Dick's Sporting Goods: Winning Strategies Behind Its Howling Retail Success
If you are in the world of retailing business for a while, you must have heard of Dick's Sporting Goods as a howling retail success within the sports industry landscape.
Actually, it has come a long way from its founding in 1948 by Dick Stack as a bait and tackle outpost in upstate Binghamton, New York. There are now some 850 Dick's stores nationwide, and counting. From the perspective of retail, it is concerted all-channels effort and a close watch on merchandising that empowers Dick’s Sporting Goods to be riding on the crest of the wave!
Would you like a crystal-clear insight into the success of Dick's Sporting Goods as a companion guide for your future success? If your answer is "yes", let’s read on to uncover.
Dick's Sporting Goods: A Retail Success Journey
Before jumping into Dick's Sporting Goods' winning strategies, it’s essential to grasp the overall picture of such a prosperous retailing company!
So, first of all, what does this company exactly specify in?
Dick's Sporting Goods, Inc. – or Dick’s for short - engages as a sporting goods retailer, which does offer a broad assortment of brand name sporting goods equipment, apparel, and footwear in a specialty store environment.
The company's products are categorized into three divisions: Apparel, Footwear, and Hardlines.
- The Apparel category includes athletic apparel, outerwear, and sportswear. It is well-designed for a myriad of activities and performance levels, as well as for specific sports in men's, women's, and children's assortments.
- The Footwear category is composed of athletic shoes for running, walking, tennis, cross-training, basketball, and hiking. Furthermore, this category also covers specialty footwear, which includes both casual footwear and cleated shoes for baseball, football, soccer, and lacrosse.
- The Hardlines division is further divided into the Team Sports, Outdoor Recreation, Golf, Fitness, and Cycling sections.
Within the large superstore format, a wide variety and availability of sporting merchandise are displayed in distinct, easy-to-locate specialty stores-within-stores. Dick's supplies range from big brands such as Nike, Adidas, Columbia Sportswear, and Calloway, as well as its private-label brands, including Ativa apparel for women and Walter Hagen apparel for men. Plus, Dick's Sporting Goods stores offer patrons with an exciting opportunity to test equipment onsite, offering golf driving ranges, running tracks, and cement inline skating areas, for example.
Now, once you've understood the overview of such a successful retailer, it's time to take a quick look at its success history through these key milestones:
- 1948: Dick Stack starts his own bait-and-tackle shop in Binghamton, New York.
- 1958: The small shop becomes a full-fledged sporting goods store, known as Dick's Clothing and Sporting Goods.
- 1984: After Dick Stack retires, his son Edward becomes CEO and president; plans expansion of sporting goods superstore concept.
- 1992: Dick's begins expansion outside the Binghamton area.
- 1994: Dick's relocates to Pittsburgh; the company operates 22 stores in four states.
- 1996: Over 50 stores are in operation, generating an estimated $10 million in sales per store.
- 1999: Chain Store Age Executive names Edward Stack Retail Entrepreneur of the Year; the company name is changed to Dick's Sporting Goods.
- 2001: Sales exceed $1 billion with more than 130 stores.
- 2002: Dick's Sporting Goods becomes a public company.
Dick's Sporting Goods: Its Winning Strategies
#1. Shifting Categories
Mid-century bait-and-tackle retailers had typically a limited, but focused, range of goods. Shoppers knew exactly what they were looking for, and a good store would have it. These days, sporting goods retailers like Dick’s do have a wide range of products on offer, from guns to yoga pants - even the biggest stores have to decide how to divvy up the space.
Actually, Dick’s has mostly moved away from its outdoorsman roots, as gun, ammunition, and hunting gear sales tapered off somewhat. It shifted many of those sales to Field and Stream specialty stores that first opened in 2013 and has since gradually expanded. The retailer acquired the naming rights from the iconic Field and Stream magazine, seeing it as a way to compete with stores like Cabela's that are focused on hunting, fishing, and outdoor gear.
"Dick's Sporting Goods originally began as a bait and tackle shop … The Field & Stream store will build upon both brands' heritage to provide an excellent customer experience for outdoor enthusiasts." - President and COO Joe Schmidt
#2. Sports: Winners, Losers, And Kids
In fact, Dick’s greatest action, as well as the greatest need for nimble adjustments to changing trends, is in the area of sports. The retailer caters to serious athletes, weekend warriors, and kids at all levels of play. It's a huge market, with a projected value of more than $80.3 billion in 2020.
