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Decathlon Overtakes Adidas, Nike In Sports Gear Retailing
With 70 large, warehouse-like stores, Decathlon's product pricing is about 30-40% lower than competing products.
French sporting goods retailer Decathlon has garnered more revenue than older local rivals such as Adidas, Nike or Puma in FY18, paced by broader awareness about fitness in the country and adoption by the average Indian of sporting disciplines other than cricket.
With revenue of Rs 1,278 crore for the year to March 2018, Decathlon has also become India’s second-largest single-brand retailer after Xiaomi. It also made a profit of Rs 33.8 lakh, the first in India for the retailer that began operations in the country about a decade ago.
In FY16-17, the brand had a net loss of Rs 53.1 crore on revenue of Rs 925 crore, reflecting a 38% jump in FY18 sales, regulatory documents sourced from research platform Veratech showed.
“Decathlon has lower-end price positioning and targets consumers who see valuefor-money as more important than brand image.In doing so, it appeals to a wide range of age groups, and more to participants in sporting and outdoor activities, as opposed to consumers buying sportswear as fashion statement,” said Alexander Göransson, consultant at Euromonitor International, which pegged the Indian sports goods stores market at $2.6 billion in 2018.
With 70 large, warehouse-like stores, Decathlon's product pricing is about 30-40% lower than competing products since it sells everything from running shoes to mountaineering equipment under its own brands. This also helps the retailer earn higher operating margins.
By selling only private labels, Decathlon controls almost every bit of operations, from pricing and design to distribution, and keeps its costs and selling prices low. Decathlon uses a combination of in-house manufacturing and outsourcing to stock its shelves.
The operating model has worked both globally and in India. Here, the company sells more than 500 products catering to 70 sporting disciplines. By contrast, most other retailers sell merchandise restricted to popular sports such as cricket and soccer. Over the past few years, India has demonstrated an increasing appetite for non-cricket sports, such as kabaddi, soccer, volleyball, hockey and badminton.
The country now hosts professional leagues in most of these sporting disciplines, drawing participants from across the globe. Also, rising stars such as Saina Nehwal and PV Sindhu (badminton), Hima Das (athletics), and Swapna Barman (athletics) have helped spawn the expansion of non-cricketing sports in India, where cricketers have hitherto enjoyed a virtual monopoly in brand endorsements.
German sportswear brand Puma, however, claimed that it is the largest sports brand in the country and doesn’t compete with any multi-brand sports retailer. “In fact, we have a strong partnership with Decathlon in Europe, where we sell our products through its stores,” said Abhishek Ganguly, managing director at Puma India.
“Being a brand that supplies to multiple channels of sales in India, a significant part of our revenue is largely wholesale. So, our revenue is channel sales, rather than end-consumer sale, which is the case with a retailer.”
Decathlon opened its first cash-and-carry format and wholesale store in 2009. However, it got approval for single-brand retailing in 2013 and changed its business model from wholesale to retail. The company has expanded its business 10 times since then by adding more than 50 stores.
To boost profitability through lower overhead costs, it operates mainly from city suburbs or struggling malls that couldn’t command high rentals.
Source : The Economic Times
Image Source : Apparel Resources