This issue of Sports News will focus on big box stores. Right now they are pushing the sports retailing industry.
The Sports Authority is the biggest big box sporting goods chain. Sales in 1996 were $1.3 billion. The average store size is 40,000 square feet. (1) As of October 1997 there were more than 180 stores.
The company's goal right now is to capture market share. "We believe in back-filling our stores, back-filling a market and adding more and more stores to every single market," said Jack Smith, the company's chairman and CEO. (2)
Another growing big box chain is Just For Feet (67 stores as of August 1997). Its average store is 15,000 to 20,000 square feet and stocks up to 4,500 styles of athletic footwear.
But no big box chain dominates the market.
In 1996, according to Gene Wright (executive director of Anderson Consulting's retail division), The Sports Authority and Sportmart (another big box chain) together only controlled 5% of the sporting goods retail market. This is in contrast to big box chains in other retail market sectors: Home Depot (10% market share) and Toys R Us (17%). (3)
Another analyst, Patrick Snell of Robertson, Stephens & Co., said that big box stores as a group have only 5% to 7% of the sports retail market. (4)
The trade publication Sporting Goods Business puts big box market share at 10%. (5)
Sports retail is a much tougher market than other retail sectors. For example, according to Wright, inventory turns over in all big boxes stores an average of 3.8 times a year, compared to 2.5 times for sporting goods big boxes. (The more turnover, the better, because a retailer only makes money when items sell.) Average sales per square foot in all big boxes is $340 compared to $210 for sporting goods big boxes. Return on equity for all big boxes is 14.5% compared to 9.8% for sporting goods big boxes. (6)
The major feature of big boxes is size. Said Alan Cohen, president and CEO of The Finish Line, "The large stores give [retailers] a tremendous ability to present products." (7)
Some of the big boxes use this size to offer special attractions.
Dick's (which had 44 stores in 1996) has a 100,000-square foot store with a running track in the footwear area, a video wall in the team sports area, and an arena-sized scoreboard in the apparel area.
Gaylan's (a subsidiary of the retail conglomerate the Limited, Inc.) has installed climbing walls, basketball courts, and batting cages in some of its stores.
Ironically, many big box chains are starting to open smaller stores.
The Sports Authority is planning to open 15,000 to 20,000-square foot stores in urban locations.
The Finish Line has eight big box stores (15,000 to 25,000 square feet); four medium format stores (10,000 to 14,999 square feet); and 269 traditional stores (under 10,000 square feet). According to Cohen, the medium-format are the most profitable. (8)
Just For Feet plans to open specialty stores of 4,000 to 6,000 square feet.
An issue for big box stores are the brands they carry. Some manufacturers won't sell to them. "You lose the specialty market when you sell to big boxes," said Don Brown, marketing director of Etnies, a skateboard shoe company. "Whether we'd sell to the big boxes is mostly dependent on the rest of the industry and how much skate shops are willing to support us." (9)
Mark Scott, president of Sportmart (which was bought by Gart, another sporting goods chain, in September 1997), said that The North Face wouldn't deal with his company. But he defended Sportmart's image. "The most important thing is that we're not a discount store. Our presentation stands are probably much higher grade than a department store. We are a specialist. We do sell authentic. We are a model account of Nike's. Those are the kinds of approaches we take and if we do business with a manufacturer we will do everything in our power to protect the integrity of their brand." (10)
Other manufacturers have sold to chains as a way to increase their overall retail sales. "We're in a position where we can't be too selective. The market is very competitive, and we need to get our numbers up, increase our exposure, and generate some advertising dollars," said Stacy Hauser of Hauser Snowboards (which no longer appears to be in business). (11)
Some big box chains have developed their own brands to be able to stock the products they want. According to Sportmart's Scott, "[Our private label] was about 1 percent of the company's business in 1995. In 1996 it was about 7 percent and I'm looking at hopefully 25 percent of the company's business in '97. It has been unbelievable. It works as well in hard goods as in soft goods. It has an incredible amount of integrity in terms of the taste level and quality and price point." (12)
Big box chains are also trying to upgrade their images by offering better service. Said Harold Ruttenberg, Just For Feet chairman and CEO, "We are the only large box that is not a rack operation. It doesn't matter if you're talking about Barnes & Noble, The Sports Authority or Sports & Recreation, every one of them is exactly the same. They buy goods, put the goods on a shelf or a rack, put a price on them, advertise them, and say to the public, 'come and get it.' In our stores, 80 percent of what we sell is in the backroom, so if one of our people don't go and get it for you, you don't get it. As a result, we have anywhere from 50 to 150 people working in every store." (13)
Another distinguishing factor among big boxes is product mix. Compare the 1995 sales breakdowns of two different chains: Gaylan's (40% equipment, 40% apparel, and 20% footwear) and Sportmart (53% equipment, 26% apparel, and 21% footwear). (14)
As much as big box chains have changed the nature of sporting goods retailing, they still face challenges in the future. For one, because of their size, they aren't as flexible as specialty stores. "The risk of a big-box format is that if it worked in 1992 at one level and doesn't work at the same level in 1996, you are stuck with these big stores," said Kirk Palmer, who runs a retailing executive search firm. (15)
Market saturation is another problem. "Research shows that a market will only support two retailers in a category, says Britt Beemer with America Research Group, a Charleston, S.C.-based organization that tracks consumer trends. Consumers visit 1.8 stores to find what they need, which means stores ranked third or fourth in a market usually don't survive." (16)
According to another industry analyst, Brad Cohen of Sands Brothers and Co., "There's such fragmentation that no one has the critical mass [needed to compete] except The Sports Authority. Sixty stores in a chain in this day and age doesn't mean anything. The problem with sports retail is there is no national chain except The Sports Authority, and how big are they?" (17)
Sporting Goods Business estimates that the country can probably only support 600 big box sporting goods stores (based on the assumption that it takes a surrounding population of between 200,000 and 350,000 to generate enough sales to keep one store in business). The magazine estimated that as of July 1997 there were already 500 such stores around the country, leaving little room for growth.