Dicks Looks to Triple E-Commerce Business by 2015
Dicks Sporting Goods told attendees at the Bank of America Merrill Lynch Consumer & Retail Conference that it expects to triple its e-commerce business by 2015. In 2009, e-commerce revenues were $103 million and last year reached just under $300 million, representing about 5 percent of Dicks SGs total sales.
The forecast comes as Dicks SG reported a 54.2 percent increase in the e-commerce business in its fourth quarter. At the conference, Ed Stack, Dick’s SGs chairman and CEO, said the retailer plans to spend about 4 cents a share to further develop its online business.
We are continuing to upgrade the functionality, expanding the content, investing in new capabilities, and beginning to leverage our store base, said Stack. All of Dicks SGs 518 stores now have ship-from-store capability. Online buyers can return product to stores and associates can order an out-of-stock in-store online to ship to a customer. For 2013, in-store pickup of online purchases is being piloted.
Stack noted that its online business is still not as profitable as an in-store transaction but changing the fulfillment model and adding ship-from-store is helping online margins. He expects the business will be much more profitable this year than it was this past year, and will be much closer or on par with the in-store profitability over the next three years.
Other opportunities will come when Dicks SG takes over full control of its online business in 2017. Currently, GSI hosts the website and fulfillment while Dicks SG handles merchandise and marketing. Added Stack, There is going to be a significant amount of business done online and we plan to go and get that.
Asked about the threat from Amazon, Dicks SG has found that 72 percent of the items Dicks SG carries arent sold on Amazon as its major brands, including Nike and Under Armour, do not sell to Amazon on a direct basis. Similar concerns we heard when Dicks SG went public ten years ago over potential competition from Walmart, Target and Kmart. Just as then, its major brands didnt sell those categories of retailer and I dont suspect they are going to be opening up that distribution to Amazon on a direct basis.
Other highlights of Dick SGs presentation:
The new Field & Stream stores, with two planned this year, will carry some better higher end hunting and shooting products, including some higher end and a broader assortment of apparel not carried in Dicks SG currently. The firearms assortment will also be slightly modified. For instance, handguns, not sold at Dicks SG stores, will be sold. A Field & Stream website is also being planned. Stack said part of the motivation for opening Field & Stream stores is because Cabelas is opening smaller stores closer to Dicks SG locations.
Its private label brands are expected to become a $1 billion business by 2017, although no comparison figure was given for 2012. Its roster includes Field & Stream and Top-Flite, both acquired last year, as well as Adidas baseball, Umbro, and women’s and men’s Reebok athletic apparel. Margin rates on these products are usually 600 to 800 basis points higher than the brands that they replace.
A little more than 20 percent of its Nike products from an apparel standpoint is exclusive to Dicks SG, such as the Nike Elite basketball collection. Dicks SG also has also gained exclusive product with Under Armour around the NFL Combine as well as adiZero Ghost basketball shoe with many of these exclusives very successful for us.
Dicks SG will expand its Nike Field House concept from 171 at the close of 2012 to just under 300 this year. It closed the year with 107 Under Armour concept shops and will add between 50 to 75 this year. It closed the year with 91 The North Face shops and is working with TNF to develop a shop concept that can be rolled out into its single-level stores.
Dicks estimates it has 8.5 percent share of the U.S. sporting goods market.
