Retail Sports Industry

Sport is a universal phenomenon that crosses

through social, religious and language barriers. Sport has an extraordinary
ability to command attention, interest and loyalty, and has a capacity to build
hysteria or even hatred. In the last decade sport participation has grown
substantially, according to the Sport England Survey during the period
October 2011 to October 2012, 15.51 million people participated in sport at
least once a week. This is over 750,000 more people than 2010/11 when
14.76 million adults played sport once a week. The latest result also
represents a 1.6 million increase on 2005/06 (Sport England, 2012). Apart
from appealing to the masses and being a common life theme, it is also seen
as a major industry in which great deal of economic activities take place.
Organizations are striving ever hard to pursue a sustainable competitive
advantage in the current turbulent market environment which is not possible
without some differentiation over its competitors. This differentiation is
commonly sought via core product and this is where the sports industry is
trying to capitalize long-term success by offering a diverse range of coreproducts.
Market Size: According to the data of IBIS research the total global sports
industry is worth between 350 billion and 450 billion ($480-$620 billion). A
graph has been demonstrated here to engross the volume of market size and

its continual growth in various types of sports.

The global market size by different region has been shown in the following
diagram:

The sports industry has been segmented here according to the region in the
above diagram. It can be seen that the America has the greater proportion of
the revenue generated across the whole globe. The Asia pacific has 19%
which is also remarkable. The another greater region in the world is Europe
and Middle east who has 35% revenue across the globe.
In this phase of the presentation it can be seen that who are the key
competitors in the retail sports industry.

Retail Sports Industry: Retail Sports industry has been dominated by several
industry across the globe. According to the market share and market
domination in the industry the major competitors are Adidas, Nike, Footlocker,
Puma. These four companies are stiffly competition with each other in the
sports retail industry and trying to take market control. Nevertheless Adidas
and Nike has rival competition in global market.

In the USA which accounts for 40% of all sportswear sales globally Nike
gear is lapped up on a huge scale, whether its next-level running gear (where

it owns roughly 60% share of the market) or must-have basketball sneakers (a

staggering 90%) or high-performance skate shoes (roughly 20%).
NIKE

Market Cap: $65.8 Billion (as of May 2014)

Industry: Sports Apparel/Accessories
Yearly Sales: $27 billion (in 2014)
Nike is an America sports brands which has grown enormously after taking
over 65% market share in sports industry in America they have penetrated in
European and world sports market as well in the past decade or so. Nike sites
in the top 25 most valuable brands over all with yearly revenue of around $27
billion a year. Nike has massive market share in pretty much every sports
industry from Golf to Tennis, NBA to NFL, Football to cricket. They design,
produce clothing for professional sports teams plus shoes for all major sports.
Nike is by far the biggest sports brand in the world.

Market Cap: $22.7 billion (may 2014)

Industry: Sports Apparel/Accessories
Yearly Sales: $19.2 billion (2014)

Adidas has made a lot of right moves and, if patient, can gain back some of
its lost share. Powell summed up for us, adding but no one is a threat to Nike
right now. Both Sketchers and Under armour have made huge gains in recent
years Adidas is now the third biggest footwear brand in the States after UA
but none of them can, it seems, realistically topple Nike at the top of the
sportswear game. The market competition can be seen from the following
chart of this two competitors. This data shows the business of these two
competitors Nike and Adids across the globe based on their revenue
generate.

Porters Five Forces

To realize the overall competition in the sports industry it is essential to
illustrated the porters five forces in this presentation.
In todays changing world, clothing and footwear modernized from being a
normal commodity into a Fashion and Sports Commodity and the UK Sports
Retail industry has made a great contribution to the Fashion and Sports
community. This Sports Retail Industry is one of the highly competitive and

price-competitive industries where the markets are constantly monitored to

keep up with the change in the Economic conditions and Customer
expectations. A five force analysis on the Buyer & Supplier power, New
Entrants, Rivalry among competitors, and Threats from Substitutes helps to
understand the Industry Effectiveness and the micro environment forces that
affect the Sportswear Retails ability to serve its customers and make profit.

The Buyer power

The Buyers (consumers) drive the Sports Retail market to a certain extent and
is evident with the retailers bringing the prices down. With the prominent retail
players trying to attract more buyers by providing with more discounts and
services to get the market share and the Buyers reaping the benefit of buying
at competitive prices. However, there is a demographic change in the age
group above 45 who are becoming health conscious and have started to buy
sports good to remain hale and healthy. This change in the demographics and
the change in the socio-economic groups ABC1 allow the customers to look
for Fashion trended sports wear. The High Competition of the retailers with
the changes in the Socio Economic Groups enhances the buyer power. On
the other end, there is a huge amount of product differentiation in the

sportswear from jogging shoes to sports-specific shoes like foot ball shoes
leading to an increase in the choice for the customers. With only a handful of
retail players in an oligopolistic market, the switching cost of the buyers is
negligible and is confined to the change in buyers loyalty, preferences and
location. The Forward Integration is not possible as the buyers are the endconsumers and the chance of taking over is negligible.Overall, the buyers
power with respect to the market is moderate.
The Supplier power
The Suppliers are the Sportswear Manufacturers (eg: Nike, Adidas, Reebok,
Puma) and as they are globally branded with high quality, reputation and
value, the bargaining power of the Industry is low. Hence these suppliers
become the Price Deciders. The forward Integration is high as these major
suppliers become a threat to the Retailers by acquiring the retail business or
venture into retail business. It is evident from the fact that Nike in partnership
with Hargreaves Sports opened an exclusive fully branded Niketown in
London in 1999 selling only Nike products. Reebok ventured into the health
and fitness by opening the fitness centre Reebok Sports Club in London.
These Suppliers offer high degree of product differentiation ranging from
Sports shoes to socks, Hand Bands, Caps and Sports Bags mixed with
fashion trend to attract consumers of all age groups. The Switching Cost is
high as the retailers can lose the brand quality and values and as a result lose
the customers who have high brand loyalty. Furthermore, the growth of this
industry also depends considerably on the advertising and marketing
strategies of sports goods by the Suppliers.
Overall, the Suppliers power with respect to the Market is high.
Rivalry between firms
Adidas: Although Adidas is currently not able to outcompete Nike in
terms of sales and market share, it has been outperforming Nike and
gaining market share since 2006 while Nike has been losing market
share since 1998 when it still had more than 47 percent of the market,
which has been cut back to 32 percent (MSN money 2011). Adidas is

