Nearly 60 percent of the decrease in prices for final demand services is attributable toSo at WalMart, Kohls, Footlocker, Macy's, etc... the prices you pay are falling. 6% is a huge drop. That's tar pits for the dinosaurs grew on mal-credit. And dinosaurs cannot adjust to an organically growing market:
margins for apparel, jewelry, footwear, and accessories retailing, which fell 6.0 percent. The indexes
for machinery and equipment wholesaling; health, beauty, and optical goods retailing; food retailing;
loan services (partial); and automotive fuels and lubricants retailing also declined.
From the rise of the casual camper to the boutique fitness boom, it can feel like there have never been more people in the market for sports apparel. As of 2015, sporting goods stores in the US were bringing in as much as $48 billion in annual revenue, according to IBISWorld, up from $39.8 billion in 2012. Sports participation is up, too. According to Euromonitor, participation in high school sports has increased from 25 percent to 35 percent over the last 35 years, with nearly double the number of female students playing sports as compared to the 1980s.
"My needs evolved, but in many ways, Sports Authority hasn't."
But there's a stark gap between an increasing customer base and many sports retailers — a gap that only continues to widen, no matter how many times companies see new ownership or rethink their businesses. As Hermina puts it, "My needs evolved, but in many ways, Sports Authority hasn't."
It's not as though Sports Authority has no idea of the trends in the marketplace, they buy the $50,000 Euromonitor reports that tell them so. It's just that Sports Authority has a hired and trained personnel, infrastructure, logistics and relationships that cannot be repurposed to meet the changes in a world where borrowing malcredit and get-big-or-get-out is over. Any more than Jeb Bush could repurpose himself in a Republican party base that wants a Donald Trump.
There are an incredible number of national and regional multi-brand sports retailers in America: Dick's Sporting Goods, Cabela's, Champs Sports, Bass Pro Shops, REI, Academy Sports, Modell's, and Big 5 Sporting Goods Corporation, to name a few — and these are just the ones that still exist today.
The least savvy, like Sports Authority, was no authority on what sportsfolk buy. Gone. Now Big 5 will see a temporary bump-up in sales as people who thought "Sports Authority" as the solution, a dwindling group to be sure, googles the nearest Big 5 and buys the soccer shoes or Nike Spandex. That is a mixed list. Within that list is REI, a co-op. It will thrive regardless of the economy.
As with all crowded markets, the sporting goods industry eventually hit a saturation point, and competition forced many stores to either close or be bought by bigger companies. The '70s and '80s saw many mergers and acquisitions in the space, and they just kept coming. Eastern Mountain Sports, for example, was founded by rock climbers Alan McDonough and Roger Furst in 1967. It was first sold to The Franklin Mint in 1979, which was subsequently bought by Warner Communications, and then sold to private firm American Retail Group. With financial backing from investors J.H. Whitney & Co., EMS chief executive Will Manzer bought control of the company in 2004, and then sold it to Vestis Retail Group in 2012, after Vestis had already acquired Sports Chalet and Bob's Stores. (Vestis was formed by Versa Capital Management, a firm best known for turning around sinking brands.)
There was no saturation. The amount of local sporting goods stores was pitch-perfect to the market. What happened is what you see above, roll-up artists borrowing malcredit to buy up all of the players. by the late 1980s, after the S&L bailout, it was clear "who who borrowed the most wins." So start up a pure play:
In the case of Sports Authority, it was founded in Florida in 1987, and was briefly owned by KMart in the the early '90s before it merged in 2003 with Gart Sports, a Denver, Colorado business that was founded in 1928. Gart had been through several mergers of its own, including with Hagan's Sports and Stevens Brown in 1987, as well as with Chicago-based Sportmart in 1997 and Houston-based Oshman's in 2001. In 2006, Sports Authority also bought Copeland's Sports, a California business in bankruptcy — the same year it was eventually bought by private equity investment firm Leonard Green & Partners.Well, these false economy monsters are now dying, since the false economy os going down. This brings up a thought, is there a LIFO rule here, last in first out? Someone should do a review of the dinosaur bankruptcies and see if there is a pattern.
