MARKETING PLAN EXPLORER

Copyright 2002, Professor Jerome M. Katrichis

 

 

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C. Nature of Competition

 

1. Industry Analysis

 

The retail sporting goods industry can be categorized into four principal categories: traditional sporting goods retailers, specialty sporting goods retailers, large format sporting goods retailers and mass merchandisers.

 

 

Category

Size

Locations

Products

Pricing

Examples

 

(sq. ft.)

 

 

 

 

Traditional

5,000-

Malls

Limited

Higher prices

Modell's Sporting

Sporting Goods

20,000

Strip Centers

quantities and

than large

Goods

Retailers

 

 

 

selection

format stores

Champs

Specialty Sporting

1,000-

Malls

Wide assortment

Higher prices

Footlocker

Goods Retailers

10,000

Strip Centers

of specific

than large

Bike USA

 

 

 

products

format stores

The Athlete's Foot

 

Large Format

30,000-

Anchor store in

Broad selection

Lower than

Dick's Clothing and

Sporting Goods

70,000

strip mall

of brand name

traditional

Sporting Goods

Retailers

 

Free-standing

merchandise

and specialty

Sports Authority

 

 

location

 

stores

 

 

Mass

50,000-

Strip Centers

Limited

Prices

Kmart

Merchandisers

200,000

Free-standing

selection, fewer

competitive to

Wal-Mart

 

 

location

brand names, no

large format

Target

 

 

 

customer service

stores

 

 

(Information compiled from Sports Authority 2000 Annual Report)

Exhibit 15.

 

a. Competitive Structure

 

The competitive structure of the sporting goods industry is that of monopolistic competition, where there are many competitors offering easily substitutable and slightly differentiated products. In the U.S., competition is very intense among retailers and is highly fragmented. The number of competitors increases even more in the athletic footwear and apparel sectors. For retail stores, competition exists in the arenas of customer service, assortment of brand name merchandise, ease of shopping and competitive pricing.

 

Prices for equipment, footwear and apparel continue to increase marginally, specifically for the sports that remain in favor with the population at large. When a sport falls out of favor the prices of items within that category decrease. Overall, very few sports categories and thereby manufacturers completely diminish their prices for products as a result of the stability in demand in the market.

 

b. Market potential and major trends

 

In 2000 the average American household spent $431.28 annually on sporting goods purchases (Calculation based on following assumption: In 2000 $45.5 billion in sales divided by 105.5 million households in US as per US Bureau of Census data). If each household increased their spending to total $600.00 per year, under ideal circumstances the market potential for the industry would be approximately $63.3 billion. The challenge to retailers is in raising customer demand to more closely resemble the market potential.

 

Throughout the last decade, the industry has seen dramatic changes in the outlets for sporting goods. The growth in popularity of chain stores in the 1990s forced sports retailers to change their venues and become specialized as a way to differentiate themselves from the competition.

 

Another change in the sporting goods industry is the way in which products are used by consumers. Today, sporting goods apparel along with footwear is considered to be trendy and is not limited to being worn only when participating in a sporting activity. Sports team shirts and other accessories are worn on an every‑day basis by the younger population and are considered to be popular and "fad" items. This has dramatically changed the way in which retailers market their products.

 

Pricing of sporting goods varies by category and retail outlet. Specialty stores and some traditional stores tend to have higher prices for comparable goods, than do large format stores. Due to higher rental costs per square footage, specialty stores charge higher prices to meet their profit margin goals. Mass merchandisers, such as Walmart or K-Mart, on the other hand, tend to have the lowest priced products in the industry; however, the products they sell are of lower quality.

 

c. Size, scope, and share of market history

 

The sporting goods industry has a vast number of competitors within the categories of traditional, specialty, and large format sporting goods retailers as well as mass merchandisers. It is estimated that in the U.S. there are approximately 12,750 sporting goods retailers (including chain stores and small outlets) as well as an additional 5,000 sportswear retailers.

 

The top five full‑line sporting goods retailers in 2000 were as follows:

 

                                                                               Sales               Market Share                                  

             1 . Sports Authority                              $1.5 billion                   3.3%

             2. Dick's Sporting Goods                      $893 million                   2%

             3. Champs Sports                                 $856 million                  1.9%

             4. Gart Sports Co.                                $751 million                 1.65%

             5. Academy Sports & Outdoors           $718 million                 1.62%

Source: Sporting Goods Business

 

As can be seen from the above information, because the sporting goods industry is so competitive and contains such a large number of players, even the top five companies together, only control slightly above 10% of the entire sporting goods market.

