Lessons from Sports Authority, Part 2: Where Consumers and Retailers Go from Here

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In the previous post, we discussed the main reasons for the downfall of Sports Authority, which announced earlier this year that all of its stores would be closed and liquidated. While industry analysts focused on the company’s debt load, InfoScout focused on actual Sports Authority customers.

Using our proprietary mobile apps to capture receipt data and analyze more than 17,000 shopping occasions, as well as a survey of more than 300 Sports Authority customers, we discovered three core drivers behind the company’s demise – high prices, poor selection, and a failure to attract Millennials.

Now that we have a better idea of what went wrong, where will Sports Authority customers take their business? What can retailers do to earn their business?

We’ve Seen This Movie Before

Circuit City was the second largest electronics retailer in the U.S. when it began closing stores in 2008. There were three sets of open arms waiting for Circuit City customers – Walmart (the mass discount retailer), Best Buy (the largest electronics retailer), and Amazon (the emerging online retailer).

Similarly, the key players looking to fill the void left by Sports Authority are mass discount retailers Walmart, Target and Kohl’s, Dick’s Sporting Goods, which is the leading sporting goods retailer, and Amazon, which is now the dominant online retailer. All have the pricing, selection, and Millennial-desired omni-channel capabilities to avoid the pitfalls that doomed Sports Authority.

Where Do Customers Go from Here?

When customers were asked what they purchased from Sports Authority, the top product categories were athletic apparel (64%), footwear (48%) and sports equipment (45%). They were followed by sports team apparel (19%), outdoor gear (16%) and fitness items (15%).

Regardless of product category, the largest percentage of these customers (68%) will now go to other sporting goods stores such as Dick’s Sporting Goods, Academy Sports, and Cabella’s. When asked to choose just one shopping destination, Dick’s Sporting Goods, chosen by 58% of respondents, was the overwhelming winner.

This data is supported by InfoScout’s analysis of actual purchase behavior, which shows Dick’s as the most frequently shopped competitor of Sports Authority. Nearly half (46%) of Sports Authority customers will shop at Amazon, the second highest ranked retailer. Only 37% will go to mass retailers such as Walmart, Target and Kohl’s.

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Fifty-three percent of survey respondents completely or somewhat agreed with the following statement: “In about the next five years, there will be no sporting goods retail store locations left because anything you need you can just buy on the internet.” Although we don’t know how accurate consumer crystal balls are, sporting goods product categories are ripe for channel disruption.

For example, brands such as Nike are benefiting from direct-to-consumer strategies. Although Sports Authority customers are or will be shopping at Target.com (40%), Walmart.com (32%) and DicksSportingGoods.com (30%), many are also shopping at brand sites such as Nike.com (36%), UnderArmour.com (20%), Adidas.com (11%) and Lululemon.com (5%).

Customers know that they can go directly to the brand. Strong brands such as Nike have created destinations for customers, both online and in-store, and are looking to rely less upon mass retail distribution channels.

Loyals, Occasionals and Millennials

Our research found that the most loyal Sports Authority customers, those who shopped at Sports Authority at least five times in the past year, are likely to go to retailers such as Dick’s Sporting Goods and Academy Sports.

Occasional customers, those who shopped at Sports Authority fewer than five times in the past year, are shifting more spend online, making Amazon the winner for this group. However, “occasionals” are spending 6% less overall, while spending among “loyals” is down just 1%.

Digging deeper into data related to the all-important Millennials, a group that Sports Authority failed to win, our research shows that Millennial loyals are spending significantly more (23%) at both Amazon and sporting goods stores. The largest increases are at Amazon (8%).

Millennial occasionals are spending 6% less overall, but 5% more at Amazon. As a result, brick-and-mortar retailers should be asking two important questions. First, how can we capture a greater share of Millennials who were occasional Sports Authority shoppers? Second, how can we convert those Millennial occasionals into loyals?

The Final Verdict

The most loyal sporting goods shoppers value the ability to find specific items and the expertise that a specialty retailer can provide. As a result, retailers like Dick’s Sporting Goods and Academy Sports, with their established store footprints, fair pricing and ample selection, are well-positioned to benefit from Sports Authority’s loyal customers.

For more generalized needs, such as apparel and footwear, online channels are likely to continue to grow and thrive. Millennials are headed in this direction. Brick-and-mortar retailers need to deliver a consistently superior shopping experience across all channels to maintain in-store sales and avoid losing online sales to Amazon and brand sites.

Sixty-one percent of survey respondents are sad about the closing of Sports Authority. Thirty-six percent don’t care. Three percent are actually happy about it. However, all of them need alternatives. Some have already found them.

Retailers need to take a hard look at InfoScout data, assess their strategies, bring their “A” game to avoid the same fate as Sports Authority, and successfully adapt to the evolving demands and behaviors of the end consumer.

InfoScout uses proprietary technology and targeted surveys to provide valuable insights into shopper behavior, purchasing decisions and industry trends. Contact us to schedule a free demo and learn how InfoScout can help you build revenue and enhance your brand.

