A recent article in the New York Times started, “If its not marked down, Americas shoppers are telling merchants to forget it”. The article went on, “Fewer shoppers are interested because they have become accustomed to bargains-discounts that are further eroding retailers profits in an already lackluster retail environment”.
While we are clearly in a soft retail period right now – due to the War, the economy and lack of real fashion newness – I believe that the sporting goods industry can be much less promotional than it is currently and can still thrive. Lets look at some history:
Our industry has always been about sharp pricing and perceived value. The great regional players of the 1980s always focused on offering value to the customer, even as the business exploded. But price promoting, in the extreme levels that we are seeing now, was never part of the business. Price parity existed across the industry. Business was driven by great assortments of terrific product at fair prices.
The over-expansion and out-of-control acquisition strategies of the 1980s started to change the landscape. Department stores led the charge, running more aggressive promotions and deeper discounts to try to drive top-line results. As sales softened, “One Day Sales” became 4-day events, with coupons and other come-ons to drive sales. Retailers leaned harder and harder on their vendors to cover the cost of markdowns. Attention to merchandise assortments was given up in favor of looking for the best deal. As a consequence of this strategy, the department stores have suffered through the worst five years in their history – with no relief in sight.
As the department store mentality has oozed into our industry, the sporting goods category has become more promotional as well. “Buy One, Get One” events are now the norm. Advertising space, instead of focusing on the aspirational nature of the products we sell, now only talk of price. Ad copy, instead of explaining the technical aspects of a product, is filled with disclaimers and exclusions from the sale.
Lets face it, BOGOs are a suckers game. As we have seen in recent announcements for Foot Locker (“BOGOs are getting tired”) and from Gart and The Sports Authority, retailers who run a highly promotional footwear business have encountered great difficulty comping those sale results. BOGOs allow our customers to skim off the best products at discounts, leaving the older styles and worst sellers to gather dust on the shelves. BOGOs force bad decision making in assortment planning. In the end, BOGOs show lack of merchandising imagination and vision. And, to top it all off, those who have been the most promotional have not fared significantly better than those who have not.
So, how do we get out of this mess?
First, the vendors must stop subsidizing the promotional events. By rewarding those who have no other merchandising direction than to run a deep discount sale event, the vendor community is acting as a co-dependent in the promotional addiction. When the vendors decide to protect their brands and stop giving favor to the biggest price offenders, retailers will not be able to afford to continue to promote as aggressively.
Second, we as an industry must commit to the values that built this business: offering aspirational, technological products to a wide range of sports participants and enthusiasts. When retailers and manufacturers are willing to partner together to create great products our industry can thrive again.
Finally, the industry can take some great lessons from Dicks, Galyans and The Finish Line. All three have a clear merchandising direction. All three put major emphasis on store presentation messages that reflect their core values. All three are committed to brand building.
Yes, all three also “promote”, Galyans by Every Day Low Pricing and the others through selective, targeted and tasteful promotions. But, you wont see category wide BOGO events at any of these retailers. And, yet, they have shown some of the best results in the industry in terms of sales and productivity.
The American consumer is indeed “accustomed to bargains”. They process hundreds of value messages every day. The sporting goods industry is somewhat insulated from this promotional environment in that we sell aspirational products to help people lose weight, run faster or hit the ball farther. We must recognize the customer wants a deal, but we dont have to mortgage our industry to give it her.
We must commit ourselves to the price sanity of the 80s. We must find ways to build our industry back to its former heights or succumb to the death spiral, as have the department stores.
Contributing Editor Matt Powell is a Partner at SportsOneSource, LLC and Principal of Princeton Retail Analysis. He writes often for Sporting Goods Business and other retail and sport