One noteworthy point may be that Dick’s has joined in the so-called alth-leisure boom, driven largely by women, with yoga gear and yoga-inspired clothing — including a line by Carrie Underwood exclusive to Dick’s — that isn’t necessarily worn just to exercise in.
“The strong performance across the remaining categories validates our merchandising and space allocation strategies that we put in place during this past year," - Ed Stack, Dick’s CEO and Chairman
Dick's EVP, COO, and CFO André J. Hawaux also noted that kids and moms have a lot of power to change the retailer’s focus.
Kids were inspired by sports events, especially the World Cup, spurring soccer sales. He noted that, due to evidence that concussions can cause severe health issues, fewer moms are allowing younger kids to play football, so those sales are likely to increasingly be tempered. Lacrosse is great because it's very popular among both girls and boys. By always keeping a close eye on all of these trends, Dick's Sporting Goods can anticipate the exact shoppers' needs – which is one of the keys to its remarkable retail success.
#3. Stores and Concept Stores-Within-Stores
Dick’s has spent most of the 21st century largely “ducking” the Amazon effect, which some observers attribute to its ability to sell firearms — one of the rare categories in which Amazon has yet to compete with.
But it could be that Dick’s close scrutiny of its merchandising needs, as previously mentioned, is also keeping customers coming through the door. Chances are that Dick’s Sporting Goods does boast what most people are looking for whenever they need footwear, apparel, or gear for their sport or fitness activity. Actually, Stack and Hawaux say that new Dick’s stores are enjoying the productivity of whopping 94.7%.
The retailer has had success with its hit store-within-a-store concept, an approach recently emulated by Best Buy in electronics. In fact, Dick's Sporting Goods stores do feature "Nike Field House" and "Under Armour All-American" concept stores within them. Not only are those concept shops a draw, but the brands also help foot the bill for some of the interior design and fixtures, according to Christopher Svezi, an analyst at Wedbush Securities. “Stores with these stores-within-stores have higher returns on investment and sales per square foot, and the margins are better as well, …”
#4. E-Commerce & Omnichannel Approach
… And that is happily bleeding into Dick’s e-commerce performance: Hawaux says that 80% of the retailer’s e-commerce sales come from zip codes in or near areas with stores. That is, the retailer sees online sales jump wherever a new Dick's store opens.
Not surprisingly then, Dick’s is all in when it comes to omnichannel. In fact, such a retailer has embraced sales and fulfillment efforts like shipment from stores, buy online pickup in store, in-store returns for online purchases, or “endless aisle” initiatives that, for instance, allow staff to place customer orders for anything not in on the racks. As a result, all of that blurs the lines between brick-and-mortar and e-commerce, using stores as warehouses and showrooms while utilizing e-commerce capabilities to meet the needs of customers in stores.
In fact, Dick’s Sporting Goods has continuously witnessed digital sales soar as in-store revenue slips, highlighting the need to continue to evolve and expand its omnichannel capabilities. To be more specific, in the second quarter of 2018, the sporting goods retailer saw its online revenue grow by double-digits, whereas same-store sales declined by 4%. Shoppers just keep embracing the ease of online shopping in the sporting goods and apparel segment has triggered massive investments at Dick’s as it looks to improve the customer experience both in-store and out.
Such an approach of omnichannel has led New York University Stern marketing professor Scott Galloway to warn of the end of pure-play retail of either stripe. Galloway, in fact, puts Dick’s Sporting Goods at the top of his top-10 list of "retailers playing offense" as regards their e-commerce efforts.
“We’ve found that these incredibly flexible robust warehouses are called 'stores” Galloway told Bloomberg. “People want access to products everywhere. This is the cross-fit of industry, it’s a warehouse and a store.”
Dick's Sporting Goods: Three Strategic Initiatives to Deliver the Best Omnichannel Experience
As already mentioned, smartly adopting an omnichannel strategy is amongst the hidden keys to fast forward Dick’s retail success. Now, let’s dive in to explore the three key strategic initiatives chairman and CEO Ed Stack has outlined as focus points as this sporting retailer continues to build out its omnichannel enterprise.