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

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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.

How Politics Can Shape Our Grocery Shopping Behavior

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Although they wave the same American flag, Democrats and Republicans often hold clashing opinions on a seemingly infinite number of issues, such as immigration, health care reform, and global warming. Knowing someone’s political identity makes it easy to predict which side they’ll adopt in these debates. But can this information also be used to predict which products shoppers will buy at the grocery store?

 

To explore this idea, InfoScout identified over 3,000 panelists who agreed to share their data on the celebrities and public figures they follow on Facebook. Panelists who follow liberal pages like Hillary Clinton were coded as Democrats; Trump followers were coded Republican. Afterwards, we compared the purchase behavior of the Democrats and Republicans using our Household Affinity report. This tool helps us determine which brands and categories most strongly differentiate the two shopper groups.

 

Below, we summarized our findings according to which brands/categories are disproportionately bought by either Democrat and Republican households, as well as the magnitude of this effect (i.e. higher numbers represent greater political skew). Percentages were determined by calculating the relative ratios of Liberal and Conservative households purchasing a particular brand or category. Specifically, we divided the % of Liberals buying and the % of Conservatives buying, with the higher percentage in the numerator. The values can be interpreted as, “Liberals are 37% more likely to have purchased a Kashi product in the past year compared to Conservatives.”

 

The data suggest that progressive and traditional values extend not only to our political beliefs, but to our grocery baskets as well. Republican households tended to buy family-oriented brands (such as Malt-o-Meal and Capri Sun) as well as traditional American foods (like white bread and sugar cookies). By contrast, Democrats tended to over-index on products that are positioned as more healthful and organic, such as Kashi and kale. Democrats also skewed towards products that are more culturally diverse, like flatbread, jalapeños, and mangos.

 

Finally, we also found that the Altoid mints brand was among the top “bipartisan products”. In other words, Altoids are purchased at nearly identical rates between Democrats and Republicans. Perhaps the greatest lesson learned from this exercise is that true political cooperation may finally be achieved by focusing on what makes us similar rather than different from each other. This summer, consider reaching across the aisle and offering your fellow American a cool, refreshing mint.

Procrastinators Are Not Who You Think They Are

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Different groups of people purchase in different ways. It is usual to study shoppers based on criteria like geo-location, demographics, or previously purchased products. But how about looking at their purchase behavior based on how timely they are?

 

Having a purchase panel that you can survey on-the-fly makes shopper group creation a breeze, enabling you to combine claimed data from surveys with behavioral data from receipts. In this particular case, we identified shopper groups of “early birds” and “procrastinators” by asking if they had or had not filed taxes by April 1st.

 

Procrastination is often associated with young millennials. A quick attempt at a google search would show that much.
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To our surprise, nothing could be farther from the truth. Who were the procrastinators? The profile of the procrastinator turned out to be mostly Gen-Xers (50.4%), at the extreme ends of the income spectrum (below $25k and above $125k) with no children. One finding that did align with the laid-back stereotype of the region, is that people on the West coast (47.4%) procrastinate more than those in other regions.

 

What do their receipts tell us about their purchase behavior? Procrastinators likely often find themselves in situations where they need to pick up something quickly from a Drug Store or Convenience Store. Meanwhile, early birds seem to plan their purchases better and tend to buy more at the mass merchandiser channel.

 

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In a curious case of routine dragging, the procrastinators were also more likely to make their shopping trips after 5pm while the early birds preferred to get their shopping done before 3pm.

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When it comes to the brands they purchase, procrastinators may not be buying the brands you might normally associate with slackers. Instead, they showed higher affinities to health-conscious brands like Kind and Nature’s Bounty. Early birds were more likely to purchase brands like Nutella, Totinos, and Funyuns, which, although delicious, are not necessarily associated with a healthy diet.

 

Another curious behavior we noticed while looking across categories was that procrastinators drag their feet when buying Christmas cards—making this purchase the same week of December 25th, while early birds were already done two weeks before.

 

When looking at the household category, it seems like the procrastinators make an effort to turn a new leaf with a New Year’s resolution to clean the house, but they revert to their old habits fairly quickly as they begin spring cleaning later than the early birds.
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Some takeaways for marketing execution are to plan in-store events and promotions earlier in the day to appeal to early birds and later in the day to reach procrastinators. The latter are often late to the game around holidays and other important retail events, with the only exception being Valentine’s Day. Capturing early-week holiday promotions is important, but there is a secondary opportunity when this type of shopper finally makes it to the store.

 

In summary, make sure to re-examine how you perceive generations overall and give extra thought as to how they interact with your brands and categories.

 

As a marketer, are you interested in the “Why” behind some of the behaviors discussed here? Are you curious about which brands in your categories are favored by procrastinators or early birds? Get in touch with us at contactus@infoscoutinc.com and we’ll be happy to help you out!