Insights

The Shifted Retail Landscape in the Sports & Outdoors Industry

image4

When Yakima’s Sales Director Frank Roome reflects on how the retail landscape has changed over the last several years, “consolidation” is the word that immediately comes to mind.

“In terms of brick and mortar, there’s been a consolidation,” said Roome. “A lot of mainstay companies have gone out of business and had challenges. Sports authority, Sports Chalet — many retailers like that have either reduced their footprint or gone out of business.”

On Wednesday, Modell’s Sporting Goods filed for bankruptcy and announced plans to close its 153 stores. The brick and mortar retailer is one of many to fall on hard times. Sports Authority, Sports Chalet, Performance Bicycle — the sunset of these sports & outdoors companies is a stark reminder of the massive shift that’s happened in retail over the last five years. An estimated 75,000 brick and mortar stores will close by 2026 in a cutback popularly referred to as the “retail apocalypse.”

 

Brick and Mortar Consolidation

 

For premium sports & outdoors brands like Yakima, ENO, and POC, the closures have made a noticeable impact in an industry that’s progressively moving online.

“The situation with brick and mortar has completely 180’d,” said ENO’s Vice President of Sales Bobby Jackson. “With the onslaught of e-commerce, we’re seeing a small percentage of independent and larger retailers dropping off and going away. There’s a couple of reasons this is happening. Obviously the big elephant in the room is Amazon.”

Amazon — it’s hard to talk about e-commerce without mentioning it. The retail giant controls the lion’s share of e-commerce sales in the US. It’s the “elephant in the room” that both brands and retailers face. For many of them, it’s a chaotic marketplace that presents major challenges.

Amazon.com is a difficult marketplace for a brand to control. Third-party sellers are the backbone of the online marketplace and have grown to make up over half of all sales on the platform. Anyone with a garage full of Yakima racks or ENO hammocks can open an Amazon account and start selling, regardless of how they got the inventory.

Unlike brick and mortar retailers, sellers on Amazon aren’t obligated to follow standards that brands have come to expect — including minimum advertised pricing (MAP) policies or marketing guidelines. It’s not uncommon for products to end up on Amazon at a lower price than what’s being offered on the physical shelf. This puts brands in a tricky spot with their brick and mortar relationships, especially when shoppers price check online.

A Salesforce study conducted in 2018 found that 71% of shoppers are using mobile devices while shopping in stores. When asked how they use their phones 36% said they compared prices.

If a brand’s Amazon presence is flooded with sub-MAP prices, brick and mortar won’t be able to compete, and the relationship between the brand and their brick and mortar channels will start to deteriorate.

 

Amazon is Reaching More Areas of the Buyer’s Journey, and Brands and Retailers are Noticing

More and more, consumers are adopting a hybrid approach to shopping that incorporates both online and brick and mortar. “Webrooming” and “showrooming” are popular terms used to refer to these behaviors. Webrooming is when a shopper starts their research online and then makes a purchase at a brick and mortar. Showrooming is the opposite.

 

 

Amazon is a popular tool for consumers to start their online research — a familiar fact for most brands.

“I think everyone knows the statistics around how many searches begin on Amazon,” said Roome. “So I think that while a lot of that business goes through Amazon, a fair amount of research happens on the platform as well.”

That statistic Roome referred to likely came from Survata, a market research firm that looked into consumer search behaviors in 2017. Survata polled 2,000 US consumers and found that 49% of them used Amazon to investigate new products online. Google came in as the second favorite at 36%, and retailers fell far behind at only 15%.

“A couple of years ago, people would go on and search for Yakima products and find that there were these unauthorized, third-party sellers representing Yakima and selling below MAP,” said Roome. “Then the consumer would assume that this is the price and value that the product has. That puts a lot of pressure on our other retailers.”

Ben Coates from POC, a performance cycling manufacturer, shared similar thoughts on the issue. “If you want to buy from brick and mortar, but it’s twenty bucks cheaper on Amazon, it’s really hard to make the decision to buy from brick and mortar. Making sure that there is a level playing field on price is a very small aspect, but it’s also a very tangible one.”

