When should brands go down market?
Under Armour, which for most of its 20-year history has attributed much of its authenticity to being sold exclusively in the sporting goods channel, last week revealed it would begin selling in Kohl’s in 2017.
The sports brand only began selling to traditional department stores such as Nordstrom and Macy’s in recent years and only recently made product available at two big mall-based athletic chains, Foot Locker and Finish Line. Kohl’s would mark its first sales in the mid-tier department store space.
The move is part of a strategic push to reach a wider range of customers across three areas: channels, categories and geographies.
On his company’s second-quarter conference call, Kevin Plank, Under Armour’s CEO, described Kohl’s as “one of the top retailers of activewear in the U.S.” The move will particularly help Under Armour reach women as the brand has traditionally skewed more towards men. It also comes as Under Armour has begun adding more casual or lifestyle offerings after focusing largely on workout gear.
“This decision to reach new consumers through Kohl’s is not a channel consideration but a consumer consideration,” added Mr. Plank.
Under Armour, with sales just missing $4 billion last year, is also plotting aggressive growth despite having just lost Sports Authority, a major account, to liquidation.
Mr. Plank said there was “nothing reactionary” about the decision to sell through Kohl’s, referencing Sports Authority’s abrupt exit. He described the move as part of natural evolution of the brand that came only after investments over the last several years were made to help further differentiate across channels.
“We believe that there’s a massive opportunity with the consumer that’s walking into those stores and looking for the Under Armour brand, and frankly, they just haven’t been able to find it,” said Mr. Plank.
Obviously, selling a new account sometimes irks existing accounts. A sporting goods chain may decide to dedicate a coveted space for an exclusive, up-and-coming brand at Under Armour’s expense. Its primary competitors, Nike and Adidas, however, also sell to Kohl’s as well as numerous outlets such as J.C. Penney and Famous Footwear where Under Armour doesn’t sell.
- Under Armour to Begin Selling Products at Mid-Tier Department Store Kohl’s – The Wall Street Journal (sub. required)
- Under Armour (UA) Kevin A. Plank on Q2 2016 Results – Earnings Call Transcript – Seeking Alpha
- Kohl’s Announces New Partnership with Under Armour to Propel its Active Business – Kohl’s
- Under Armour Makes Big Play for Women With Kohl’s Tie-Up – Fortune
- Under Armour to Partner With Kohl’s in Push to Become Mainstream – Bloomberg
DISCUSSION QUESTIONS: What should guide a brand’s decision to expand to a lower-tier channel? What are the obvious and less obvious risks in such moves?