Tips for retailers

The year ahead: 2 International views on retail

Feb/ Mar 2009

(1) Group buying the face of the future

A few years ago, a panel discussing the future of retailing would have concluded that large, integrated, warehouse-type discount store groups like Decathlon was the future face of retailing… the last few years have shown that the future lay in individual stores, particularly as part of a franchise (or buying group), which offers the best of both worlds, says Franz Julen, CEO of IIC-Intersport, the purchasing arm of the Intersport buying group.

“The individual store owner will always outperform the chain manager — it is his own investment that is at stake,” said Julen. “Even if performance bonuses are given to the chain manager, it will not have the same effect.

The franchise concept, however, gives the individual entrepreneur the opportunity to get support from a large organisation, whilst taking little or no freedom away, he added.

Wolfgang Schnellbügel of Sport 2000 agreed — but cautioned that the “McDonald’s” concept of franchising, where the branding and product offering of every store is 100% the same, will not work in the sports industry. An individual store must be allowed to adapt to its specific market, he stressed.

The franchise concept supports the owner, as he gets the benefit of better prices, administration support, logistics systems, marketing, etc, added Dr Christoph Wildhaber of the Swiss franchise association. “But he must still be allowed to differentiate himself. The individual store owner will, on the other hand, find it difficult to survive. He does not have the time to devote to all the different functions he has to perform.”

In answer to a question about the role house brands will play in the future, Julen answered that their own house brand was quite successful, but sports stores will always have to carry well known sports brands. “A house brand is never advertised as well as a well-known brands and consequently it can never compete with a recognised brand. It has to be an entry level brand.”

Dr Stefen Stremme agreed and said that the customer always demand choice and therefore an individual store has to stock the largest variety that their floor space will carry. “If you cannot carry a wide choice of product, you must specialise more. You must become the best in your area in your selection.

“Today’s customer comes to the shop after having researched the product well. Tomorrow’s customer will even be more so. Very little information is available on house brands, but lots on well known brands.”

Stremme stressed that private labels can only be carried successfully by large integrated chain stores such as Decathlon, who has set that as a specific strategy.

The discussion then turned to single brand stores. The general feeling was that many customers get so hooked on one brand that they want to have the largest possible range of only one brand to choose from. The other panellists agreed and said that they did not have a problem with brand concept stores.

The same could not be said of factory outlets. Julen said that factory outlets teaches the consumer that he only needs to postpone his buying decision by six months and get the item he wanted for a much reduced price. It is much better for brands to sell their ranges through the retailers until the whole range is sold out.

Some other future trends mentioned:

People over the age of 50 are steadily becoming a larger part of the population. They have spending power and they spend more on their health and fitness. The days are gone when sports stores only catered for the best athletes.

More and more customers are also regularly taking part in more than one sport.

Customers are going to the trouble of educating themselves about the available products from easily accessed sources such as the internet. The person serving them must ensure that he is better educated.

Women will increasingly play a bigger role in buying sports products, to the extend that the trade needs to devote dedicated stores to them.

Individual owners might have to encourage other specialist sport stores to open near them. Space is at a premium, and if the owner’s store specialises in one sport or activity and the customer requires something else, he can be referred to a nearby shop.

As far as the immediate future and the state of the world economy is concerned, the consensus was that sports stores will not be as badly effected as other businesses. It will still be tough, however. And in tough times you have to work hard at removing unnecessary costs, but needs to spend more on advertising to draw more feet through the shop.

(2) Five ways to beat the downturn

» Get closer to your customer than ever before — make sure you are talking to them, analysing what they are buying and what they are not buying. It is clear that consumers do still have money but are extremely reluctant to spend unless it is a product they need or are excited by, but equally only at the right price. You have to know and understand what that is;
» Manage stock levels — for obvious reasons! Skilled buyers are more important than ever before. Getting them to buy the right amount and get it into the stores at the right time is absolutely crucial. And they can get the products and the prices that give you your point of difference.
» How do you make your stores more enticing? At a time when the greatest need would seem to be to cut costs, the biggest danger is allowing that to show in your stores. Shoppers will still respond to a good looking store with attractive layouts.
» How well are you doing on-line? The fact is that around the world, it is one of the fastest growing areas of retailing. It is how shoppers today increasingly want to shop or browse, or compare prices. If you aren’t as advanced as your competition, it is probably time that you caught up — fast!
» Stay optimistic! Hard to do in this current climate but talking to veteran retailers, their belief is that there has probably never been a time of such change which leads to enormous opportunities for those prepared to seize them. Take care of all the basic things that drive the business and this will allow you to see the bigger picture and go for all the opportunities that present themselves.