How sporting goods brands can master the new normal and make the leap to a Direct-to-Consumer sales model.
The last couple of years has been a time of tremendous churn and uncertainty for consumer brands, but it’s had a particular impact on companies serving the needs of professional athletes and casual sports enthusiasts. Brands that have traditionally sold via retail channels are confronting new challenges and new competitors. Those who can adapt to the new realities of direct-to-consumer (DTC) selling will reap significant rewards and ensure a future-proof brand experience.
This post is the first in a series where I will explore the changing market landscape for global sporting goods brands and explain how CoreMedia is building a sustainable path to the future of online sales.
The Future is Direct
2020 was a tumultuous and troubling year for sporting goods brands. As consumers have abandoned in-person shopping, retail sales plummeted. According to the NPD Group, fashion footwear sales fell 24% in Q1 2020 compared to the same time in 2019. This shift resulted in an explosion in online sales – for those companies with the right technologies and business vision. According to McKinsey and Co., eCommerce sales penetration in the United States more than doubled to almost 35% in 2020 from around 16% the previous year.
The chief beneficiaries of this shift have been the growing number of purely digital DTC brands. By leveraging the lower barriers to entry, these brands forged unique relationships with an increasingly isolated community of sports enthusiasts, eager to remain connected to their athletic passions and maintain their workout schedules. Companies like Peloton, Lululemon, Bombas, and Outdoor Voices all changed the way that consumers shop for sporting equipment and apparel.
Sporting Goods is a Natural Fit for DTC
It’s no surprise that sporting goods brands have found success with a direct sales model. DTC is all about reducing the distance between sellers and buyers. Consumers no longer need to wade through a confusing landscape of resellers to find the products they need. DTC is an ideal match for the passionate mindset of the typical sports enthusiast who is always looking for the next product to boost their performance and increase the enjoyment of their chosen sport – whether it’s hiking, skiing, biking, running, surfing, or mountain climbing. While the pandemic may have put a damper on pro sports, it only whetted the appetite of individual athletes wanting to transform lockdown into workout time.
In fact, sporting goods brands have already been at the vanguard of this shift. Nike recently pulled all its products from Amazon and Under Armour reduced its wholesale channel partner network by almost 3,000 distributors. Footwear pioneer Adidas projects its direct-to-consumer business will account for half of its total sales by 2025.
Weighing the Pros and Cons of DTC
Pursuing a direct sales model is hardly a guaranteed victory, particularly for brands with deep roots in traditional retail. Just as athletes can only succeed when they have a clear and rigorous training regimen, traditional brands can only make the shift when they have a clear understanding of the costs and benefits of a direct approach.
The DTC model is based on a simple equation. By eliminating the wholesaler and focusing on a targeted set of online consumers, brands can significantly increase their margins and invest these additional funds into new technologies and more aggressive marketing.
The benefits of a DTC approach are well understood and include:
- More direct customer relationships and better customer data
- The ability to shift marketing and merchandising quickly in response to market pressures
- More control over the brand and the entire customer journey
- Enhanced customer loyalty
- No need to worry about end cap fees or retailer discounts
But these results can only be achieved if the brand can overcome the inherent challenges of DTC, which include high customer acquisition costs, the constant need to retain your customer base, and the threat of newer, more agile competitors.
Traditional brands face some additional challenges. It may be true that the future will be defined by DTC, but most of these brands still rely on their channel partners for much of their revenue. They also come with considerable additional overhead in terms of logistics and infrastructure. Yes, they need to forge new relations with their buyers, but they also need to maintain – and sometimes even expand – their relationships with their existing sales partners.
Fortunately, as CoreMedia has learned from working with some of the world’s leading apparel and sporting goods brands, it is possible to accomplish both goals. And, in some ways, traditional brands might be in an even stronger position than the pure-play digital startups.
The Ball is in Your Court
Because direct sales are all about community, ubiquity, and content-driven experiences, traditional brands seeking to transition to DTC are in a good position. Not only do traditional brands start with stronger brand awareness, but they also have a pre-existing ecosystem that can deliver greater convenience to shoppers. By leveraging their traditional strengths and resources, these brands can gain a significant advantage over their supposedly more agile competitors.
The path to achieving the perfect balance between traditional and direct selling involves creating a self-reinforcing community of partners, customers, and athletic influencers who can deliver personalized, content-driven experiences across any channel to inspire, inform, and transact.
The following tactics are just of few of the topics that we will explore in upcoming posts in this series:
Chapter 1: Content-driven storytelling and 1:1 marketing
Most leading sporting goods brands have already done a lot to build their customer communities in-store and online. They know an enormous amount about their customers – their goals, performance metrics, and more. Despite this, many brands struggle to monetize this data effectively while protecting customer privacy. The key is to pair this data with inspirational and informative content to deliver truly targeted 1:1 experiences. Ultimately, this can even be extended to personalized products. These same experiences can be delivered via direct-to-consumer channels, as well as partner-empowering B2B marketing portals.
Chapter 2: Blend content and commerce to deliver frictionless omnichannel transactions
Consumers want online brand experiences to be integrated with transactional experiences. Every interaction with a brand should be an opportunity to learn, become inspired, and to buy. Regardless of where a shopper encounters a brand, they should find a seamless, personalized opportunity to engage and purchase. And the scope of products that are included in the portfolio can then be extended to include a broad range of experiences – from workout clothes to workout music, from running shoes to exclusive fitness events. The possibilities are endless.
Chapter 3: Build a partner and customer loyalty loop
Truly enduring customer relationships are based on more than just price, selection, and availability. Once a true 1:1 relationship has been established with a customer, this can be extended to include other customers, athletics influencers, and even retail partners. Customer will trust brands and their partner sellers not just because of their products and services, but because of a vast network of athletes and experts. All this drives buyers back to the brand and encourages them to become advocates and influencers in their own right. The result is a virtuous cycle of engagement, influence, and loyalty.
We’ll explore each of these topics in more depth in upcoming posts, so keep checking in with us to learn more. In the meantime, check out a few CoreMedia customer success stories to find out how leading companies like Deckers Brands (owner of Hoka One One, Teva, and Sanuk) and others are leaping over their competitors with innovative customer experiences.
Or, better yet, give us a call. We’d love to talk with you.
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