Nike and Adidas Like Retail Industry Sports Sector Companies SWOT Analysis Example

Introduction

The retail industry is a very big industry that comprises of various sectors such as food, sports, clothing, groceries, etc. In UK, the retail sector comprises of 10% of the overall employment share. UK is one such international retail market where there is highest proportion of international retailers trading. It is contributing 5 percent to GDP and the government supporting the industry through UKTI (UK Trade and Investment). It is the largest broad industrial group in UK viewed in context of the number and proportion of employees. There are 428000 businesses operating in the retail sector in the UK, and contributing to 8% of all UK businesses (The retail industry 2013).
Among various sectors in UK, the sports retail sector is chosen for the concerned study. In the changing and dynamic world of today, the clothing and footwear are two sectors that have modernized from the time when they were a normal commodity into the fashion and sports commodity. In this context, the UK sports retail sector has made significant contributions towards the proliferation of fashion and sports community. The sports retail industry sector is one of the highly competitive as well as price competitive sectors in the retail industry where there is continuously monitoring of the market in order to keep up the pace with the dynamic business environment and continual changes in the expectations of consumers and prevailing economic conditions (The retail industry 2013).
There is diversification of the sports retail sector into various strategic groupings, such as clothing, sports goods, and footwear and sports equipments. The chosen sector of sports retail is discussed in the context of all these strategic groupings along-with the discussion of major player in the market, i.e. Sports Direct. The company holds the first position in the UK sports and leisurewear retailers in the presence of other big players, such as JJB Sports, JD Sports, and niche players such as Nike, Puma and Adidas (UK Sports Retailing 2011 2011).
In the growing competition in the sports retail sector with niche players also opening to the budget segment market and the supermarkets expanding their non-food segments by involvement of some retail products, major and other players in the industry can face fierce competition in the coming years. The position of the UK retail market also makes it necessary to look at the strategic issues, opportunities and threats that face the sector and its operations in UK (UK Sports Retailing 2011 2011).

Competitive structure and major strategic groupings

The UK sports retail sector is highly competitive. The size of the sector forms the considerable share of the overall UK retailing industry. The sports retail market of UK is 7.6 billion pounds and the growth is mainly driven by the sports clothing and footwear along-with the equipment sales. UK is the fifth largest market for sporting goods and the UK market of sports equipment and clothing is typically made of 80% of sports clothing and 20% sports equipments. Over the last five years, the sports clothing and the sports footwear sector has grown up by 4.7% and 4.9% respectively (UK sportswear market value to grow 8.6% by 2015 2011). The DRETS analysis for the UK sports retail sector overall are as follows:
Demographic factors: The disposable income of the people of UK has significantly increased due to which they prefer to buy sporting goods and related clothing products. There is incremental increase in the consumer expenditure sector in UK leading to the growth of the UK sportswear market by 3.2% in 2011. The market is receiving the boost from the growth of the non-specialists’ stores in the sports segment. The employment opportunities in the sector are also high as the retail industry overall contributes to the 10% of the employment in the UK (The retail industry 2013).

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Regulatory factors: The government of UK supports and encourage the UK sport retailing market by its strategic interventions and investments through UKTI. It is aimed at increasing the activities in the sports retailing sector with promotion of investments by niche market brands in UK such as Nike and Adidas, and the mass-market brands such as sportsdirect.com (UK Retail Industry – International Action Plan 2013).
Economic factors: The UK economy bounced back from the period of recession in a quick manner. Consumer spending drives the UK economy and the service sector is continuing to lead in the recovery progress of UK from recession. The retail sales are continuing to pick up with summers gone busier than the last year. As the service industry is the major driver in the economic growth of the company, sports retail sales also have witnessed increased consumer expenditure (UK Sports Retailing 2011 2011).
Technological factors: There is an increasing trend towards online purchasing of sporting goods, sportswear and equipments. The retail online is far more in comparison to other countries. Sporting goods have emerged as a major online performer in the UK with the significant increase in the traffic in the warmer months while the traffic for Europe did not change (UK summer sees online sporting goods traffic increase while Europe remains stagnant, new research reveals 2013). ‘Become Europe’ is the price comparison provider that analysed the traffic of the UK and European shops and found out that there was substantial increase of 55% in the UK traffic for sporting goods for the first six months of 2013 particularly the categories of cycling, water sports and camping and outdoor. Thus, it has implications for sport retailers as they have to ensure that customers that shop online will be shown content that seems to be relevant to fulfil their needs (UK summer sees online sporting goods traffic increase while Europe remains stagnant, new research reveals 2013).
Social factors: Social factors include the value given to the sports in the UK society that drive the consumer expenditure in this sector. Sports is an important part in the national economy and organizing 2012 Olympic and Paralympic games showcased the positive effects of sports that are wide ranging and how they can bring happiness. It is revealed in a study by Sport England that consumption of sport benefit includes well-being and happiness of spectators and the national pride or the feel good factor that sporting success brings to the life of UK people. Thus, they consumer sports products to experience and share their sports pride (Economic value of sport in England 2013).

