Industry facts and figures

Challenges facing the independent retailer

While population statistics show that the general population has been trekking towards the larger cities, independent retailers seem to be reversing this trend. They are migrating away from cities.

According to our mailing list, roughly the same number of general sport stores closed (222) as new ones opened (208) during the past five years. But, while 51% of the stores that closed were situated in major cities … 65% of the newly opened stores are in smaller towns or rural areas. Of the 163 new stores selling sport as well as outdoor gear that opened during the past five years, 78% are outside the major city areas.

Whether this is from necessity — an inability to compete against mass discounters and chains in cities — or lifestyle choice, is a topic for another research study.

But, due to this migratory pattern, and the complex nature of the independent leisure trade – you could have four retailers in one block, all requiring different stock – we wondered how the independent retailers coped with the challenges of the current trading environment?

We sent out questionnaires via email to independent retailers on our mailing list, asking about these challenges. The profile of the 5+% store owners/managers that responded, are as follows: 48% had been trading longer than twenty years, 16% longer than ten years, 12% for 5-10 years and 24% less than five years. Most of them were therefore fairly experienced traders.

Forty percent of the respondents are situated in major cities and another 40% in large towns, while 16% come from small rural towns. More of the respondents (24%) have stand-alone stores than a position in a mall (20%), while 16% are street-facing stores in a smaller shopping strip. Twelve percent own stand-alone stores in suburban areas.

While a consumer will have a pretty clear idea of what to expect upon entering a grocery or electrical appliance store, the sport, outdoor and leisure industry is far more complex.

There are more than three hundred stores across the country that order every kind of equipment that one would need to participate in just about every sport and outdoor leisure activity … as well as the right clothes and footwear to perform them in. They constitute about 10% of the industry.

A further 23% of the stores on our mailing list order equipment, clothing and footwear for all types of sports; with an additional 7% specializing in one specific sporting activity.

About 32% stores cater for people looking for things to wear and equipment to use for outdoor activities.

About 27% of the buyers on our mailing list order stock for stores selling mainly athletic and leisure footwear and apparel — although several buyers represent several stores (about 10-20 stores).

The diverse nature and locations of the stores, would surely result in problems getting stock? we argued.

There was a time when distribution was simple: suppliers sent their agents off to see the store owners in a specific area, whom they all knew by name, family and preferences. With stores closing and opening in more remote areas and more retailers specialising, the task of the agent is becoming more difficult, but most seem to manage.

Finding stock

Only 40% of the respondents report that agents are reluctant to visit them. A high number — 60% of the respondents — do say that they are regularly visited by agents, and place their orders with them … but we have been told hair-raising stories, for instance by a retailer who offered to collect catalogues from an agent who was reluctant to visit him — and the agent then not arriving at the designated meeting point!

But 64% of the respondents said that they mostly have to ask distributors to supply them with products – instead of being approached by the suppliers themselves. Forty percent of the respondents report that suppliers are reluctant to supply them.

The third highest number of respondents (44%) mostly order from catalogues sent to them by suppliers — but only 8% will start stocking products because consumers come to ask for it.

Staffing problems

By far the biggest challenge currently facing independent traders (72%), is finding the right staff. Most respondents (80%) say that they have to train staff from scratch and only 20% say it is easy to find people knowledgeable about the sports/activities they cater for.

Slightly more than a third (36%) of the respondents offer learnerships and suppliers have given product information lectures to only 32% retailers.

The second biggest challenge facing retailers (60%) is getting their stock mix correct.

All the respondents said that they select the products to stock based on quality and durability, with 76% saying that price, good margins, a well-known brand name and the fact that it represents a new trend, will determine if they place a new product on their shelves. Having heard, or read, good reports about a product, sways 68% of the respondents, while 60% will stock a good product if promised a good delivery time.

Interestingly, the five least likely reasons for the respondents to decide to stock a new line are: popularity overseas or competitors stock it (32%), promotions planned by the distributor (20%), it is endorsed by a celebrity (16%), the distributor offers incentives (12%) and because they like the sales rep (4%).

The responses given by the SA retailers about why they select stock, is very similar to the criteria used by 192 retailers in the Netherlands, interviewed in a 1997 study*. As can be seen from the table below, the first four criteria for selection of products are the same in SA and the Netherlands.

The two factors that have the least influence — incentives offered by the distributor and endorsement by celebrities — are also the same in both countries.

Money, money

An equally big challenge, faced by 60% of respondents, is cash flow. But, interestingly, uncompetitive wholesale pricing is only a problem experienced by 44% of the respondents.

While most (84%) believe that the wholesale prices they are offered allow them to compete with other independents, and 68% say that the wholesale prices offered allow them to make a good margin, only 52% say that the price of stock allow them to compete with chains on price.

Delivery of stock does not represent a problem for the majority of respondents, with most of them happy with correct and complete delivery (76%), received mostly on time (72%). A high 72% are happy to place futures orders and 52% are happy with delivery lead times.

High rent (56%), bad manufacturing and direct selling by suppliers (52%) are also problems identified by more than half the respondents.

Interestingly, crime is a low-priority problem: only 32% indicated that shoplifting or crime in the area surrounding their store is a problem. More than half (52%) say that they seldom have a problem with staff pilfering, seldom have a problem with shoplifting (44%). This could, however, be influenced by the type of stock they carry — it is more difficult to walk off with a cricket bat than a T-shirt.

Going online

Keeping up with technological developments is a concern for less than half the respondents (44%)— and as a matter of fact, 72% use the internet for research and 56% place orders via the internet. But only 32% have a website where customers can place orders.

In future, the internet could become more of a threat to brick and mortar traders, as 40% believe that internet trading is one of the future challenges they will have to cope with.

The trend of suppliers opening own brand, or concept stores, where a full range of one brand is sold, is the biggest future threat identified by independents (64% of respondents).

This is followed by the challenge posed by the changing market, with a growing number of consumers taking up niche activities, mostly extreme sports, instead of the traditional sport and outdoor activities. The people who manufacture or import equipment for these niche markets – think kitesurfing, paintball, kayaking etc - are usually participants who sell direct to fellow-participants – or open a store, to cater for fellow-participants. They often do not have sufficient stock to supply other retailers - or are not interested in supplying them. This is a future problem identified by 52% respondents.

The threat posed by the opening of new shopping malls (48%) near where they are situated and the opening of factory stores by suppliers (44%) are other factors they believe could affect future trading.

Customers becoming more knowledgeable and demanding, is a challenge of the future identified by 44% of the respondents … which ties in with their current concern about finding the right staff.