 

The increase in popularity in mass retail outlets as well as large format sporting goods retailers over the last few decades has reshaped the way in which Americans make their sporting goods purchases. Traditional and specialty stores have lost market share over the years due to their inability to remain competitive with regards to pricing, an area where large format stores and mass retailers have a lot of strength.

 

d. Industry capacity

 

The sporting goods industry is currently operating below capacity as can be seen by their competitive environment. Characteristically, over the last five years, the industry has seen many bankruptcies and store closings. If the demand for sporting goods products increased, the industry would most certainly be able to supply their customers.

 

e. New product entry prospects

 

New products drive the sporting goods industry. Manufacturers are always looking to market their products to customers and it is the job of retailers to make the sales. New products tend to be higher priced and are sought after by both the avid sports enthusiasts as well as the fashion conscientious athletes. Holidays tend to be a favorite time to introduce new products to the market. The hope is that the product will start a new trend and not be just another "fad."

 

f. Power of suppliers

 

The core competency of a supplier is to produce products and to market their brands so as to create demand in the market. The job of retailers is to merchandise and sell. The relationship between these two groups needs to be very well developed in order for it to be mutually beneficial.

 

In the sporting goods industry, sporting goods retailers purchase merchandise from a variety of vendors. Large retailers such as Sports Authority try not to maintain any material long term or sign any exclusive commitments or arrangements to purchase from one single vendor. Some vendors, such as Nike, Inc. have a large presence in the retail market and in the case of Sports Authority account for 12% of the total merchandise purchased by the store in 2000. Vendors, in many cases, offer volume discounts to their retailers that lock stores into buying particular brands, as is the case with stores such as Foot Locker and Champs Sports. Conversely, smaller outlets are charged higher prices by their vendors due to their lower volume of purchase and thusly have to pass the higher prices along to their customers.

 

g. Power of buyers

 

The power of buyers (or customers) does not have a great impact on the industry aside from determining which items are popular and through which retail outlets they wish to make their purchases. It is important for manufacturers and retailers to understand their customers and to make reasonable predictions about their buying behavior. Otherwise, companies may be faced with large inventories of goods and then be forced to sell the products at reduced prices.

 

h. Rivalries

 

No major rivalries exist within the sporting goods industry. Competition exists on a regional and national level between store formats, otherwise no fierce competition exists.

 

2. Competitor Analysis

 

Note: Competitive analysis will be made based on the four categories of sporting goods retailers as described in the Industry Analysis section. Examples for each category type will follow.

 

Traditional and Specialty Sporting Goods Stores

 

Specialty shops and pro shops cater to sports such as golf, tennis, snow skiing, cycling, hunting fishing, bowling, archery, boating and water sports. Although within each region a large number of these formats exist, the most well known and whose market presence is the greatest are chain specialty stores present in the mall‑ based outlet.

 

Traditional sporting goods retailers, cater their product lines to activities such as team sports and physical fitness, in addition they offer men's, women's and children's athletic and active apparel and footwear.

 

Foot Locker, Inc., a part of Venator Group, Inc. is the world's leading retailer of athletic footwear and apparel. In addition to operating approximately 3,600 retail stores under the brand names Foot Locker, Lady Foot Locker, Kids Foot Locker and Champs Sports in North America, Europe and Australia, the company sells athletic footwear, apparel and equipment direct‑to-customers through catalogs and the Internet. Foot Locker is an example of a specialty store and Champs Sports is an example of a traditional sporting goods store. Following is market share and sales information for the company as a whole, including both Foot Locker and Champs. Information by individual retailer is stated when available.

 

The company estimates that it has an 18% share of the $13 billion U.S. athletic footwear market. Other mall‑based specialty stores hold a 9% share, while department stores, discount stores and others hold the remaining 73 % share.

