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Snow Sport Stores Get Faceplanted by Online Rivals

February 11, 2013

In an open letter to his trade members, particularly vendors, Brad Nelson, chairman of the National Ski & Snowboard Retailers Association (NSSRA), earlier this month said the snow sports specialty industry is at a "tipping point" with the disruption caused by discounted product now widely found across the internet.

He argues that in just the past five years, the snow sports specialty channel has lost 20 percent of its market share while causing equal damage to the equity of many of the industry's brands.

"Vendors that have attempted to create a compelling brand story for their current inline product are fighting a losing battle because consumers can find last year's version of that same product on the internet discounted for 40 percent to 50 percent off," he wrote on the eve of the industry's bi-annual SIA Snow Show held in Vegas.

The current advertising policies of the snow sports specialty industry, he argues, came of age at the beginning of the e-commerce boom before the consequences of selling into the new channel were understood.

"For better or worse, some industries, like books and music, were forever disrupted and will never be what they once were," he wrote. "Other industries were quick to see what impact e-commerce was having on their traditional channels of distribution and were quick to make the tough decisions to insure a sound future for their brands, their channels of distribution, and, most importantly, their customers."

His recommendations called for vendors to "build to order" to minimize the overproduction of inventory and establish MAP (minimum advertised price) policies for prior-season as well as current-season offerings. He also called for fairer terms for the "retailers that support and build snow sports brands" with a goal towards equal treatment of specialty and e-commerce retailers.

"The snow sports industry is at a fork in the road," he concluded. "One road leads to future growth, fair competition and even support for all channels of distribution. The other road leads to a disruption that will forever change the fortunes of brands, sales reps and specialty brick and mortar retailers, and will arguably ruin this industry that we all love so much."

Operators of running and outdoor stores have likewise complained of consumers coming into stores to not only to try merchandise but also to learn from their highly knowledgeable associates only to find a better deal online.

Discussion Questions:

Are pervasive online discounts a particular problem for specialty retailers with a focus on service? How important is it for vendors selling to specialty retailers to support them against competitors who take a more commodity view of the business?

While we value unfettered opinion, we urge you to show respect and courtesy for people or companies about whom you comment. Keep in mind that this is a public, professional business discussion. RetailWire reserves the right to edit or refuse the publication of remarks that we deem unsuitable. We may also correct for unintended spelling and grammatical errors.

Instant Poll:

How important is it for vendors selling to specialty retailers to support them against competitors who take a more commodity view of the business?

Comments:

At the same time, the very brands specialty retailers are carrying are going their own way to grab consumers and cut out the middleman, as I've seen with appliance makers, cameras and more. I'm not sure the build-to-order is the way to go as one of the trends upending retail is that Millennials (as I wrote in my special report) are willing to buy and resell on craigslist, eBay, etc, or gift as they move on to other merchandise.

Those who continue to say showrooming isn't real or a threat continue to miss the very real cries of specialty retailers like Mr. Nelson.

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Bob Phibbs, President/CEO, The Retail Doctor

Online discounts are an issue for all retailers, regardless of their focus on service. However, retailers were accustomed to a significantly higher margin on the products they sell in exchange for superior service are now finding that the premium that consumers are willing to pay when they are aware of the price is less than what they used to pay before they were aware of the price discrepancies.

All specialty retailers have this issue. In an industry that issues new products annually, with little differentiation that is apparent to the consumer, in exchange for a premium price, this equation will no longer work.

Ski retailers will have to develop new models to engage consumers over time (e.g. long-term lease programs) or they will find themselves sitting on the outside while discount retailers take more and more of the available market share.

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Mark Price, Managing Partner, LiftPoint Consulting, Inc.

Mark nailed this one. An industry that tries to sell a new product each year to the same consumers without significantly improving the product will find consumer resistance in the form of buying a previous year's product at a discount. MAP and other price control schemes won't work.

The industry needs to take a look at itself and figure out how to encourage purchase, rather than artificially holding prices high.

