Sports Authority Closing All 450 Stores – 3 Lessons for Every Business

Sports Authority Closing All 450 Stores – 3 Lessons for Every Business

This week, Sports Authority, one of the largest “big box” sporting goods retailers in the U.S., announced they are closing all 450 stores, selling their inventory and shutting down. Dozens of other public retailers also announced slower growth, lower profits and took down their future estimates. This means fewer retail jobs, lower stock prices for these businesses and a changing retail environment.

Everyone is quick to cry “it’s the end of retail because of the Amazon effect.” It’s not the end of retail, it’s just the end of general retailers selling average stuff to “average consumers.” Department stores are out, specialist shops are in. And the specialists are doing pretty well, despite Amazon.

Specialists eat generalists

When stiff competition arrives and the overall market stops growing, it’s just a game of musical chairs – in any industry. The weakest players get weeded out first. The weakest players are almost always the generalist businesses that tried to do a little bit of everything for everybody. That may have been OK when they were the only store in town, but when the specialists appear and people have lots of online choices, the generalists are the first to go.

Sports Authority was just the weakest player in a competitive market. I had shopped there occasionally to buy a few simple things. Their stores are huge and always full of inventory (mostly clothes), but I had never seen more than a few shoppers at the store at a time. Crickets.

This isn’t a sign that the economy is off or that people don’t buy sporting stuff, it’s just a sign that Sports Authority wasn’t winning the sporting goods horse race. They were “whipping their horse” with aggressive coupons and discounts (always a bad sign), but it wasn’t enough.

The specialist retailers are doing fine

Sporting goods is doing great for other retailers who specialize.

  • REI is an outdoor sporting goods retailer with fewer stores, smaller footprints and more expensive (well-trained) staff. Their parking lots are full on Saturday afternoons; they have lines of smiling buyers with armloads of expensive camping, hiking and biking gear. REI focuses on just the upscale outdoorsy types who take selfies from the tops of mountains and who care about the environment.
  • Cabela’s is another outdoors equipment retailer that has full parking lots, busy stores and lines at the cash register. They sell to a different kind of outdoors enthusiast than REI, but Cabela’s customers are also deeply connected to their brand and their shopping experience. Cabella’s is for the pickup driving, hunting, ATV-ing, boating and fishing crowd, which isn’t everyone and isn’t the REI crowd.
  • Lululemon is sports apparel for the yoga crowd and they doing just fine too. High prices, busy stores, fast growth, lines at the cash register. Lululemon is only for upscale women (and some men) who are invested in being super fit and want to look and feel great. That’s not most people either.

Each of these retailers’ shoppers visit often and enthusiastically say, “I love REI!” and “I love Cabella’s!” and “I love Lululemon!” Nobody was saying “I love Sports Authority – let’s go hang out there!” No connection with their shoppers, no lines at the cash register, no premium prices – and no business in the end. Might as well buy it online.

These specialty retailers focus on just their narrow target market of customers who REALLY CARE about their offering and want the best equipment and experience. They connect emotionally with the passion for the particular sport AND the type of person who is passionate about it. Their customers could buy this stuff online, but they’d rather go to a store to get expert advice, hang out with other people like them and find inspiration for their next outdoorsy or yoga adventures.

Beware the “average”customer

Sports Authority offered “average stuff for average sporting buyer with an average shopping experience.” Why didn’t this work?

What is average in the sporting goods world? Consider that about half of Americans don’t exercise at all or play sports, on one side, and only about 10% of Americans are serious about some different sport (running, hiking, baseball, skiing, yoga, etc.) on the other. Average means the “place in the middle, “but there’s really nothing interesting in the middle in sporting goods, and in most markets.

Average is between the big crowd who doesn’t care at all and the small percentage who care a lot; it’s a no man’s land where it is very hard to survive. Dick’s Sporting Goods is another big box sporting good retailer generalist that stands to gain from Sports Authority going out of business, but it’s still a tough business for them, too.

