This week, Sports Authority, one of the largest “big box” sporting goods retailers in the U.S., announced they are closing all 450 stores, selling their inventory and shutting down. Dozens of other public retailers also announced slower growth, lower profits and took down their future estimates. This means fewer retail jobs, lower stock prices for these businesses and a changing retail environment.
Everyone is quick to cry “it’s the end of retail because of the Amazon effect.” It’s not the end of retail, it’s just the end of general retailers selling average stuff to “average consumers.” Department stores are out, specialist shops are in. And the specialists are doing pretty well, despite Amazon.
Specialists eat generalists
When stiff competition arrives and the overall market stops growing, it’s just a game of musical chairs – in any industry. The weakest players get weeded out first. The weakest players are almost always the generalist businesses that tried to do a little bit of everything for everybody. That may have been OK when they were the only store in town, but when the specialists appear and people have lots of online choices, the generalists are the first to go.
Sports Authority was just the weakest player in a competitive market. I had shopped there occasionally to buy a few simple things. Their stores are huge and always full of inventory (mostly clothes), but I had never seen more than a few shoppers at the store at a time. Crickets.
This isn’t a sign that the economy is off or that people don’t buy sporting stuff, it’s just a sign that Sports Authority wasn’t winning the sporting goods horse race. They were “whipping their horse” with aggressive coupons and discounts (always a bad sign), but it wasn’t enough.
The specialist retailers are doing fine
Sporting goods is doing great for other retailers who specialize.
- REI is an outdoor sporting goods retailer with fewer stores, smaller footprints and more expensive (well-trained) staff. Their parking lots are full on Saturday afternoons; they have lines of smiling buyers with armloads of expensive camping, hiking and biking gear. REI focuses on just the upscale outdoorsy types who take selfies from the tops of mountains and who care about the environment.
- Cabela’s is another outdoors equipment retailer that has full parking lots, busy stores and lines at the cash register. They sell to a different kind of outdoors enthusiast than REI, but Cabela’s customers are also deeply connected to their brand and their shopping experience. Cabella’s is for the pickup driving, hunting, ATV-ing, boating and fishing crowd, which isn’t everyone and isn’t the REI crowd.
- Lululemon is sports apparel for the yoga crowd and they doing just fine too. High prices, busy stores, fast growth, lines at the cash register. Lululemon is only for upscale women (and some men) who are invested in being super fit and want to look and feel great. That’s not most people either.
Each of these retailers’ shoppers visit often and enthusiastically say, “I love REI!” and “I love Cabella’s!” and “I love Lululemon!” Nobody was saying “I love Sports Authority – let’s go hang out there!” No connection with their shoppers, no lines at the cash register, no premium prices – and no business in the end. Might as well buy it online.
These specialty retailers focus on just their narrow target market of customers who REALLY CARE about their offering and want the best equipment and experience. They connect emotionally with the passion for the particular sport AND the type of person who is passionate about it. Their customers could buy this stuff online, but they’d rather go to a store to get expert advice, hang out with other people like them and find inspiration for their next outdoorsy or yoga adventures.
Beware the “average”customer
Sports Authority offered “average stuff for average sporting buyer with an average shopping experience.” Why didn’t this work?
What is average in the sporting goods world? Consider that about half of Americans don’t exercise at all or play sports, on one side, and only about 10% of Americans are serious about some different sport (running, hiking, baseball, skiing, yoga, etc.) on the other. Average means the “place in the middle, “but there’s really nothing interesting in the middle in sporting goods, and in most markets.
Average is between the big crowd who doesn’t care at all and the small percentage who care a lot; it’s a no man’s land where it is very hard to survive. Dick’s Sporting Goods is another big box sporting good retailer generalist that stands to gain from Sports Authority going out of business, but it’s still a tough business for them, too.
Three lessons for every business
- Each of these specialty retailers could sell to people outside their target market and expand their offerings, but they don’t. They all have extreme pressure from investors to grow faster and make their numbers, but if they sell to everybody, the jig is up and the spell is broken. They stay the course and don’t try to be generalists. They also promote the activity they serve. More yoga enthusiasts is good for Lululemon, not adding jewelry or other non-yoga goods “because they could.” Yoga or die.
- If you don’t offer the best goods, services and experiences for people who really care about what you offer (the 10% most passionate in your market), you are very vulnerable to competition. If people don’t say “I love _(your company)_!“, you will never create a line of enthusiastic new clients or customers to efficiently drive your growth. More advertising and more discounting = less profits and slower growth.
- It’s not just about what you sell, it’s the whole experience. People can buy fishing rods and boats online, but they want to whole experience of buying these things at Cabela’s. It’s not just the coffee at Starbucks, either. The thing is never just the thing.
Say No to being average. It’s always tough business; it’s a mirage for thirsty entrepreneurs.
Focus on the 10% of your market who really care about what you do, then do great things for those passionate customers.