also still the second biggest competitor to Nike competing for market
share and has plans in the pipeline that it is trying to implement in order
to grow. One of them is heavy sponsorship of football tournaments all
over the globe since football has the highest fan support with more
than 2billion people who follow it, with Basketball behind it with 1.2
billion followers. One such plan has been paying off when Spain, the
team it sponsored at the 2012 Euro championships, won the
tournament in style (Torry 2012).
Puma: Puma is another rival to Nike that has been having a bad time
with financial figures not going according to expectation. Although the
firm has been sponsoring some very famous names (it sponsored the
Italian football team who reached the final of Euro 2012), while Usain
Bolt wore the firms kit when he competed in the 100m at the London
2012 Olympic Games, Puma has served up a profit warning. It said
that net earnings for the first quarter of 2012 were expected to be 13
percent below the 115m Euros reported during the same period last
year. Puma is also expect to take a EURO 100m restructuring charge
showing that the firm is doing not as well as expected so Nike has little
worry from this rival. According to the Financial Times (2012), the main
problem with Puma does not lie on the sporting field but in the stands.
Puma's recovery over the past decade was driven mainly by its
popularity with fashion-conscious youngsters. So it is not helping Puma
that many youth are unemployed in the Eurozone. Puma generates
more than 45 per cent of sales from Europe, the Middle East and
Africa, so the fall in spending power has been hurting it badly, as does
rising competition in the sports lifestyle market. The company is also
hurt by its dependence on shoes, which account for about half of sales.
Under Armour: As stated previously, Under Armour has been the one
company that has gained the most from any slip ups from both Nike
Adidas and Puma as it has been going strong for the last few years.

Threat of New Entry: The threat of entry is highest in the apparel market
due to the relatively lower costs of manufacturing apparel compared to the

footwear market where the biggest threat posed is basically from current rivals
already established in the market e.g Adidas and Puma, who although behind
in market share, are currently implementing strategies that are helping them
close the gap on Nike. Adidas has especially been gaining ground on Nike
boosted by its strong presence in sponsoring the European soccer
tournament where it sponsored eventual winners Spain (Torry 2012).
According to Marketing Weekly News (2012), Adidas is also planning on
moving into the more fashion-aligned market of teenagers which could see it
improve global market share. NEO, a fast fashion adidas sub-brand aimed at
teenagers is Adidas attempts to enter new apparel segments that will even pit
it against the likes of H&M and Zara in an effort to gain market share and
squeeze more profits out of mature industries. Another threat of entry is posed
by Under Armour Inc. an established company in the athletic sportswear in the
USA which in 2009 decided to enter the U.S athletic footwear market creating
competition in a market which had been dominated by a few players like Nike
and Adidas. Recently the US sports brand has started entering markets which
have been traditionally fought over by Nike and Adidas. For example, Under
Armour is using its sponsorship of Tottenham Hotspur in an "aggressive"
digital marketing drive which it views as part of a wider strategy to steal
market share from Nike and Adidas in the apparel category in Europe. This is
the firms first foray into professional football, which have been areas where
Nike and Adidas traditionally dominated and performed well in but are now
having to brace for new competition from Under Armour.
Threat of Substitute : Substitutes in the footwear category can include any
other types of shoes that consumers can choose to serve similar purposes.
Substitutes here therefore include the likes of sandals, which can act as
substitutes, even though they may not fulfill exact same purpose. It is difficult
to think of other substitutes that can fulfill the same purpose as athletic shoes
from the footwear industry since this an industry that has something very
specific to offer to a targeted market. This means that it is not meant to appeal
to the general population and everybody. Thus consumers who are looking for
shoes to run in will not look for boots as substitutes simply because boots are
cheaper substitutes. This is due to the specialization of running shoes that
makes substitutes hard to come by.But while athletic footwear has little

substitutes, sportswear apparel can have substitutes that include normal

everyday clothing which can be used for athletic purposes if necessary. For
example, some consumers may choose to wear tight fitting t shirts to exercise
in instead of using Nikes sportswear, making normal clothing from high street
brands substitutes.
Commercial challenge : Retail is getting complicated. It is no longer a case
of simply stocking shelves with desirable goods and waiting for shoppers to
flock through the doors. Rapid developments in technology are changing the
game.
Modern-day retailers have to make their goods available via websites and
mobile apps, run efficient e-commerce operations alongside or instead of
bricks and mortar stores, deliver goods to the consumer's front door and be
prepared to manage a backlash on social media if things go wrong.
Consumers are becoming more demanding and less willing to tolerate failure.
They want a seamless shopping experience however they interact with a
retailer. They may check out a store's products on their mobile on the bus
back from work, then wish to continue on the same page on their tablet or PC
at home. That requires considerable technical prowess in managing the
customer journey on different devices. In the global market in the developed
countries these company has these advanced access whether at the same
time in many more countries in Asia this market has not been initiated. The
market penetration in such horizon is not only a great challenge for the sports
retail industry but at the same time it will open a door of the opportunity for the
whole sectors.

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