 

In 2000, the company's retail stores generated $3.9 billion in annual sales (or almost $300 per square foot) a 10% increase from the prior year. This represents 8.5% of the total sporting goods market. Sales from the direct to customer segment were $279 million in 2000, a 29% increase from the 1999 level and a 55% increase from the 1998 level. Catalog sales increased 7.4% to $218 million in 2000 from $203 million in 1999, due to increased catalog distribution and expanded product assortment. Income from operations was $176 million in 2000, an increase of over 8 1 % from 1999. Operating profit of $272 million in 2000 increased by $255 million from $17 million in 1999.

 

a. Measure and evaluation of results

 

Foot Locker measures results in terms of sales and operating profits. In 2000, sales and profit growth of Foot Locker outpaced the industry as a whole. The company experienced a 10% increase in comparable‑store sales during this period. They were able to transfer those sales into operating profit that was 56% higher than the 1999 level.

 

The productivity of Champs Stores is below the level of the Foot Locker stores and the company sees this as an area of improvement. Champs experienced a loss in operating profits in

1999, but has been able to show an increase in 2000 to reach $62 million. Sales for the company in 2000 totaled $856.1 million. (See information on Venator Group for additional financial data).

 

The number of stores in operation are also a measure of a company’ success. Currently,

Foot Locker has 1,453 stores open in the United States while Champs Sports has over 550 stores.

 

b. Achievement of results

 

The company has many years of experience in the industry and their size alone distinguishes them from their competition. Foot Locker has been able to develop and maintain very strong relationships with their vendors and to provide their customers with trend‑right products.

 

c. Strengths and Liabilities

 

Foot Locker is the world's largest specialty store retailer. Their target customers are 12 to19 year olds, whose primary interest is in function or fashion. Therefore, the company places an emphasis on brands rather than price and offers more high end products to their customers. Champs is the largest mall‑based retailer of sporting goods in the U.S. and their primary customers are 12‑25 year olds that reside in suburban communities.

 

The company as a whole has recognized the importance of keeping up with the ever-changing needs of their target customers and as a result ensures an in‑depth selection of products at their retail locations.

 

d. Future Strategy

 

Foot Locker stores will continue to provide their customers with the latest styles and technology in the athletic footwear industry. The company aims to increase their market share by improving the productivity of their existing stores. One way this will be accomplished is through upgrades and remodeling. Plans also exist to expand into urban markets and high‑profile statement locations. Strategies to improve productivity for Champs stores include improving product assortments, improving customer service, and continuing to remodel and relocate stores. Once this is achieved the company will look into opening additional stores.

 

The company also plans on increasing their sales by emphasizing their direct‑to‑customer catalog and Internet businesses, Footlocker.com/Eastbay. Currently the company offers more than 17,000 products on the internet and through their catalogs, this being the largest assortment in the industry. Footlocker.com has an exclusive agreement with the National Football League and manages the official store of the NFL, www.nflshop.com, and the official NFL catalog business, NFL Shop. By establishing other partnerships such as they have with NFL, the company hopes to expand their online business opportunities.

 

Although the company believes there is growth potential in the U.S., they consider international markets as having greater opportunities for the footwear segment. Currently the company operates 500 stores outside the U.S. and has plans to primarily expand in the markets in which they currently operate.

 

e. Pricing History

 

Categories of athletic footwear that can be found in Foot Locker stores include: running, basketball, classic, tennis, walking and cross‑training shoes. For the industry as a whole, according to National Sports Association data, the average price for running shoes in 2000 was $50.36, a 0.9% decline from the prior year. Since 1995, however the price of running shoes has increased by 14.5 %. In 2000 the average price for basketball shoes was $57.16, an increase of 2.9% from the prior year. Since 1995 prices for basketball shoes have increased by 13.5%. The average price for tennis shoes in 2000 was $33.19, a 4.5% decline from the 1999 price, yet a 16.7% increase from the 1995 price level. Of all the categories of footwear sold by Foot Locker, cross‑training shoes have shown the lowest price growth since 1995, 3.4%. In 2000 the average price of cross‑training shoes was $48.27, while the 1999 price was $49.04.

