The Retail Pot Calling the Global Sports Brands Kettle Black?

The term “the pot calling the kettle black” is usually used in the sense of accusing someone of hypocrisy. The origins of the phrase date back to at least the 1600s, when several writers published books or plays which included word plays on this theme.

I read with some degree of astonishment that 'Mike Ashley' he of UK based retail chain 'Sports Direct', he's the lurker, and acquirer of numerous struggling heritage sports brands that ultimately became nothing other than low cost commodities for his retail store empire.

This year he also became owner of failed department store group 'House of Fraser' where the retail and consumer jury is still very much out.

We now hear he's filing complaints against global sports brands 'Nike' and 'Adidas' (link here) for abusing dominance and looking to bypass his stores by going 'direct' (oh, the irony) to us the consumer.

I wrote a blog a number of months ago (read it here) on this very subject, below is my edited summary based around how given the opportunity many brands would prefer a 'direct' relationship with the end consumer which will continue to mean significant disruption and erosion for the associated retail distribution chain, other sectors apply.

A number of years ago I was working on what was a 'top secret' project (secret no longer) with Beauty and cosmetics brand 'Avon'.

Avon Products, Inc. is a multi-level marketing company in beauty, household, and personal care categories. Avon had annual sales of $5.5 billion worldwide in 2018. It is the fifth-largest beauty company and, with 6.4 million representatives, is the second largest direct-selling enterprise in the world.

The secret project was to help them explore a 'direct to consumer' relationship without upsetting the traditional ("Ding - Dong Avon Calling") agent distribution base, which, after all is how they grew the business around the world - so a very sensitive subject indeed. 

However, in the glamorous world of sporting goods and the huge brands like 'Nike, Reebok, and Adidas' that dominate the global space, the same issue has been lurking and festering away at them for many years, it was, and still is the 'Elephant Running Shoe' in the room, so to speak.

Image credit: Textile Focus

These global sports brands main challenge is no different than that facing the secret Avon project we worked on back in 2004. As such they're all experimenting with ways to 'get closer' to you and me without pissing off the plethora of retail stores they have historically relied on for their distribution base - with the inexorable rise of the internet, eCommerce, Social Media, Social Commerce, growth in televised sport streaming, and eSports they're now able to come for you and me.

esports and the availability of streamed sports events;

If we take a look at where the real growth areas for sport brands are taking place we can't afford to ignore the easy global access to sport, on any device, anytime, anywhere, and what about the surge in popularity of....eSports?

eSports has been a growing market for many years, and as those audiences has also grown sports brands 'digital' and commercial interest to be able to tap into those audiences.

"With roughly 1 in 6 adults around the world already watching video game tournaments today, and with tens of millions of new spectators starting to watch every month, the esports opportunity only looks set to grow.

Gaming enthusiasts are a notoriously tough audience though, and the size of the esports audience isn’t the only thing that marketers need to consider. As with all sports marketing, the secret to success involves understanding your audience’s motivations for watching, and identifying how you can actively enhance their enjoyment". 

Simply sticking a logo on the hoardings, a shirt, or pair of boots won’t endear your brand to digitally savvy esports fans; you need to deliver something that makes the audience’s experience better than it would have been without your brand’s involvement.

Research image courtesy of; Data Reportal

40 percent of internet users in China – equivalent to more than 300 million people – already report watching esports, while one-third of internet users in Vietnam say they’ve recently watched a video game tournament.

However, it’s taking longer for the trend to catch on in the West. Less than 10 percent of internet users in North America and Europe watch esports today, which may explain why marketing budgets continue to lag.

An overall audience of 1 billion people doesn’t quite match the 3.5 billion people who watch the Olympics or the FIFA World Cup, but you may be surprised to learn just how big esports have become.

For context, the global esports audience is already:

• Double the size of the global audience for Formula 1 motor racing;
• 8 times bigger than the TV audience for the baseball World Series; and
• 10 times bigger than the number of people who watched the 2019 Super Bowl.

Research courtesy; Data Reportal

Social Commerce: Adidas has been one of the first to test Instagram’s checkout feature, announced in March: a way for people to purchase products directly from the app. In exchange for being part of the marketplace, Adidas and the other 19 brands currently taking part in the closed beta pay a fee to Instagram to sell their products directly via the app. It’s a price that has been worth it so far, said the Adidas’ CEO, Kasper Rorsted.

And now this from Nike via 'Retail Week' - paywall apologies;

Nike is to end its supply agreements with dozens of independent retailers as it accelerates efforts to sell more of its products direct to consumer. The sportswear giant has told smaller retailers that access to its products will end in two years – placing the likes of Sports Direct and JD Sports on red alert that it could also scale back its agreements with larger retail customers.

Nike has previously revealed plans to make 50% of its sales through its own stores and ecommerce platform in a bid to take greater control of its distribution and boost margins.

If you operate in other sectors of the retail landscape, especially those in the supply chain side of B2B who rely on traditional retailers as a key partner, you might be thinking 'so what'? 

I might be inclined to agree if we were talking about 'multi-million ￡￡$$ hardware and software deals, however, there are many manufacturing companies like Philips, Unilever, Proctor & Gamble, who are highly dependent on a similar distribution model as those sports shoe companies, and Avon. 

You only have to consider the multi-levels of distribution that all those car manufacturers and financial services products currently have to go through, which includes a myriad of dealers and brokers. 

Just like the arrival of the birth of the internet, the evolution of eCommerce, and now the global surge in free to use 'social media' which is driving 'social commerce', it's not technology, process or cost that upends the business of today, its the ones who still think that they have little to no control over external forces, and as the saying goes 'if you can't change yourself, you'll never change others'.

It might not be happening with them yet, but you're not sat in those 'secret' meetings like I was with Avon all those years ago, are you?

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