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Max Goldberg, President, Max Goldberg & Associates

I like and appreciate that Mr. Nelson is calling on the vendors to take the stand. I work with a number of companies that use MAP pricing to ensure their retailers remain competitive and profitable. They refuse to let online sites cheapen their brand and cherry pick the sales.

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Doug Fleener, President and Managing Partner, Dynamic Experiences Group

Snow sports retail is significantly different than most apparel and hard goods categories, let alone books and CDs. Since the array of options is confusing to most consumers (including this veteran skier) and the big ticket items often require a demo before the consumer is ready to purchase, service and expertise will always make a huge difference.

Evo, a thriving Seattle-based company, may be showing the way forward for the industry. They are one of the largest online sellers of skis and snowboards, but they also have a retail location here that is best in class when it comes to store design, merchandising and customer service. The two sides of their business reinforce each other to form a greater whole.

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Martin Mehalchin, Partner, Lenati, LLC

Yes, some markets have truly been disrupted to the point that the old business models are just not going to work. I really don't think the answer is to find ways to stop showrooming or promoting the heck out of product. Creating loyalty programs isn't working, but isn't all this just looking at the problem with the same old model?

Maybe the answer to this is getting the manufacturers to put skin in the game. Like the old department store cosmetic counters that were partially staffed by the vendor. After all, the vendor's objective is to get the product sold through any channel. The vendor wants the customer to get their questions answered and get the best service. Look at what Ron Johnson is doing at JCPenney with the store within a store. The initial execution may not have been the best, but the boy knows what he's doing. Let's rethink the model needed for these specialty markets and get ahead of the curve. IMHO

Lee Kent, Let's meet share and succeed in Retail, YourRetailAuthority

Yes, I have been in the snow sports business since 1984 and winter traffic and margins have been falling for the last 10 years. This year traffic is almost non existent. Yes we have a tough economy and no snow, but it is more than this.

I see good loyal customers with new product that they bought online, free shipping and no sales tax. When I question them, they say they checked my website and saw MSRP or map price and saw lower prices elsewhere. They thought they would be insulting me or damaging our relationship to ask me to meet the price they found online.

I fear snowsports is broken. Our plan to buy for next year is one quarter of what it has been. We may be getting out after next season.

Ralph Ruffolo, President, SOUTHPORT RIGGING

Yes, online is, and will continue to be a retail channel that all specialty retailers must embrace. This doesn't mean that service will disappear, or that a model to support these online retailers won't change either. The clear advantage is for the specialty retailer to have both an online and specialty bricks and mortar presence, with both embracing each other. Win/win!

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Kai Clarke, CEO, American Retail Consultants

This is so true. We are at that "tipping point." As an industry, we have failed to control distribution and as a result, our retail hardgoods business is down ~50% in the last ten years. Skis and boards are down more than that, as they've become thoroughly commoditized and are easily "showroomed" with today's technology and distribution policies. Boots and softgoods are not down as much, as it's a little easier for skiers and riders to see the value in getting personal service with boots and immediate gratification with softgoods. But on the whole, in the past 15 years snowsports has dropped from ~53% of our retail business to ~15%. If we were a ski/board shop only, we'd be gone.

I'm also in the bike business, and that has tripled at retail in the same time period. There are problems there, but we can still find brands who control their distribution (and online pricing) effectively—that's one of the key differences.

And I was in the book & music business... Interesting that Brad Nelson should say, "For better or worse, some industries, like books and music, were forever disrupted and will never be what they once were." I once owned a bookstore, had to close that (after large losses) four years ago.

The snowsports industry *is* at a tipping point -- we can be like the bike industry, or like the book industry (sure, I'm oversimplifying here... but the essential choice is there). Which do we want? If we (OK, if hardgoods manufacturers) choose the "multi-channel, no price controls" option (the path many if not most are on now), I think that most ski & board shops will close. Without local retailers to build excitement, guide individuals' choices, deliver personal service and solve problems, the quality of participants' experiences on snow will decline, participation will decline and the industry will die a slow death. O well -- we'll find other jobs and other pastimes -- just don't say you weren't warned!

'kbikski'

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