 

f. Distribution Channels

 

The company is a multi-channel distributor of goods, selling merchandise through brick and mortar stores, websites and catalogues. Although ideally prices through all channels of distribution should be the same, they tend to be slightly lower in the brick and mortar stores, especially for promotional items as a result of the way in which price changes are handled. Any price changes made by corporate can be updated immediately in the brick and mortar stores, whereas on the internet they are changed only once a week. Catalogue prices also tend to be a bit higher due to the infrequency in which they are printed. Returns and exchanges for items purchased through the internet or catalogue can also be made at the brick and mortar stores. One advantage over shopping through the catalogue versus online is that the catalogue does not charge shipping and handling while the internet does.

 

g. Selling Policies and Practices

 

Foot Locker stores average 2,300 square feet of selling space. All associates wear the signature striped black and white uniforms. Typical store size for Champs stores has 4,000 square feet of selling space. Sales associates for both outlet types are specifically trained to offer one‑on‑one customer service. The company believes their sales staff to be experienced and knowledgeable about the products they sell.

 

The merchandise mix of Foot Locker stores includes men's, women's and children's athletic footwear. In addition stores also sell men's athletic apparel and accessories. The mix of products for Champs Sports also includes athletic footwear and apparel. But their main product offering is equipment and accessories not only for a variety of sports but also for fitness and lifestyle activities. Their differentiating strategy is being able to outfit their customers from "head to toe."

 

h. Advertising and Promotion

 

The company offers promotional values during the key selling seasons. Advertisements are made on a national level through corporate headquarters where large sales are promoted. Smaller promotions are placed in store windows by the individual outlets. This is a very effective advertising vehicle since purchases for this mall-based outlet type are impulse oriented. The company also has agreements with certain vendors such as Nike or Adidas, in which the tag lines for those vendors’ commercials indicate that the product is only available at Foot Locker stores. The company does not do weekly flyer inserts in local newspapers for promotional purposes. For internet shoppers, there is an on-line registry which allows customers to receive special coupons and other promotional material.

 

i. Resources

 

Ability to conceive and design new products

Foot Locker works closely with its athletic vendors to deliver to their customers products that are exclusive, innovative, unique and "marquee". Because of their size and purchasing power, the company is able to obtain marquee products, those that are not offered to smaller specialty store chains or department stores such as the Jordan Retro shoes by Nike and the Kobe basketball shoe from Adidas. In addition, the company is able to offer exclusive products such as Nike Tuned Air and the Reebok Pump. These high‑end product offerings differentiate Foot Locker stores from the smaller specialty retail stores and department stores. In 2000 the company purchased approximately 49% of its merchandise from one major vendor and approximately 71 % from its top five vendors.

 

Not only does Foot Locker sell branded merchandise including Nike, Adidas, Reebok, New Balance and K‑Swiss, they also offer private label products, under the Foot Locker and "Colorado" labels. These products tend to be lower priced than branded merchandise. Similar to the Foot Locker stores, Champs offers exclusive merchandise as well as lower‑priced, proprietary products under the Champs Sports and "Colorado" labels.

 

Ability to produce and manufacture

Manufacturing of private label products is done by third‑party manufacturers mainly in Asia and Central America and is overseen by a Taiwan based subsidiary. Foot Locker Inc. also has a U.S. based manufacturing subsidiary, Team Edition, who is the principal source of licensed products.

 

Ability to meet customer service needs

As a full‑service retailer, Foot Locker, Inc. is able to meet customer needs. Their goal is to offer the products customers want through the retail channels preferable to their customers. Customer service is provided at all retail outlets as well as on the company websites.

 

Ability to market

The company has a large national network of retail outlets which allows them to market their products to target customers on a mass or regional level. With locations of outlets mainly in mall‑based locations, the opportunity of marketing products to the public is greater than for free standing outlets.

 

Ability to finance

The company manages capital and pursues opportunities without the burden of debt by using their cash flow from operations to fund new retail concepts, acquisitions and improvements to existing stores. The financial group of Foot Locker Inc. performs crucial functions for the company and coordinates between the divisions acting as the guidance system for company management.

 

Ability to manage

Foot Locker, Inc. strives to be a results‑oriented organization. They recognize the value of their associates and try to provide them with continuing development opportunities.

 

Will to succeed

Footlocker has been an established company for the past 27 years and is always looking to expand. From their inception, the company has recognized that sports and fitness activities have different requirements and their goal as a retailer is to help determine what those requirements are and to supply them to their customers.

