Independent brick-and-mortar outdoor shops that spent the last two years dialing back their pre-season orders and rationalizing their assortments to conserve cash and reduce inventory risk may be ceding market share and growth to more aggressive online and multi-channel competitors.


After falling off in the wake of the Great Recession, online retail sales returned to double-digit growth in 2010. Through the first nine months of the current retail year, sales growth in the Specialty Retailer channel kept pace with the Internet channel in the area of outdoor footwear and outdoor apparel, where fit requirements bestow an advantage to brick-and-mortar stores. In hardgoods, however, Internet sales grew in the high-teens or at nearly three times the rate of the Specialty channel, according to OIA VantagePoint, the weekly retail point-of-sale data reporting platform developed specifically for the outdoor industry.
“Online retailers in 2010 were the only ones who stepped out and took inventory risk and they won in a big way,” said Topher Gaylord, president of Mountain Hardwear. “They took the most amount of risk with the most payback and they are winning at the moment.”
Mountain Hardwear anticipated that some of its traditional dealers would order conservatively and built additional re-order volume into its forecast for the fall/winter season.


“We are in a position to service growth,” said Gaylord, “because we assumed we would see greater at-once business. The specialty channel has an opportunity to capture additional upside with thoughtful buying and inventory management.”


Generally speaking, though, small brick-and-mortar retailers are not as well equipped or inclined as e-tailers to chase inventory, so that’s not a race they are likely to win.


Forrester Research is forecasting online sales will grow 16% during the holidays, or twice the rate of last year when it slowed in the wake of the Great Recession. That compares to forecasts of 2.5% to 3.0% growth for overall retail sales. A recent Forrester survey of 4,700 U.S. online consumers showed that they will make 37% of their purchases via an online channel this holiday season, compared with 30% in 2009.
Thanks to aggressive free shipping policies, pure play retailers like Zappos are making significant inroads into apparel sales, which account for about one-third of outdoor retailers’ margin share, according to research by Outdoor Industry Association. Zappos, which picks up return shipping fees for its domestic customers, has greatly expanded its selection of outdoor products since being acquired by Amazon.com in November 2009. 


“Historically, a number of brands have protected their retailers by not selling through Zappos,” notes Sam Orme, a securities analyst who follows active lifestyle brands and stocks for D.A. Davidson & Co. “However, this is now changing and – slowly, but surely – premium brands are coming on. In fairness to the brands, if you are not on Zappos you do not exist. If you are not on Zappos now you will be on in the next year.”


In a move aimed in large part at competing against Amazon.com, GSI Commerce last month rolled out ShopRunner, which offers unlimited free 2-day shipping, no minimum order size and unlimited free shipping on returned orders for a $79 annual membership fee. Dick’s Sporting Goods, Eastern Mountain Sports, The Sports Authority, the NBA Store, the NFLShop and Shop.NHL.com are all offering ShopRunner.


This will present significant additional competition for apparel and footwear sales for independent outdoor specialty dealers already struggling to keep up.


“We smaller accounts are getting thrown to the wayside because we are ordering smaller onesies and twosies,” said David Polivy, owner of Tahoe Mountain Sports, a California retailer. Polivy, who started selling online before opening his first brick-and-mortar store, said he feels increasingly marginalized by outdoor vendors. On one hand, they demand he place pre-season orders earlier and earlier. On the other hand, he is the last to know when they miss a shipping deadline or have close-outs available.


Those pressure will only increase, because more Americans are starting their shopping experience by going on line, notes Mark McKnight, marketing and e-commerce director for Rock/Creek, an outdoor retailer based in Chattanooga, TN.


“Amazon has become a huge part of how people research and shop,” notes McKnight. “The percent of customers that shop just one channel are minimal and customers that shop in two or more channels are more profitable.”


The proliferation of smartphones and a coming wave of geolocation apps and social shopping services like Groupon and Foursquare will only accelerate the trend in 2011.


During the current holiday shopping season, 18% of U.S. online adults plan to use their mobile device to compare retail prices, and 16% expect to use their phone to locate a nearby store, according Forrester.


In mid-November, REI joined the ranks of national retailers that display local availability online and Moosejaw became one of 35 retailers to start feeding Google store inventory data in near real-time so shoppers can see what’s in stock at each of its seven brick-and-mortar stores.
“We offer a lot of hard-to-find outdoor products, so this will really help drive people into our stores,” said Kate Runyon, Moosejaw's Internet marketing manager. “We see Google Local converting some online shoppers back to local, as they discover specialty retailers like Moosejaw.”


While helping multi-channel marketers drive customers back into their stores, these trends threaten to leave single-channel, mom-and-pop shops even further behind.


 “Here is reality retailers have to get mind around,” said McKnight at Rock/Creek. “If you don't have a website out there with the information, your customers are going somewhere else to do the research. If you have [the] right product at [the] right time, they will buy it, but you have to capture that purchase right away. It’s all about conversion rates.”