Sporting Goods Retailers
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Industry Overview
The US retail sporting goods industry includes about 20,000 companies with combined annual revenue of $35 billion. Large chain operators include The Sports Authority, REI, Dick's Sporting Goods, Academy Sports + Outdoors, Cabela's, and Hibbett Sports. The industry is fragmented: the 50 largest companies account for less than 50 percent of revenue. Only about 170 companies have more than five stores.
Competitive Landscape
Demand is driven by population demographics and consumer income. The profitability of individual companies depends on merchandising and marketing skills. Large chains have an advantage in stocking a wide variety of goods. Small companies and specialty retailers can compete successfully by carrying a deeper product line in specialized sports, hiring highly experienced staff, offering repair services, or by serving a local market. The industry is fairly labor-intensive: average annual revenue per employee is about $135,000.
Products, Operations & Technology
Major products are outdoor clothing and shoes, firearms, sports and exercise equipment, and bicycles. Equipment accounts for nearly 50 percent of industry revenue, footwear 30 percent, and clothing 20 percent. Major equipment categories include exercise, hunting and firearms, golf, fishing, and camping.
Sporting goods stores vary according to format and merchandise. Large-format stores are from 20,000 to 100,000 square feet, stock a large number of items, and are typically found as anchor stores in strip malls or in stand-alone locations. Traditional sporting goods retail stores vary in size from 5,000 to 20,000 square feet, carry a more limited number of items, and are typically found in strip or enclosed malls. Specialty stores have a wide selection of items for just one or two sports, such as golf, tennis, skiing, and camping; are typically 2,000 to 20,000 square feet; and are located in enclosed and strip malls. Specialty sporting goods stores typically hire staff who are skilled in the designated sport, to appeal to hard-core athletes and beginners looking for expert advice. Local specialty stores try to differentiate themselves from the larger sports stores by connecting with the community through sponsoring local events, as well as offering special services such as repairs or in-store restaurants. Large-format stores typically have more than $5 million in annual revenue and more than 50 employees. Specialty stores have less than $1 million in annual revenue and fewer than 10 employees. Sporting goods are also sold by mass merchandisers like Wal-Mart, Kmart, and Target, and by catalog and Internet retailers such as L.L. Bean.
Although large chains can sell a broad range of merchandise at lower prices, small local stores can successfully compete by offering better service or specializing in a particular sport. Because the equipment for many sports is very technical, knowledgeable salespeople are a strong competitive factor. The operations of sporting goods stores are fairly straightforward: companies acquire merchandise, determine store layout, train employees, advertise goods, provide services, sell goods, and manage inventory. Some larger chains also operate specialty sports stores. For example, Dick's Sporting Goods operates the Golf Galaxy chain.
Product is acquired from manufacturers and about 1,000 wholesale distributors. Manufacturers regularly introduce new models, which often have only minor changes from older models. Trade shows are an important way of finding out about new products. The type of merchandise purchased varies according to the season and regional and local preferences. In addition to equipment, most retailers sell sports apparel and shoes. Nike, mainly a manufacturer of shoes and sports clothing, is one of the biggest vendors to Dick's Sporting Goods, accounting for more than 10 percent of its merchandise.
Store layouts and merchandise presentation are often changed, especially in large-format stores that try to maintain the atmosphere of a collection of specialty departments. Layout and presentation may be designed with the help of special merchandise planning and analytics software. Because much sports equipment is highly specialized, employees must be trained to understand and explain differences. Companies typically try to recruit employees who are avid sports participants. Many companies rely on part-time employees for 50 percent or more of their workforce.
Inventory management is a major concern for all sporting goods retailers because of the large numbers of items they sell and the short selling season for many sports. Chains usually supply their stores from a central distribution facility, with weekly resupply based on sales. Hibbett Sports supplies most of its some 700 stores from a single 220,000 square foot distribution facility. Many companies use highly sophisticated computerized inventory management systems that include point-of-sale (POS) terminals, scanners, and handheld radio frequency terminals to record merchandise receipts, print pricing labels, monitor inventory levels, facilitate automatic inventory replenishment, and identify popular items.