 

Large Format Store – Dick’s Clothing and Sporting Goods

 

a. Measure and evaluation of results

Dick’s Clothing and Sporting Goods, is one of Sports Authority’s leading competitors.  They are part of the large format stores that range in size from 30,000 to 70,000 square feet.  Dick’s offers a broad selection of brand name sporting goods merchandise and they tend to either anchor stores in malls, or separate free-standing locations.  Dick’s measures their results according to its increase in profitability.  The more they sell of a particular item, the higher their price will be, and thus the more of a return profit they will experience.

 

Athletic retailing has been in a slump for two years because of a sharp decline in demand for athletic shoes and apparel, which account for at least half of the stores' profits, analysts said.

 

 

 

 

b. Achievements of results

Dick’s achieved its results by focusing all of its attention on how to mass-produce their merchandise quickly and effectively.  The result was a 388,000-square-foot distribution center with an extremely fast computer sorting system and enough capacity to allow it to double its store locations within three or four years. The distribution center can now also serve up to 160 stores.  Knockout panels on one end can potentially allow another 235,000 square-foot expansion when needed.  These factors helped the company more than double the amount of merchandise they sold as well as create uniformity in their product and merchandise offerings all over the country.

 

c. Strengths and liabilities

Dick’s idea is to redefine sports and fitness specialty retailing for all athletes and outdoor enthusiasts through quality brands, information, technology, and superior service. Dick's Sporting Goods is a major player in the industry, comprised of over 100 stores nationwide.  Dicks also has an extensive online store available to its customers.

 

d. Future strategy

In the past year, Dick’s has expanded into new market areas including Kansas.  Dick's also continues to expand in their home base area of Pennsylvania.  There are currently seven Pittsburgh-area locations and in 2001, two more are planned for the Stacks at the Waterfront project in Homestead and in Harmar.

 

e. Distribution channels

Dick’s is its own distribution channel.  However, for a long time, Dick's subcontracted its distribution work, using four locations that sorted goods manually.  Now the company is operating out of a single distribution firm that will produce more goods and perform everything in one single location.

 

f. Selling policies and practices

Dick’s selling policy has always focused on a fair yet competitive pricing structure, which made it appealing to people who were initially skeptical of Dick’s. The company sells to a wide target audience. Dick’s is focused on customer service and stresses the company’s return policy of complete satisfaction. If a customer is not completely satisfied with a purchase, the item may be returned for a full refund.

 

g. Advertising and promotion

The company’s promotional mix includes traditional and new-age advertising such as online gift certificates. Most advertising is made through weekly newspaper inserts or through billboards. Dick’s also provides its customers with a detailed and comprehensive website.

 

 

h. Resources

Ability to conceive and design new products

Dick’s ability to conceive and design new products is one of their biggest strong holds.  They are always staying “on top of the game,” and rigorously compete in the market.  Their new manufacturing unit, along with the attention and dedication exemplified by their work-staff, reinforces the company’s position as the second largest sporting goods chain, and number one when it comes to customer service.  They have an excellent marketing team that is constantly discovering the latest trends and making sure their customers have what they need.  The places that mass-produce their merchandise are always checked and carefully scrutinized to prevent any problems with wrongful or harmful labor issues.  Thus, Dick’s employees are happy to provide good quality craftsmanship and care to the merchandise they sell.  

 

Ability to produce and manufacture

The manufacturing facilities for Dick’s use merchandise scanners to track inventory. Based on the level of inventory at the time, merchandise is custom packed and shipped to the individual store. This scanner system allows the manufacturer to hold inventory until it is needed by the store.

 

Ability to meet customer service needs

Dick’s website offers customers the following services:  buyers’ guides, comparison charts, tips from professionals, low-cost gift wrap service, and online order tracking. In addition, 24 hour customer service support is available to customers. In-store customer service needs are met by knowledgeable and friendly employees.

 

Ability to market

The company has highly trained professionals who are knowledgeable about their target markets.  Therefore, the company is able to continuously adapt to changes in customer needs. For instance, the company’s newest stores have 45,000 square feet of retail selling space and include some new interactive sales features such as a running track to test shoes, a golf hitting area to try out clubs, and a "Sportsman's Lodge" where hunters can test bows.

