Is everything they teach you about retail wrong? It is the start of a new football season. My 15 year old son goes back to training and (guess what) discovers he needs new boots. As last year’s player of the year only the most expensive ones worn by English Premier League stars will do.
Is everything they teach you about retail wrong?
It is the start of a new football season. My 15 year old son goes back to training and (guess what) discovers he needs new boots. As last year’s player of the year only the most expensive ones worn by English Premier League stars will do.
My son researches football boots and shops on his iPad and we head for Sports Direct. Having just read the book ‘Ten Words’ by former Tesco CEO Terry Leahy we arrive ill-prepared.
This is not the world described in Terry’s book.
The Sports Direct retail experience
The store is more like a warehouse without windows: no shopping mall experience here. no retail therapy. Stock is piled up to the rafters it is hard to see or even touch much of it moving around is difficult because the aisles are so narrow. Every available area of floor space is filled with stock. Almost everything is on special offer or showing a big 30% discount label. For some it is Aladdin’s cave full of bargains. For others who like admiring as well as buying this is a shoppers’ nightmare. The store is actually quite dark and dirty underfoot the fittings are shabby with worn out display racks or stock simply stacked in their boxes. No Tesco disciplines here either.
We press on and contain a strong desire to retreat. The basic driver for going to the store remains strong. My son could buy from internet sites but as parents we do not see this as an option. Sizing is unreliable (it is a mystery why governments and manufacturers have never agreed on an international sizing standard with 4 different sizes on each boot?); our son is growing and needs to try on shoes and clothes to make sure they fit.
Strangely knowing why we come in person Sports Direct leaves all the trying on to you. Staff are not there to help you make choices. In a conventional shoe shop staff are trained to measure feet provide advice and help with fitting giving customers the confidence they have made a good choice. In Sports Direct you view boots on display and hunt down a member of staff to point out your choice. This is an Orwellian world. Staff then mutter into walkie talkies to a mysterious person off stage. If your size is in stock the boots are sent out to you. My son must squeeze on to the end of a tiny bench to try them on. My wife and I with all the other parents in the store find it hard to even get close to our children to advise them in this cramped environment. This is not the world Mr Leahy describes.
When my son makes his choice at last the pair are reclaimed by the staff – presumably to stop you walking off without paying. You must then make your way to the tills at the back of the store. You must wade through the narrow aisles and all the other customers to pay and collect. Tags and alarms stop consumers walking off with clothes. Queues are lengthy. Again no Tesco disciplines here even in a quiet period it seems to take 10 minutes to pay.
Talk to other parents helping their children choose and like you; they can’t wait to leave for ever. But we come back and the formula works. Stores are full of shoppers with all socio-economic groups present. Mike is getting richer and his company is expanding globally. Competitors are falling by the wayside and the least worst way to buy a pair of football boots is in one of his stores. The small high street sports shop does not have the range in stock and trying shoes on at a market stall is not easy. Only the club shops have an edge for replica kit. The internet still has serious limitations for clothing and footwear purchases.
Sports Direct business strategy
So what is the secret? Pretty much everything seems to be counter intuitive but dig a little deeper and Terry Leahy’s focus on the customer and on simplicity is central here. Unlike Tesco which attracts customers through service as well as price and quality Sports Direct knows getting value is prized above all by its customers – much in the way Ryanair knows travellers will trade comfort and convenience for value and Tesco offers its value range to appeal to even the shallowest pockets. The business disciplines soon become obvious:
CLEAR CUSTOMER OFFER
SWEAT THE ASSETS
A low cost high volume retailer driven by the major sports brands – a retailer with a distinctive value proposition. The driver is price and value for consumers on a budget willing to tolerate a basic retail environment.
The religion is ‘pile ‘em high sell ‘em cheap’ – as Sam Walton preached: natural soul mates are Poundland Aldi Lid: high volume low price selling basics in a no frills formula. There is no pretence to be anything else. Customer service is minimal – it shouts out at you – here we are take it or leave it it is up to you to find it yourself and decide if it is right for you.
This is a globally sourced business and a great supply chain with good inventory control are essential: value comes out of really hard negotiations with manufacturers willing to shave margins for higher volume turnover giving Sports Direct a return on low prices.
Use the retail floor as a warehouse for stock– low cost no frills facilities: totally unafraid to use an unfashionable and unfriendly retail environment on the basis that consumers are willing to forgo these in return for lower prices.
Only employ the absolute minimum of staff to a minimum standard on a minimum wage. Why do more when value is more important than service?
Use staff to promote the brand by dressing them in bright red uniforms with a prominent corporate logo. Avoid hierarchy with highly interchangeable teamworking to perform a tightly limited range of tasks – stack shelves bring out stock enter sales take the money apply stock control to drive replenishment.
Established in 1982 Mike Ashley was sole owner until the company floated in 2007. This is a radically different strategic approach to Tesco not that Mr Ashley really needs to care what anyone else thinks – results show his strategy works.
Sports Direct is the self-styled UK No1 sports retailer. It has some 500 stores in the retail group (393 in the UK) including Sports Direct Sports World Field & Trek and Lilywhites. It has a number of group-own brands including Dunlop Slazenger Kangol Karrimor and Lonsdale. It is expanding outside the UK and is continuing to grow organically and by acquisition.
As a business leader founder and owner Mike Ashley has grown very rich with this simple retail formula. Ranked 15th in Britain in Forbes Magazine in 2012 with estimated wealth of £1.5bn he is rich enough to own a premier league football club one of the privileges of oligarchs and the super rich. Wealthy enough to know how to make a fortune in football: ‘start with an even larger fortune.’
Shoppers would probably hate it if all retail experience was like this but Sports Direct knows its customers what they want and what they are prepared to tolerate from its minimalist approach and by keeping it simple the business has stayed strong. There has been some limited impact from the current recession on the firm’s profits but it is still able to fund acquisitions and remains confident that this basic retail formula will go on working for some time to come.
image by Michael Senchuk