For independent retailers, it can sometimes be helpful to look at how big-name brands and companies are doing in the marketplace to better gauge where your brand stands. Don’t worry, independent retailers can’t really compare themselves to these big players, but they can use them as a litmus test of how the market is shifting and changing.
While athletic brands as a whole had over $35 billion in sales in 2016 alone, each brand’s share of this market becomes increasingly smaller. With many new trends, independent brands, and players in the space, traditional big-name brands just aren’t cutting it anymore.
Breaking Down the ‘Nike Problem’
Nike, one of the largest, most well-known brands in the world, has been having revenue issues that continue to plague the company. Recently, Goldman Sachs lowered its rating for Nike to "neutral" from "buy" due to excess inventory. With larger markets such as Asia just not performing as well, Nike is left with an abundance of goods — and not enough demand.
The athletic brand has tried to control this fate, even inking a deal with Amazon.com this summer to sell Nike products on the e-commerce giant’s site, and yet profits are still sinking. This news was shortly followed by yet another article stating that over the next several years, Nike will focus its resources, marketing efforts and exclusive product offerings on just 40 key partners, two of which include Foot Locker and Nordstrom. Each of the 40 selected partners will be comprised of those willing to create a unique, branded Nike space within the store and have specific Nike-trained employees to assist with sales.
The challenges that Nike is tackling are partly due to a large inventory overhang that's eating up whatever profits the brand is bringing in.
What’s at Stake for Nike and Other Brands?
For many retailers, inventory is one of the biggest "ifs" in the business. Supply doesn’t always meet demand, and conditions can change at any moment. In the sports and athleisure world, for example, the demand from consumers hasn’t dwindled (in fact, it’s risen with the introduction of athleisure), but the competition is incredibly fierce. Luxury brands such as Tory Burch and Versace have released sportswear lines, while big-name brands such as Adidas have aligned themselves with countless celebrity brand ambassadors. The competition is fierce in the sports apparel and athleisure markets, and brands are doing everything they can to capture their piece of the profits.
Reducing Excess Inventory as a Strategy
For sports-focused small business owners, it can be disheartening at first to hear about how one of the world’s largest names in athletics is struggling to unload its excess inventory. Nike’s new approach means it’s focusing largely on boosting the speed of product creation, manufacturing and delivery across all areas of the business, from product to mobile customer experience. It also means the household brand will bring 25 percent fewer styles to market within the next few months to focus on its best-sellers.
Similar to Nike, independent retailers can rethink their strategies to improve conversions while reducing excess inventory. But luckily, the transformations don’t need to be quite as dramatic. Consider these tips:
1. Cater to your local market.
Local business owners have a distinct advantage over their big-name counterparts — they know exactly what their audience wants. Talk to your consumers in person or via social media and host in-store events to get a good idea of what your core market wants. Then, when you’re ordering new inventory, you know exactly what to purchase and what trends or fads to avoid. This is especially important during the holidays, when small businesses tend to cater directly to their core market of gift-givers.
2. Get rid of excess inventory.
It’s a known fact of retail life that you'll have some sort of excess inventory. While many brands (even Nike) take a loss on these unsold goods, small businesses don’t have to. Local stores can leverage online marketplaces to move their excess inventory even if it’s no longer on the sales floor. Look for a marketplace with an easy-to-use online platform that makes getting rid of excess inventory a breeze for any small business retail owner.
3. Leverage sales.
If a small business is really looking to move inventory, a sale is a great way to get people in the door. Just remember, however, that while a few hot pieces may be discounted, not everything in your store has to be marked down. The sale will get people through your door, but the other inventory will have them opening their wallets. Local businesses should look for a happy medium between these two to help move product without reducing the sale too much.
Continuing Success in a Crowded Marketplace
While the sports apparel and athlesiure marketplace is growing, it’s not done yet. There will always be new brands emerging, new avenues to engage with these products, and, through it all, the same stalwart brands will be there. Local businesses can hold their own alongside big-name brands such as Nike by remembering that even these sportswear goliaths have the same issues and challenges as small, independent retailers.
Chris Palmer is the CEO of BoxFox, a B-to-B marketplace that hosts surplus inventory auctions for independent retailers to sell excess inventory to a network of authorized buyers.