 

Ability to finance

Dick’s does most of its financing through the company’s credit facility and borrows as needed from their lenders.  The money borrowed from these lenders was an estimated $60 million this year in anticipation of monies owed for their new distribution center. Additional cash flow provided by these financing activities was $45.5 million in 2000, an increase from $36.4 million in 1999.

 

Will to succeed

On average the company has opened 20 new stores per year, with 83 locations in 15 states. It is believed that this privately held company will continue its expansion policy and remain a key player in the sporting goods industry.

 

 

 

 

Mass merchandisers

 

a. Measure and evaluation of results

Mass merchandisers such as Wal-Mart measure their results according to sales and profit margin. Net sales in 2000 for Wal-Mart Stores, Inc. totaled $191.3 billion, making the company the world’s largest retailer. Because of their buying power, mass merchandisers are able to negotiate pricing of goods with sporting goods manufacturers based on the number of units sold. This endures desired profit margins for mass retailers and allows them to be competitive in this market. 

 

b. Achievement of results

Mass-merchandisers have been successful in the sporting goods market due to their ability to offer products at affordable prices.  The factors that have helped achieve their success include their ability to negotiate prices with manufacturers, allowing for sufficient profit return. These savings are then passed on to their customers, resulting in cost-effective merchandise.

 

c. Strengths and liabilities

Mass merchandisers such as Wal-Mart have strengths and liabilities directly related to their company’s size. The company does not provide the same level of service to their customers as compared to other stores in the sporting goods industry.

 

Stores typically do not train their employees to be knowledgeable about specific categories of products, due to the diversity of product offerings through out the store. Furthermore, these stores carry limited selections of sporting equipment, and have less brand name merchandise than other large format sporting goods stores.

 

d. Future strategy

 

It is anticipated that mass merchandisers will not change their product offerings due to the level of success they have experienced thus far and will continue to operate in the same fashion in the future.  

 

e. Distribution channels

Mass merchandisers have their own private distribution centers that mass-produce large amounts of equipment throughout the year.  During fiscal 2001, approximately 84% of the Wal-Mart discount stores’ and Supercenters’ purchases were shipped from Wal-Mart's 55 distribution centers, 16 of which are grocery distribution centers, and three of which are import distribution centers. The balance of merchandise purchased was shipped directly to the stores from suppliers.  The 55 distribution centers are located throughout the continental United States. During fiscal 2001, Wal-Mart.com utilized two, third-party distribution centers, one in Utah and one in Ohio to fulfill orders for goods placed on its website.

 

 

f. Selling policies and practices

Mass merchandisers are known for their low prices, as indicated by Wal-Mart’s slogan, “Everyday low prices at affordable rates”. The company’s objective is to sell large amounts of merchandise at affordable prices to end consumers, with very little cost involved in the production process. In addition, manufacturers choose to sell their products through this outlet type in order to increase their sales volume.  

 

g. Advertising and promotion

Popular advertising promotions for mass merchandisers, especially Wal-Mart include slogans and company programs such as "Everyday Low Price", "Item Merchandising", "Store-Within-a-Store" "Price Rollbacks", and "Store of the Community." Advertising and promotion for these outlet types is through television commercials and newspaper inserts.

 

h. Resources

Ability to conceive and design new products

Wal-Mart discount stores and the general merchandise area of their Super-centers are generally organized with 40 departments and offer a wide variety of merchandise, including apparel for women, girls, men, boys and infants. New products to the industry usually are available at mass retail locations shortly after demand in the market is generated.

 

Ability to produce and manufacture

Mass merchandisers have exclusive agreements with manufacturing facilities for the manufacture of various goods. Without these large manufacturing facilities, mass merchandisers would not be able to offer their existing level of merchandise and keep up with customer demands.  

 

Ability to meet customer service needs

 

Minimal customer service is offered at mass merchandisers, specifically in the sporting goods area.

 

Ability to market

Mass merchandisers such as Wal-Mart are able to market their products effectively because of the vast availability of store locations and the fact that their hours of operation for nearly all of their Super-centers and an increasing number of discount stores are 24 hours each day. Hours of operation for the remaining discount stores vary by location. Furthermore, Wal-Mart discount stores and Super-centers maintain uniform prices, except where lower prices are necessary to meet local competition. Therefore, they can reach a larger share of the consumer market than high-end sporting good retailers.

