Sports retailers are on the ball

The mid-Nineties have been a time of restructuring for the largest sports multiples. The former market leader, Olympus, has been taken over by Sports Division; Lillywhites has a Portuguese owner; and key companies such as JJB Sports and JD Sports have floated as public companies.

The restructuring has come as demand for sports goods has picked up steadily after the recession. In 1997, consumers will probably spend 3bn on sports goods, six per cent more than in 1996, which experienced an even higher growth rate (8.6 per cent).

This growth has benefited both generalists and specialists, since 39 per cent of sports goods are sold through clothing shops, shoe shops and variety stores, and 20 per cent through even more general outlets (mail order and department stores). However, multiple sports groups have also increased their share, from 12 per cent to 14 per cent since 1990.

Reebok, Nike and Adidas have been part of the youth fashion scene for many years, but this trend, with the outdoor/industrial look having peaked, is accelerating in the late Nineties. Several large multiple sports retailers have admitted to being in the fashion market first and foremost. They admit to being outlets for the big sportswear brands, with no pretensions to creating an own-label presence.

The market for performance sports goods is also not to be ignored. This is best measured by the equipment market, worth 560m (consumer spending only) in 1996, or 18 per cent of the total sports goods market, including sports fashions.

The pervading culture of health and fitness is beneficial in creating interest in sports products among the public.This is backed up by participation gains for swimming, working out and club membership.

With sports shops in vogue for the fashion shopper, a major change has taken place in image terms. Sports shops used to be backwaters of retailing, but they are now at the cutting edge in terms of stock control, display and sophisticated marketing techniques. The main area left for catching up is in out-of-town superstores, and sports superstores are rapidly proliferating through investments by Sports Division, JJB, JD Sports and Lillywhites.

Scottish retailer Sports Division took UK leadership in sports retailing with the purchase of Olympus at the end of 1995. All stores are being branded as Sports Division, and the group will have estimated sales of more than 250m in 1997. Olympus had been the largest multiple for many years, but the restructuring plans of its owner, Sears, entailed moving out of sport and outdoor retailing (Sears sold Millets Leisure, a 172-outlet outdoor retailer, to its management in 1996).

Mintel’s research found that “quality and durability” were sought by 44 per cent of sports consumers, while comfort (38 per cent) and well-known brands (32 per cent) also rated highly. Low prices only scored 21 per cent.

By contrast with many other retail sectors, shoppers for sports goods show little interest in value for money bargains, whether they want fashion (that is the premium brands) or performance goods, where economising can be futile. This is a core advantage for retailers, although allegations of resale price maintenance have clouded the issue in 1997.

The vast majority of retailers interviewed by Mintel are “very optimistic” for trading conditions in 1997. Growth is anticipated both in the high street and for out-of-town superstores, and vertical integration (for example Nike Town outlets) is not seen as a major threat.

Mintel’s forecast is for sports goods to increase from 0.65 per cent of consumer spending in 1996 to 0.67 per cent by 2001, equivalent to the market rising from 3bn to 4bn. Even this may be conservative, since sports goods achieved a 0.69 per cent share of consumer spending at the peak of the last consumer boom, in 1989/90.