Grouping of the sector

The sports retail sector can be grouped into leisure and equipments groups. Leisure group includes sport clothing, such as tracksuits, hooded sweatshirts, swimwear, and accessories, such as gloves, caps, etc., and sports footwear, such as running shoes, ski boots, trainers, football boots, etc. Sports equipment includes golf clubs and balls, tennis racquets, snooker tables, trampolines, etc. However, they are the diversified operations of the same sports sector. Most of the companies, such as Nike, Adidas and other retailers sell all of these products to consumers (UK Sportswear Retail – Macro Economics 2011). The sports retail sector is discussed in the strategic grouping of sports leisure on an overall basis.

Opportunity and threats analysis

Opportunities

• The UK market is witnessing growth and the economy is under quick rebound from the period of recession. The quick rebound of economy is facilitated by the strong performance of the retail sector.
• Barriers of the entry in the UK sportswear market are low owing to the presence of demand for these products and the feel and connection that UK people feel for the sports and related activities.
• Customers tend to show attention to products that are quality based and prefer to consume them more as is observed from the UK online sale traffic of premium sports products identified from the study by Sport England and the study of the traffic of online sports goofs sales.
• There is a significant shift in the social patterns with emergence of wealthier women. Thus, there is opportunity for increasing the sale of sports swimwear suits and other premium products due to the more inclination of women towards shopping in comparison to that of man.
• There is opportunity present in the form of approaching to different types of outlets in UK, as there is online market, mass-market retailing, niche brands and non-specialty sports segments.
• Several non-sport retailers have widened their collections of sports-wear including Amazon, Sainsbury’s etc. (The retail industry 2013)

Threats

• Highly competitive market with competitions based on price.
• There is high dominance of the greatest sports brands in the niche market that makes the operations and sale of general sportswear and sport goods limited.
• The switching cost of the consumer is high in the sports and leisure market.
• Strong brand loyalty with premium sports brands, such as Nike is a good example of an emotional brand, and high demand for quality in the sports market is a threat for small and medium sized retailers, as they cannot compete on price basis for long time (Sports Goods Retailing – UK – May 2011 2011).

