Will Dick’s Sporting Goods win by cutting SKUs?
Ed Stack, CEO of Dick’s Sporting Goods, announced that the company has established “a new merchandising and vendor matrix” that will result in closer relationships with some suppliers while pulling back from dealings with others. In the end, implementation of the plan will mean up to 20 percent of the chain’s vendors will be cut before the end of the year.
Strategic vendors, grouped into “Segment A”, will be companies that “will invest significantly in our business both online and in-store and we will invest significantly in their business,” said Mr. Stack (via Seeking Alpha).
“Segment B” vendors will be those that Dick’s has “a transactional relationship with” while “Segment C” vendors will have their products discontinued.
Dick’s CEO was asked about the timing of the move in light of the changing competitive landscape. Ten sporting goods chains have filed for bankruptcy since 2015, according to USA Today. The Sports Authority, the second largest chain in the category, liquidated in 2016. Dick’s acquired 114 million shopper files and 25 million e-mail addresses from The Sports Authority last year along with its brand name and e-commerce domain.
“We felt that it was really the right time to review, really, an in-depth review of everything that we do in the business,” said Mr. Stack. “As we looked at this, we felt that it was the right time to consolidate our vendors and we will continue to have a good, better, best strategy that isn’t really going to change.”
Mr. Stack said Dick’s doesn’t “expect to give up any sales or margin rate” due to its vendor consolidation. He said the action will be spread across categories and enable the chain to “showcase our private brands more and drive that business, which we’ve indicated we expect to be approximately $1 billion this year.”
Comparable sales, including online and stores, for the Dick’s chain along with the Field & Stream, Golf Galaxy and Golfsmith businesses grew five percent for the company in the fourth quarter. Dick’s omnichannel comps increased 5.3 percent as traffic improved 2.9 percent and the average ticket rose 2.4 percent.
- Dick’s Sporting Goods CEO Ed Stack on Q4 2016 Results (Earnings Transcript) – Seeking Alpha
- Major sporting goods stores that have filed for bankruptcy – USA Today
- Here’s why Dick’s Sporting Goods won’t suffer the same fate as Sports Authority – CNBC
- Should e-mails and other personal info be for sale? – RetailWire
DISCUSSION QUESTIONS: Is Dick’s decision to eliminate vendors the right move based on the changing nature of the sporting goods market? Do you see any downside to this approach?