#1. Core Execution
Dick's Sporting Goods is making huge investments in both its e-commerce and in-store capabilities to offer the best possible shopping experience for its customers.
“Improving convenience for our athletes is a top priority and we are continuing with our rapid, data-driven testing approach to deliver key improvements through the omnichannel shopping experience,”
Dick’s president, Lauren Hobart shared on a recent earnings call with analysts.
Plus, one of the core functionalities Dick’s continues to emphasis on is its last-mile fulfillment. In the earlier months of the last year, the retailer went live with a small-scale buy online pickup in-store (BOPIS) locker test at three locations. Such a pilot scheme was well received by customers, both those that choose to use the service and those that simply benefited from a streamlined checkout experience due to less traffic at the registers. Because of the overwhelmingly positive response to the program, the pilot amazingly expanded to 10 locations.
“The surprise for us was the much- improved satisfaction scores from our in-store athletes as well as they benefited from shorter wait times and improved service levels,” Hobart said. “This rapid testing approach continued through the second quarter, and we are now testing Curbside pickup in select stores as well.”
Besides its commitment to improving the in-store pickup experience, Dick’s Sporting Goods is significantly investing in its Distribution Center (DC) fulfillment capabilities. The retailer began building its first regional e-commerce fulfillment center in Binghamton, New York, which will open in the fall of 2019.
“The fulfillment center will utilize robotics to increase the facility's throughput and make it much more efficient than our current in-store fulfillment processes,” said Lee Belitsky, CFO, Dick's. "Additionally, we plan to open a smaller regional e-commerce fulfillment center for the Western Region of the U.S., which will also come online late in 2019. We expect these new fulfillment centers to reduce delivery time to our customers, allow us to scale quickly and be more efficient as we continue to grow our e-commerce business."
#2. Leveraging Its Expertise
In addition to its tremendous efforts to consolidate the e-commerce and in-store capabilities, Dick’s is making timely changes to its assortment, emphasizing its apparel business and reducing its hunting and electronics categories.
Whereas its hunting section is a good source of revenue during the busy hunting and the holiday gift-giving seasons, the margins in that department are razor-thin. In fact, the operating margin of the hunting and electronics categories is roughly 1,700 basis points lower than the company average.
The sporting goods retailer decided to remove all of its hunting products from 10 of its locations where the category has been underperforming. And “replace it with products and in-store experience that are most relevant to our athletes in those markets,” said Stack. “Some examples include an elevated outerwear and license shop assortment and more experiential elements such as the HitTrax batting cages in our baseball area. We are executing our strategies to better navigate the dynamic retail environment and ensure long-term success.”
“In addition to the refinements we've made to our assortment, we're improving the in-store presentation to provide our athletes with a clear point of view of what's important through what we're calling strike points,” said Hobart. “With this elevated presentation, the athlete is drawn to these key items, making our stores easier to shop. We have been extremely pleased with how the athlete has responded and the increased depth and elevated presentation of these strike points is resulting in strong double-digit sales growth on many of those key items.”
#3. Improving Productivity
Across the whole organization, Dick’s is constantly looking for ways to lower its costs and unnecessary spending to allow for greater investment in its strategic growth initiatives.
"We've reduced expenses within our stores and at our support center by improving efficiency through workforce productivity initiatives," Hobart said. "Moving forward, we will continue to make critical investments in the customer experience, the store environment, and our supply chain."
Further to looking for ways to trim excess fat from the enterprise. Dick’s has paid meticulous attention in tools development as well as the training programs to best leverage its in-store staff.
"We have had a huge focus in our stores on training and specifically on cross training so that our associates and teammates now are not just able to work in one area but each of them can help each other out and lead one of our athletes through the entire store," said Hobart. "It's been a huge initiative for us so that we're getting more bank to the buck with every teammate that we have in the store. We are very focused on service, efficiency, and productivity. So that we can free up those teammates to serve the customer better."
The Bottom Lines
There are good reasons behind Dick’s Sporting Goods' notable success within the ever-changing sports retail landscape. Amongst them,a close watch on merchandising and concerted omnichannel effort stand out as the major drivers for its dominant position in online athletic merchandise sales.
It’s never too late or too early for you to jump in the challenging yet rewarding game of retailing. But, unless you prefer to be a loser, let’s arm yourself well with all the essential understandings over the industry, particular some outstanding retail success insights.
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