Services marketing strategy commonalities and differences among major players

Major players in the sports retail market of UK are sportsdirect.com, Pentaland Group, JD Sports Fashion Plc, etc. The leading group in sports retailing is Sports Direct, while JJB Sports, JB Sports and the Blacks Leisure Group makes the rest of the sports retailing market (Winners and losers in the sports retail sector 2011). In regard to the service marketing strategy, there are both commonalities and differences between these major players in the market. First consideration is that of commonalities. All major players specifically Sports Direct and JD Sports are competing avidly in terms in order to become the champion of the sports apparel market of UK, not only on the high street but also in the online market space, which is one of the major places in service marketing Ps. These companies offer and sell a range of high quality sporting brands at discounted rates (Battle of the Sites: JD Sports V Sports Direct.com 2013).
Furthermore, both JD Sports and Sports Direct are two of the most visited websites in the online retail UK market. Both the websites ensure that that there is significant traffic passing through on a daily basis as a part of their service marketing strategy. Considering the look of their websites, there are commonalities in the terms of providing sleek homepage, with establishment of brand identity and large advertising of the main advertising section. Maintenance of the site manoeuvrability and the opportunities for sale are clearly balanced so that the customer does not feel bombarded with products (Battle of the Sites: JD Sports V Sports Direct.com 2013).
There are other commonalities, such as quality-based competition as all the major players tend to attract consumers through advertising quality based sports products in their stores. In regard to the differences, there are differences in the marketing strategy. Players, such as Sports Direct focus on mass market with opening of stores in various places of UK- both near and distant so that they can cater to a large number of people i.e. mass markets. On the other side, niche players that have started opening their own chain stores, such as Nike and Adidas focus on targeting the niche segment with catering to people  who are brand conscious and are ready to spend a considerable amount of money on sports leisure (Winners and losers in the sports retail sector 2011).
The differences at the strategic level are observed in the marketing strategy. For instance, Sports Direct updated its Carnaby Street store for providing a flagship Soccer Scene experience in Central London in the year 2012, that shows that the company is focusing at ensuring high probability of satisfaction and hence the repeat attendance of visitors in its store (Sports Direct Annual Report 2012). On the other side, JD Sports focus on offering strong differentiated product that combines both branded and own brand products. It reaches its customers through targeted messages. Extensive market research and inorganic growth through acquisitions are the major factors that differentiate it from other players in the market (Annual Report and Accounts 2012).

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Sports Direct strategic issues for 5 years

Sports Direct is the leading sports retailer in the UK market. It holds the first position in the sports and leisurewear retailer. There are some strategic issues related to service marketing that the company can face in the upcoming five years. They are as follows:

• Competitor positioning: At present, Sports Direct targets all customer level segments due to which it does not focus its marketing strategy for one single consumer group. On the other side, JD Sports, which is the major competitor of Sports Direct, focuses on differentiation and quality based products with innovative store formats (New store format will up JD Sports game 2012). Due to rise in the quality based and more premium segments in the sports retails grouping, the company faces the strategic issue of the tough competition and its own positioning in the market.
• Owing to the rise in the trend of niche players and midmarket non-specialists moving into the sportswear, there is the threat of maintaining the leading position in the market. It is because consumer preferences are for quality based differentiated products and niche players, such as Nike have already high brand loyalty on their side due to which there is likelihood of consumers purchasing from their own retail stores rather than the general sports retail chains like Sports Direct. At present, only four major players cover the retail sports market, but the entry of supermarkets and non-specialty middle segments will affect the market share of Sports Direct due to competing on the same platform of discounts and price based competition (Sports Goods Retailing – UK – May 2011 2011).
• In order to maintain the position and remain competitive, it is necessary that the company maintain a deep portfolio of range of sportswear products. In addition, making acquisitions of related businesses is also a strategic concern in service marketing so that it can remain in leading position in the long run as JD Sports is giving tough competition to Sports Direct by following the path of inorganic growth i.e. acquisitions. It recently acquired Black Leisure in 2012 (Annual Report and Accounts 2012).
• Maintaining the usability of the online retail website- Sportsdirect.com is one of the most sought websites for sports retail products in the UK market. However, players such as JD Sports and non-sports players, such as Amazon, Sainsbury’s etc. have their own well-established websites and their entry in the sportswear market creates service-marketing issue for Sports Direct in the form of maintaining visibility that comes in the place and physical evidence Ps of the service marketing mix (UK Sports Retailing 2011 2011). As identified from theories, larger brands tend to enjoy more loyalty. In addition, if a brand appeals to a particular consumer group, then it has a higher market share among that user group in comparison to the rest of the market. The company has to look upon development of specific target markets so that it can develop the strategy accordingly (Klien et al 2007).