 

Ability to finance

Mass-merchandisers, as the large-format groups, do most of their financing through the company’s own credit facility and then borrow as needed from their lenders.  The money borrowed from these lenders was an estimated $175 million this year in anticipation of monies owed for new global stores.  New cash provided by these financing activities was $276 million in 2000, a decrease from $185 million in 1999.

 

Will to succeed

 

Mass merchandisers primarily focus on one objective: maximizing sales volume and inventory turnover while minimizing expenses.  As a result of this, their will to succeed is strong and will surpass other smaller niche-markets.

 

3. Other potential competitors/substitutes

 

a. E‑commerce

 

Customers can now make their sporting goods, athletic footwear, and apparel purchases online not only on the websites of retailers, but also, of manufacturers themselves. These websites include features such as detailed product information and buying guides and size charts. In order to make the shopping experience even more "life‑like" websites offer special features such as item comparison charts and multiple views of an item.

 

Today consumers are much more knowledgeable about the products they purchase by browsing sites for background information prior to visiting stores. Consequently, retailers need to stay ahead of the customer and know more about the product and how it will work for the customer, information that is best attained from the manufacturer.

 

Although the volume of sales through the internet is not significant in comparison to the industry as a whole, it is still considered a potential threat to the retail industry. For instance, in 2000 internet sales reached almost 1.5% of the total athletic and sport footwear market, almost a 50% increase in market share from the previous year. The effects of e‑commerce are an increase in competition; however, the competition is on a different scale because manufacturers are selling their products directly to customers. This has eroded the trust between manufacturers and suppliers. Typically products are introduced into the market through retailers and become established goods. Retailers make the investments in training and support, yet when the purchase is made directly from the manufacturer, the retailer is losing profit. The same is also true for service costs. Retailers continue to provide customer service to items purchased on line, even though they made no profit on the sale. Demands on retailers remain the same, whereby they are required to meet large program purchases. Suppliers, however, are inexperienced in dealing with customer service at the retail level. Other considerations are shipping and handling costs for returns or exchanges, which can simply disintegrate the savings of making the purchase on‑line.

 

Not threatened are the specialty sporting goods dealers because of the personal service they provide to customers, and their ability to manage the long‑term customer relationship. Although these outlets tend to charge higher prices, they provide an increased level of customer service. If the customer did not find value in this type of service, they would simply price shop and not go to these types of outlets in the first place. In addition, the internet has provided an opportunity to these small retail shops to advertise their unique services and to differentiate themselves from the chain stores.

 

It will be difficult for e‑commerce to compete with a physical storefront, as consumers want to see and touch the merchandise, have the immediate gratification of ownership, along with the social interaction of shopping with friends. For young consumers especially, where mall shopping is a social experience, and who also have the "buy now‑wear now" mentality, shopping on the internet will not be appealing.

 

Nevertheless, the increasing popularity of intent use has stimulated the sporting goods industry to participate in e‑commerce business and to set up sites of their own.

 

b. Used Sporting Goods Equipment

 

The used sporting goods equipment market is estimated to be valued at $744 million. This number increases to about $1 billion when all used equipment is taken into consideration. The category that comprises 60% of the used equipment market is outdoor sports (camping, fishing and shooting sports) totaling $450 million in sales. The next largest category is used exercise equipment with sales totaling $125 million or 16.8% of the total used equipment market.

 

There is an increasing number of sporting goods stores that offer used sporting equipment. In addition, auctions are held on the internet, on sites such as e‑Bay that are geared toward pre-owned products including sporting goods. Although the purchase of used equipment takes away from a new purchase, it also can serve as an introduction to a sport or a type of equipment and may lead to a future new product sale.

 

In certain categories, according to the National Sporting Goods Association, the volume of units sold of used equipment is substantially higher than that of non‑used equipment. Such is the

case with exercise equipment, where more than one million pieces of equipment were purchased in 2000 (excluding small hand equipment and weight sets).

 

 

c.       Catolog Sales

 

Another potential format for competition is sales from catalogs.  Consumers often receive a plethora of catalogs through direct mail, and hence have a wide selection of merchandise at their fingertips.  Catologs such as L.L. Bean, not only market athletic apparel, but also, a limited amount of athletic equipment to its customers.

 

 

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