Some companies elect to go against the marketplace. Nike, Birkenstock, and Ikea are just some of the brands that have made headlines with their decision to pull off Amazon. A few years back, ENO was close to making the same decision.

“We were on the path of just pulling away completely out of Amazon,” said Jackson. “And it quickly became evident that, even if we tried that, we weren’t going to be going away on Amazon.”

Getting off Amazon may seem like an obvious choice for brands, but there’s a catch: ignoring Amazon doesn’t actually work. Its third-party seller model makes it difficult for brands to keep their product off the marketplace. As long as a seller has access to inventory, they can continue to sell on the online marketplace.

 

Adapting Retail Strategy for Online Marketplaces: It’s Mostly a Distribution Problem

Instead of leaving Amazon, many brands are adapting their retail strategy. Distribution is the best place to start. There isn’t a tried and true way to stop unauthorized sellers from selling inventory they already have, but brands can take steps to prevent further issues by rethinking distribution. That’s exactly what Yakima did.

“We spent a considerable amount of time looking at our distribution roadmap and actually refining that to reward partners that we feel are going to invest in the brand and be able to service the customer at the appropriate level,” said Roome. “We’re staying away from companies that aren’t representing the Yakima brand responsibly.”

By avoiding companies that misrepresent its products, Yakima is protecting its brand and moving closer to controlled distribution.

Control over distribution affects more than just Amazon; it affects every marketplace that utilizes third-party sellers. This type of control will become even more important as other online marketplaces — most likely Walmart and Target — emerge and grow in popularity. Brands that rework their distribution now will be well ahead of the curve.

 

The Road Ahead

It’s no secret that e-commerce has changed the game. Amazon has dominated. And brick and mortar has taken most of the impact. What happens next?
 

Brick and Mortar

 

 

The media uses terms like “retail apocalypse” to spell out the end of brick and mortar, but that term is more of an exaggeration than anything.

“It’s not that brick and mortar is dying, it’s transforming,” said Ryan Riggs, Netrush Vice President of Sports & Outdoors. “It’s a shift away from commodity items and a move towards specialization. It’s getting harder for brick and mortar to be sustained by selling commodity items, but there’s plenty of room for brick and mortar in regards to specialized, high-end retail, especially in sports & outdoors.”

The transformation Riggs referred to has a lot to do with commoditization. Amazon and other online marketplaces are all about convenience. For commodities and general purchases, Amazon is a great solution for shoppers. But when it comes to highly specialized purchases — such as a high-end pair of snow skis — shoppers are going to want a more tangible experience.

Bobby Jackson from ENO sees a similar future for retail. “I think it’s important for our customers to touch and feel. Good retailers are going to be the ones that hang in and do it right.”

 

Emerging Marketplaces

Amazon is leading in the e-commerce market by a long stretch, but competitors like Walmart appear to be gearing up for fierce competition. This is something that Yakima sees on the horizon.

“I think we’ll see the growth of Walmart.com,” said Roome. “What remains to be seen is whether or not consumers will identify the difference between Walmart.com and Walmart. It might take consumers a while to differentiate between the two and buy products that are perhaps not normally associated with Walmart’s brick and mortar brand.”

Roome’s prediction about Walmart growing is probably right. Recently, Walmart released their new seller program Walmart Fulfillment Services (WFS), which is designed to help sellers and brands grow their sales and reach more customers. This development might be the first part of a much larger project, Walmart +. Rumors surrounding Walmart + have circulated news headlines, but very little is actually known and confirmed.

Regardless, it’s only a matter of time before online marketplaces outside of Amazon develop and gain popularity. When that time comes, brands that have already invested in refining their distribution strategy will be positioned ahead of the game.

 

The Final Takeaway

Retail has shifted. It’s already happened, and Amazon was the main disruptor that made it happen. This isn’t fresh news. Brands and retailers have been impacted for years. Online marketplaces are firmly established in the retail landscape. E-commerce is here, and it’s here to stay.

Amazon is on top with a significant lead. Other retailers are heavily investing in their own online marketplaces and racing to catch up. As those retailers start to capture more market share online, it will become essential for brands to have a marketplace-specific strategy, especially in regards to distribution. Brands that prepared for this ahead of time are the ones that will come out on top.