Relationship between theoretical principles and service marketing issues

In the service marketing, physical evidence is an important P in marketing mix. Whether it is the physical store or online presence, the service organization has to create a connection with the user so that the consumers can make the decision of buying the service of the organization. Physical evidence is any kind of physical manifestation of service that consumers can connect to.  In the context of online market, the online retailer can never meet its customers. Therefore, the website creates the connection between the retailer and the consumer. Building trust and brand awareness in the online market is done through creation of high-end experience of the visitor on the site (Klien et al 2007).
It is usually done through ensuring that the site is error free, use of high quality product images and displays with attractive and informative product descriptions, showing testimonials, ensuring that the physical location can be easily located and ensuring that the usability of the website is high. In the context of Sports Direct, the company has to add more to its website and go for digital marketing tools so that it can compete well with the major competitor JD Sports that is ahead of Sports Direct in terms of website usability.  Subsequently, it can also address the upcoming challenges of the emergence of mid segment non-sports supermarket chains and other players, such as Amazon that have expertise in online marketing (Sports Direct thrashes out deal to buy 60 JJB Sports stores 2012).
In the service marketing, one is the core product and the other is the augmented product. The service organization has to cater to the customer considering both the products with the help of relationship marketing. Relationship marketing is an important concept in the field of service marketing. As intangibility prevails in the customer service aspect, it is essential for service marketers to create connection with the customer through the extended marketing mix and focusing at the customer service as its core value (Dann & Dann 2011).
In the context of Sports Direct, it has to maintain the connection with the customer through becoming an emotional brand so that customers do not switch to products of competitors. As identified, the major strategic issue is market share as the future of the UK sports retail market includes non-specialty and niche players strong presence in the market. Therefore, relationship marketing can play an effective role in saving the leading position of Sports Direct in the next five years. With multichannel retailing gaining momentum and pace, and increasing activity of online giants, such as Amazon, the traditional service marketing strategy of Sports Direct to focus on stores is insufficient in gauging the actual competitive landscape. Sports Direct is usually regarded as pile-it-high, sell-it-cheap retail store (Sports Direct thrashes out deal to buy 60 JJB Sports stores 2012).
Therefore, increasing the usability of the website and creation of relationship marketing are needed for the company to hold on to its current position of the leader of the market. The possible solution includes use of the warehouse and distribution centre of the JJB that Sports Direct recently acquired in 2012 to focus on retail and supporting the burgeoning online retail business of the company. For increasing the usability of the website of the company as part of the physical evidence of service marketing mix, it is necessary that the company work on the online graphics, presentation and ease of surfing the website. It will help in increasing the traffic to a significant level (Sports Direct thrashes out deal to buy 60 JJB Sports stores 2012).
At present, Sports Direct navigation is quite confusing because of drop down menus having a large number of categories. Furthermore, the homepage is sleek looking with presence of excessive advertising sales goods. Low resolution images of products and lack of comprehensive review section takes customer away from further navigating. Therefore, the relationship building through increasing the usability of the website is needed (Battle of the Sites: JD Sports V Sports Direct.com 2013).
Functions on the web page should be made more easy and convenient for the visitor. It is also necessary to involve customers in their social media marketing so that a two-way connection can be established. Creating campaigns, such as customer stories and experiences in shopping at Sports Direct can build the much-needed emotional relationship between the company and its consumers so that upcoming changes in the UK sports retail market can be faced well by the organization (Daws 2009).

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Conclusion and recommendations

Service marketing requires organizations to create the connection with the consumer and make its presence felt even in the absence of tangibility as is common in the product organizations. The UK sports retail market is highly competitive with presence of both big and small players along-with emerging niche players. It is one of the most competitive sectors as it significantly contributes to the GDP of the UK economy and creates employment for a large number of people in the UK. The sport leisure grouping comprises of sportswear and footwear that is responsible for most of the retail activities and revenues generated in the sector.
Sports retailers in the sector are a few big names that cover the entire market. However, there is recent change seen in the market with the entry of non-sports retailers, such as Amazon in the online market, and niche players such as Nike and Adidas coming up with opening their niche stores that make the competition tougher for traditional sports retailers, such as Sports Direct. The strategic issues related to service marketing involves the competitive positioning and the need to focus on online retail sales.
Physical evidence and relationship marketing are the two major theoretical concepts. It is recommended that Sports Direct focus on its e-marketing strategy by increasing the usability of its website and building emotional connection with customers in their marketing campaigns. Just as it focuses on ensuring that, the customer visits its physical store again by organizing events, such as screening of sports events, there is need to focus on online marketing campaigns.

References

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