Sports Insight

2 0 1 9 O U T L O O K 20 • Sports Insight January/February 2019 sportsinsightmag.com Specialty Retail and Curation "As I see it, one of the biggest challenges for the running specialty channel is avoid- ing the commoditization of product that is out there in the market and available to customers. In other words, product that is carried in the store can in many cases be found virtually everywhere. And when price gets into the conversation, it becomes very difficult for stores to maintain a competitive level. So, for our channel and its success what we're seeing is a very strong trend towards curating stores with product assortments that really speak to customers, that offer something new and differentiated that they don't and can't find online or can't see online, or maybe in some cases isn't available online. And we use the word curation on purpose. In essence, it's about creating an experience for the visitor. And in that context, it's very important for stores to ensure that they're looking towards satisfying the needs of customers for the products that they expect to see in the store. But also, surprising and delighting that customer with something new, and again something differentiated and fresh, is really important." Dealing with the Direct-to- Consumer Issue "We all know that direct-to-consumer sales from a brand strategy standpoint is here to stay. But as that strategy evolves, it's important for brands to realize that they must do everything they can do to create a fair and level playing field for all channels of distribution, in particular specialty retail. Brands that offer very clean distribution that are laser-focused on protecting the integrity of their product online and the way they distribute it themselves and their connections to the customer and how they drive sales to the retailer — those are the brands that are going to win at specialty retail. When brands come up with strategies that are specific, and even exclusive strategies for specialty retail, those are the brands that are getting the attention of specialty retail. And those are the brands that are starting to get some traction when they're trying to build their assortments at specialty." Tariffs? "I had assumed that before I started doing my research that tariffs and freight costs were going to be a big part of the conversation and a challenge. And yet the feedback that I received is that that's kind of settled down. On the footwear side, we're not seeing it, at least not yet. On the apparel side, there's some noise about some higher tariff and freight costs. But we're not really seeing the tariffs hit our market, at least not yet. And on the freight side, charges seem to have kind of settled down. Fuel charges, in terms of shipping and all that, have kind of moderated somewhat. We're not seeing big increases there, but that's not to say that that can't happen in the near future. You never know, but that doesn't seem to be a significant part of the conversation, at least not right now." Retail Profitability "From a pure operational standpoint, the huge challenge for stores is profitability. The days of double-digit volume increases are gone. That was a wonderful time from 2000 to 2012. But it's gone now and now the new normal is single- to mid-digit increases. And that's fine, and that's good healthy growth. "But with small volume increases and relatively modest growth, how do you increase profitability? That means you have to have a laser focus on your margins. You have to have good inventory turns, having and securing that you're very professional in terms of how you're doing your buys and again how you're managing that inventory. Having the right amount of inventory at the right time. Getting more inventory and what sells and then getting rid of inventory that isn't. "If you can't count on big volume increases, then you have to be focused on your profit- ability. And while it's a challenge, the better stores are managing that very well and find- ing that an increase in profitability through margin growth is the key to success. "Just to recap the four things — the right product curation. You have to select and work with the brands that are willing to provide support for specialty retail and help create and prop up specialty retail by creating special programs for them. You have to connect with your customer and you have to be laser focused on profitability. It's a lot of things to consider. But if you can do all those really well, that's the key to success for specialty retail." n The Running Industry W H O W E T A L K E D T O Terry Schalow Executive Director, Running Industry Association

• Cover