Lessons from Sports Authority, Part 1: What Went Wrong?

Sports_Authority_in_Hillsboro,_Oregon

 

After nearly 30 years as a sports retail powerhouse, Sports Authority will soon cease to exist. Burdened with $1.1 billion in debt, the company filed for bankruptcy protection in March. After failing to secure financial assistance, Sports Authority announced in May that all 463 of its stores would be closed and liquidated by August.

The demise of this once-great retailer begs a simple question. What went wrong?

The company admitted that it had been slow to “react to changing consumer trends.” The crushing debt that Sports Authority has carried since being purchased by a hedge fund 10 years ago surely didn’t help. Various analysts and commentators have weighed in on the matter, pointing to everything from a dull shopping experience to a lack of uniqueness.

InfoScout decided to get the real story from the people whose experiences and perceptions matter most – actual Sports Authority customers.

Using receipt images of actual customer purchase data captured by our proprietary mobile apps, we analyzed more than 17,000 Sports Authority shopping occasions during a 52-week period. We also conducted a survey of more than 300 Sports Authority shoppers.
The problem clearly wasn’t customer service, which is an easy scapegoat when things go south. 56% of survey respondents rated Sports Authority’s customer service as very good or excellent. Only a handful said customer service was fair (8%) or poor (2%).

Our research revealed three primary reasons for Sports Authority’s downfall.

Sports Authority Frustrations@2x

You Want Me to Pay What?

When asked to identify issues or frustrations experienced while shopping at Sports Authority, nearly half (49%) of survey respondents pointed to high prices, which was more than three times higher than the next highest contributing factor. Not only were prices deemed too high, but consumers said coupons didn’t work for the most popular brands, making them virtually useless. Unfortunately, it’s not uncommon for retailers to push out coupons and special offers without ensuring their relevance to shoppers.

Price transparency on the web allows people to compare prices in a matter of seconds. Many shoppers know what they should be paying before they walk into a store. Sports Authority failed in large part because its pricing was not competitive – and its customers knew it.

I Still Haven’t Found What I’m Looking For

30 % of respondents said they were frustrated by merchandising issues, including a lack of desired products or brands (14%), products in the right size (11%), and overall selection (5%).

The reality is that we live in an environment of a rapid convergence of channels, with limitless aisles that can be instantly accessed from our mobile devices. Failing to fully understand and deliver the correct merchandise is a fatal mistake for retailers.

The continued fragmentation of our retail environment, customer tastes and general trends makes the merchandising function more and more complex.

Missing with Millennials

Millennials now represent the largest segment of the U.S. population. According to customer data generated by InfoScout mobile apps, Sports Authority hadn’t done nearly enough to win over Millennials. Among loyal Sports Authority customers – those who shopped at Sports Authority at least five times per year – just 22% were Millennials. Gen Xers (66%) outnumbered Millennials three to one. This was a major miss that clearly had an impact on the company’s bottom line.

InfoScout data and insights clearly show us that high prices, poor selection and the failure to attract Millennials represented a three-headed monster that Sports Authority was unable to overcome. In the next post, we’ll discuss where Sports Authority’s former customers are planning to go for sporting goods and apparel and what can be done to earn their business.