Sports Authority Bringing Changes to Consignment Deals?
Sports Authority limped into bankruptcy in March with a straightforward plan to survive as a smaller, more nimble purveyor of sporting equipment and apparel. The first step — close unprofitable stores and sell off its inventory. But almost immediately a fight broke out over who owned some of that inventory: the retailer or the vendors who supplied it on consignment? Employees pulled more than $25 million in stock from liquidation sales while Sports Authority and its suppliers bickered about how deeply to slash prices and who got the money.
Total Retail's Take: I'm on the side of the suppliers on this one. If Sports Authority didn't have the money to buy the product upfront, then it doesn't belong to the retailer. Therefore, Sports Authority didn't have the right to sell the goods at liquidation pricing, which in turn would impact the amount suppliers would receive for the goods. This also raises the question of how viable consignment deals will be for retailers going forward, particularly in such a volatile industry where a retailer's fortunes can turn for the worse seemingly overnight (see Nordstrom). And with the holidays around the corner, and retailers stocking up on merchandise, will suppliers be willing to take the risk of signing consignment deals? Sports Authority may be a cautionary tale for vendors.