Now here are a couple of quotes, surprisingly juxtaposed:
"The lines between wholesale and retail faded from black and white to gray to nonexistent," Greg Baldwin, vice president of merchandising at sporting goods chain Schuylkill Valley Sports, told the Philadelphia Inquirer. "I now compete with 90 percent of my suppliers via e-commerce, physical stores, or a combination of the two. The importance of the retailer as a pipeline to the consumer has been greatly diminished."And then
Today's consumers are looking for specificity, both in terms of function and also aesthetic. The everything-to-everybody nature of huge multi-brand retailers no longer appeals; department stores across America are struggling with this new reality as well.People looking for specificity in function and aesthetic default-buy mass produced Nike for lack of a better product (as I default buy Apple, the least bad.) That he has to compete with Nike stores and Nike online is no surprise. The real question is the goods represented by the 10% of his suppliers with whom he does not compete online or otherwise, what is his volume, profit margin and turnover. I can pretty much guarantee this is his best performing segment.
That 10%, obviously small specialty suppliers, figured out how to reach Schuylkill Valley Sports, as well as enough other small retailers to thrive. In every industry we have countless examples of this, and at the same time we have so many more people who could be producing goods and services for the domestic market, except for the sales networks that atrophied under the malcredit regime.
But they are coming back, representing a means for the design creative to connect with the retail creative, an organic market.
If Jobs had to open Apple stores because as late as 2002 there were no computer stores that felt like Saks 5th Avenue, and Nike had to open stores for the same reason, then that was a failure of the retailers.
Elsewhere here I have advised startups to sublease space in retailers to get started. Here is another example:
Dick's has taken this to heart by developing stronger partnerships with big brands and rolling out shop-in-shops like a trend-focused "Nike Field House" and a dedicated "Under Armour All-American" section in its stores. As a result, the selection at Dick's has became more enticing, and also more expensive.Yes, if you sell what people want, they will pay more for it. if it is not quite right, they need a discount to buy. In any event, make your agreement very short term, month to month, because as the article notes, Dick's chances of succeeding are slim.
The problem to solve is to rebuild the link between the design creative and the retail creative. We lsot two generations of entrepreneurs to F I R E. Many o these natural salesfolk went into false economy Finance, Investment and Real Estate sales. Sure, they carved out a portion of the malcredit for themselves, but their investments are now tallied in credit in the very bubbles in which they were instrumental in inflating: stocks, real estate, etc. When that goes pffffft, it will be good to have them back.
When more small biz retail-creativ are offering more of that 10% unique, there will be more design-creative folk drawn into the remunerating work.
The article predictably assumes the false premise that online sales are a threat to brick and mortar. We've eliminated that false premise on this blog, so people can proceed from factual bases. Although this comment is tainted, it is otherwise sound:
"Retailers in general have a huge advantage over Amazon in that they have physical stores and they are able to actually raise an emotional response," says Sam Cinquegrani, the founder and CEO of digital marketing firm ObjectWave. "These stores need to understand the opportunity and leverage that because they have way more to offer. Once they think in those terms, competing with Amazon becomes a different type of exercise."The taint "digital marketing firm" is a false economy exercise if ever there was one. But the point is spot-on. Amazon is simply a massive, unprofitable, mail order catalog and online self-serve check-out system. If retailers simply do what they have always done, 20% new, 80% mainstream, they do fine. Malcredit disrupted that by shifting the "new" from design to price. Now the dinosaurs are stuck with a infrastructure that offers little of interest at any price. There is no way they can cash in on what is coming back: personal relationships, that which atrophied as malcredit grew.
For a startup, a few points:
1. Stay away form the biggies, don't you supply them. Sure, give Dick's 6% of the gross for a month long trunk show in their stores, so you can make money testing your new ideas. This is no different than those people with folding tables in Costco for three days selling some local products.
2. There is a vacuum being created by a death like Sports Authority, but Big 5 gets most of the temporary benefit. A tiny sliver of permanent benefit go to specialty retailers. The tiny sliver is huge when given the base size of the specialty retailer.
3. The dead inventory in the pipeline, plus the excess in peoples storage lockers, is all inventory that must be disposed. Two things, prices will fall and used needs to be moved with new, causing more downward pressure. (Walmart is testing upscale used stores!) Specialty retailers need to keep a section for used, like Powell's books.
4. Compete on design. Give the specialty, small retailers a supply of what they need. Trade on the smallest quantities rational, not the largest order possible. The trick is frequency and iteration, not volume.
In any event, get your business going.
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