rather do?….NO, of course not. However, all businesses must do what is necessary to keep their employees in much needed jobs.”

But the debate ensues on whether even sales of clearly differentiated lines to mass channels somewhat diminishes a brand's perceived value. Some feel only a few brands – some mentioned Nike and The North Face – can sell in more promotional channels while still commanding a premium price at specialty.

“When brands go mass, it's hard to keep that sense of loyalty,” augers Leonard Cercone, partner at Cercone Brown & Co. “The truth is that brands need to figure out the common ground because for most, staying specialty only isn't an option. And many have balanced this well, such as The North Face. The key is in the brand's commitment to its core sport, its drive to innovate and, of course, a good product segmentation strategy.”