Three lessons for every business

  1. Each of these specialty retailers could sell to people outside their target market and expand their offerings, but they don’t. They all have extreme pressure from investors to grow faster and make their numbers, but if they sell to everybody, the jig is up and the spell is broken. They stay the course and don’t try to be generalists. They also promote the activity they serve. More yoga enthusiasts is good for Lululemon, not adding jewelry or other non-yoga goods “because they could.” Yoga or die.
  2. If you don’t offer the best goods, services and experiences for people who really care about what you offer (the 10% most passionate in your market), you are very vulnerable to competition. If people don’t say “I love _(your company)_!“, you will never create a line of enthusiastic new clients or customers to efficiently drive your growth. More advertising and more discounting = less profits and slower growth.
  3. It’s not just about what you sell, it’s the whole experience. People can buy fishing rods and boats online, but they want to whole experience of buying these things at Cabela’s. It’s not just the coffee at Starbucks, either. The thing is never just the thing.

Say No to being average. It’s always tough business; it’s a mirage for thirsty entrepreneurs.

Focus on the 10% of your market who really care about what you do, then do great things for those passionate customers.

8 Comments on “Sports Authority Closing All 450 Stores – 3 Lessons for Every Business

  1. Your assessment is dead on. CEO’s get paid millions and don’t understand what you just said.

  2. You have just summed up the first major principle of quality in my book Small Business Magic. Nice to know someone else gets it.

  3. There’s a 10% in every market isn’t there? Whether the 10% is then even enough to sustain a growth business, or whether (hooray!) it’s an even lower percentage needed, then serving that group with passion and diligence is clearly one of the key skills to master… thanks, as always, Greg!

    • That’s the myth right there, Gareth! In any big market, 10% is a billion dollar/pound/euro business, or more. 10% of books, yoga apparel, sports equipment, cheeseburgers, fish and chips, online tax software, premium coffee or petrol stations is HUGE. For any small business, 10% of customers in their region would be huge. In the Infusionsoft world, as you know,

      Infusionsoft isn’t even close to 10% of the 2-25 employee English-speaking small business market of those who are active in digital marketing. At maybe 2% of that market it’s more than a $100M business for Infusionsoft! Any Infusionsoft consultant would be happy to serve 10% of Infusionsoft customers in their region. Do any Infusionsoft add on apps have more than 4,000 customers (10% of the Infusionsoft base)? I doubt it. Small businesses don’t need to be close to 10% to have wildly successful businesses.

      I propose the “90/10 Rule” and put the “80/20 Rule” to bed. 10% is more than enough if you do it right!

  4. Good point, in fact excellent point – well made. Recently we changed our model to focus on just 100 Clients and deliver exceptional value just to that small group. It works and I love the connection and seeing the end-to-end results of our association.

  5. While some valid points, I have to disagree with them as well.

    First of all, while a specialized market might seem well, you constantly need to innovate and expand to keep people coming back. This helps prevent someone else going in, and knocking you out completely because they beat you in the one area you specialized in. Plus based on that logic, Wal-Mart wouldn’t be doing well for say groceries, as stores like King Soopers would be beating them. But here you have Safeway who has actually shutdown stores, and Albertsons you can barely find. They focused on this, and yet, Wal-Mart has large grocery sections.

    Also, personally, I shopped at Sports Authority for most of my sporting needs. REI and Cabela’s were nice for outdoors stuff, but when it came to say Baseball, Basketball, Running, ext, I would go to Sports Authority. (Plus I have never even heard of Lululemon).

    Now that being said, the employees really can make the difference at a store. At Cabela’s they have very knowledgeable people I feel I can go and just ask questions (which can be much easier then going online). Or REI where not only are they helpful, they seem happy.

    The employees can be a big driving force, treating them well, and they’ll pass that onto the customer.

    • There are a few big generalists that get scale and power to become effective monopolies. This includes Amazon, Facebook, Google and even Walmart in the past. But WalMart continues to expand into new areas and their stock price hasn’t done much in 10 years. They are the Sears of the last 50 years and I don’t predict much more stock price growth for them.

      Here’s one for you. Walmart hired the executive who took Target upmarket to be a more designer brand – differentiating from Walmart. If Walmart goes upmarket and gets more expensive, then they are just everything for everybody at every price. I don’t see how that’s going to help.

      Everything is either bundling or unbundling. Right now, with the exception of Google and Amazon, the unbundling (specialists) are winning – even in sports itself! Baseball and basketball used to be the only sports in town, now there are a hundred sport and leisure exercise options for everyone. Don’t bet on golf coming back as a business.