(part 2 from the recent European Outdoor Forum held in Annecy)
Another much-awaited part of the European Outdoor Forum was a retail panel bringing together four leading outdoor retailers from Europe, China and Canada. They discussed ways to stimulate the industry while protecting it from price battles and all sorts of uncertainties, not shying away from outspoken criticism of the strategies used by some of the leading outdoor brands.
Thomas Lipke, managing partner at Globetrotter, which achieved sales of about €230 million last year, took a swipe at brands that undermine their established retail partners by opening stores and selling to discount-oriented online retailers such as Amazon. He described such online retailers as distributors, unlike actual retailers who stimulate the market with investments in attractive retail space and merchandising – some of them creating entire communities and strongly pushing participation as well. Lipke added that he would not have any qualms about excluding suppliers, even such prominent brands as The North Face, if they showed too little regard for this issue. Instead, he would favor brands with a long-term and transparent distribution strategy.
The plea was echoed by Frederic Hufkens, chief executive of the A.S. Adventure Group, which reached a turnover of about €291.1 million last year with A.S. Adventure in Belgium (and France since this year), Bever in the Netherlands and Cotswold Outdoor in the U.K. He said A.S. Adventure would commit itself more to brands that are transparent and refrain from opening too many mono-brand stores. However, the A.S. Adventure Group runs several mono-brand stores for The North Face in the Netherlands and Belgium.
Some suppliers retorted that the retailers themselves were encroaching on the business of the brands by coming up with private labels. The rate of sales from such generic products reaches about 15 percent at Globetrotter but nearly 50 percent at Mountain Equipment Co-op (MEC), the Canadian retailer that took part in the debate through its head buyer, Jeff Crook. Established in 1971, the cooperative has 15 affiliated stores and an online store, which together generated sales equivalent to just under €200 million last year.
An important part of the discussion covered the use of the internet by the retailers. Zhang Heng, chief executive of Sanfo, the leading outdoor retailer in China, said its online sales still made up less than 3 percent of its turnover, which reached over €25 million at 31 stores. They account for about 9 percent of sales at Cotswold Outdoor but only 2.5 percent for the entire A.S. Adventure Group, partly due to the density of stores in Belgium (and the fact that Bever launched its online store just recently).
The rate reaches some 10 percent at MEC – and about 85 percent of the Canadian retailer's in-store sales were pre-shopped on the internet, Crook added. On the other hand, mail-order and online sales make up about 48 percent of Globetrotter's sales.
Among the people who reacted from the audience, Jean-Marc Pambet, head of footwear at the Amer Sports group, which is opening more and more Salomon concept stores, argued that mono-brand stores were meant to display an entire range, rather than taking sales away from retailers. He said it was a matter of brand-building, which ultimately benefited retailers. Pambet opined that suppliers and retailers should both adjust to the situation by building multi-channel strategies.
It seems that the price increases introduced by outdoor brands this year did not cause nearly as intense worries for the retailers, who have generally adhered to the recommended retail prices for specific products. Hufkens said it was up to the retailers to adjust their price structures, and make sure they would still have products on offer in a wide range of prices. Others added that consumers were always prepared to pay more for compelling products that are marketed in the right way. Sanfo's Zhang Heng pointed out that Arc'teryx was the best-selling apparel brand at his stores, even though it was about 25 percent more expensive in China than in Europe.
Both sides agreed that trust and transparency were keys to overcoming potential tensions between suppliers and retailers on the split of their functions and margins. Lipke said that he was particularly at ease with family-owned companies where he could have a direct relationship with people who make the decisions – contrasting that with brands such as The North Face, whose management changes all too often and has to refer to far-away executives at VF Corporation. (The much-maligned brand was not represented at the debate.)
This tied in neatly with a speech given by Heiner Oberrauch, whose family owned Salewa, at the forum's opening dinner, hosted by Ispo on a boat crossing the Lake of Annecy. He described his personal touch at the company and investments in facilities that contribute to its identity, like the new head office inaugurated in Bolzano a few days before the EOF. He insisted that the atmosphere prevailing in a company is more important than knowledge or capital. Oberrauch also urged the industry to encourage risk-taking by employees, as he has done by introducing the word “courage” in Salewa's code of conduct.
More practical tips were provided by Douglas Kent of the Supply Chain Council, who called for outdoor companies to invest more in this part of their business. Nearly all the people who attended his presentation said they had a budget for innovation, but only three of them still had their hands in the air when asked if they had a budget for innovation in the supply chain – whereas he found a study showing that 74 percent of companies see the reliability of their suppliers as a major risk.
One of Kent's main points was that most companies do not have a single supply chain, but several supply chains. The requirements vary, depending on factors such as the quality of the products to be delivered in specific markets, if the orders are for at-once deliveries or not, and so forth. The demands on the supply chains could therefore vary, for example focusing on cost in one market, but on reliability in another market.
Two other speakers broadened the scope of the discussion by focusing on youth and marketing. Walter Naeslund, chief executive of the Honesty agency in Stockholm, encouraged companies to use seduction and gossip to spread the word about their brands, particularly on the internet. He said brands should embody a personality that friends identify with, and let them tell the brand's story.
Alex Striler, a management consultant specializing in action sports, partly advocated the same approach. He said companies should create a conversation with youth – not talk to them through advertising, but make them talk about the brand. He used several concrete examples of brands associated with the fast-growing motocross category, perhaps not realizing that such sports do not sit easily with the values of outdoor brands in Europe.