The Future of Retail in the Sportswear Industry
The Sports Authority bankruptcy earlier this year reconfirmed why companies such as Nike (NYSE: NKE) and Under Armour (NYSE: UAA)(NYSE: UA) are working so hard to sell directly to consumers. By owning those interactions and cultivating long-term relationships -- not to mention the opportunity to earn a higher gross margin by not giving a cut to third-party retailers -- here's how these companies are preparing for the future of retail.
A full transcript follows the video.
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Vincent Shen: Can you elaborate a little more on the direct-to-consumer? I think that's very relevant now. We had a show recently where we talked about Black Friday, the holiday shopping season overall. I think a lot of people, if you have been following consumer trends in the past few years, you've generally seen headlines indicate that more and more spending dollars are moving online, foot traffic is not quite as strong as it used to be, these doorbuster deals don't get people out quite as much, because they're spreading out their spending, and online stores are making that much more possible.
Seth McNew: Yeah. I don't know how much shopping you did over the last couple weeks through all the Black Friday and Cyber Monday, but to me, it felt like the exact same deals for about two weeks. I don't think there's any longer a need to have a specific time that people are forced to buy something. I think that makes sense. Companies are seeking to cultivate customers for the long term. It's no longer about trying to get a one-off hit, and every year trying to produce some sort of deal that's going to get you a small sales growth. It's about cultivating long-term customers that know and understand your brand. That's why direct-to-consumer is so important. It's much easier for a company like Nike or Under Armour to have that, to own and control that customer relationship, when they're sending the product directly to the customer instead of through a Foot Lockeror a [Dick's Sporting Goods] or, as we've seen with Sports Authority as it's gone underwater, they can also really make sure they control inventory, make sure they understand trends that are happening, and plan accordingly.
Shen: Yeah. I think the big investments that Under Armour made, with the connected-fitness apps, for example, ultimately it's a move to better understand who your customers are. Now, you mentioned, with their direct-to-consumer strategy, and how removing that middle man gives them a better view of what is in demand, what features or fashion trends are resonating more with their customers, and which lines and products they are selling better.
As we wrap up our discussion, anything else, in terms of the connected fitness and the e-commerce that you think is notable, worth mentioning, for Nike, Adidas, or Under Armour? We'll go from there.
McNew: Yeah. I think it's important to watch what these companies are doing specifically to grow their e-commerce footprint. You have companies like both Nike and Under Armour, which both have opened new mobile apps this year at that are connected to some of their fitness apps, that can get even more data from the users and market to them more effectively. You're looking at country-specific new dot-coms opening up around the world. Nike opened up 20 new country-specific sites around the world last year, doubling to 40. That's a way that they can spread their footprint further, while also keeping everything within this e-commerce world.
Seth McNew owns shares of Nike and Under Armour (C Shares). Vincent Shen has no position in any stocks mentioned. The Motley Fool owns shares of and recommends Nike, Under Armour (A Shares), and Under Armour (C Shares). Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.