Run Specialty's Sprint to Omnichannel

Run specialty has finally embraced online retailing due to COVID-19 to support a strong sales recovery in the second half of 2020, according to the latest survey from the Running Industry Association (RIA). However, according to the survey, it’s still uncertain how big a driver online will be for the channel, and direct-selling continues to cause tension in supplier relationships.

“The brick & mortar shopping experience is what makes the run specialty channel special, and that is not going to go away,” said Terry Schalow, RIA’s executive director, in an interview with SGB Executive. “That said, the rapid growth of e-commerce illustrates the channel’s ability to adopt new sales platforms to adjust to the changing needs of customers.”

The survey of over 100 specialty run retailers across the U.S. found that 86 percent were selling online by the end of 2020, up from just 27 percent last March when the pandemic emerged. Another 6 percent plan to add e-commerce, with 9 percent having no plans to add online selling.

So far, however, online selling remains a small portion of sales for most run specialty stores. According to the survey, 73 percent indicated e-commerce represented between 1 and 10 percent of sales, with 18 percent claiming 11 percent to 20 percent.

Slow migration to online selling is expected for 2021. Asked about expectations for the current year, 62 percent of run specialty shops said they expect online to represent between 1 and 10 percent of sales and 28 percent between 11 percent to 20 percent.

Run Specialty Embraces Digital Selling And Outreach
Schalow said providing an omnichannel offering had, for the most part, eluded run specialty until last year. He remarked, “As one of our retail members put it, “COVID-19 was the kick in the butt that we needed to get going and focus on our e-commerce platform.'”

He doesn’t foresee online taking over the run specialty channel but believes many shops now recognize the value of providing an online purchasing option.

“What our retailers have discovered is how to reach their customers, no matter how their customers want to shop,” said Schalow. “Will online grow and evolve? Almost certainly, yes. Will it overtake in-store sales? I seriously doubt it. The in-store experience will continue to be the key point of contact, but now our retailers will retain their customers who sometimes choose to purchase online for convenience, and attract the massive number of new customers who are happy to support local specialty retail.”

The survey also found many run specialty shops see online as an opportunity to reach runners outside their geographic areas. Most running shops agreed that most purchasers on their e-commerce sites are local customers, but many find orders from nearby towns and some across their state or the U.S. Sixty-one percent of retailers said they expect to expand their e-commerce business beyond their local community in 2021.

Many retailers also significantly ramped up investments and efforts to drive online engagement last year, given the state and local restrictions on in-store visits and the suspension of run clubs and race cancellations.

“They are getting creative,” said Schalow. “For example, virtual races are getting more traction. But what’s having a larger impact are third-party marketing platforms that create targeted social media campaigns, helping retailers remain connected with their customers. What’s even more exciting is the number of new customers that are responding to these targeted efforts. One of our marketing partners shared a report showing 50 percent of sales were from new customers directly attributed to their marketing campaign. That is phenomenal and illustrates the specialty channel’s ability to compete online despite massive SEO spending from the pure-play e-commerce retailers.”

Strong Bounce-Back In Second Half
The survey confirmed that run specialty proved resilient, with the vast majority of stores rebounding in the back half of 2020.

Key takeaways include:

Despite store closures in March and April, 39 percent of stores in the channel in 2020 exceeded 2019 sales and another 29 percent were within 10 percent of the prior year;
Footwear sales held up the strongest, with apparel sales within striking distance. Accessories took the biggest hit, with over two-thirds of retailers reporting flat or down compared to 2019;
Over 85 percent of reporting stores finished the year with a full staff or stayed within 90 percent of a full staff;
Retailers are generally bullish on 2021, returning to pre-COVID-19 growth. Forty-two percent are back to normal sales, and an additional 37 percent are confident about returning to normal sales volume by the third quarter; and
Expected revisions on Spring 2021 futures reflect the bullish attitude, with 75 percent not anticipating downward revisions.
Supply Chain Disruptions
Supply chain disruptions are expected to be a challenge in 2021 due to COVID-19, with bottlenecks leading to congestion at ports and shipping container shortages. Nineteen percent of the run specialty store respondents in the survey indicated they were under-inventoried and are looking to bring in more product.

Schalow said several of RIA’s brand members shared that they are having difficulty landing freight on time from overseas. Some reported supply chain problems with material suppliers, but most are concerned about delays at entry ports due to COVID-19 restrictions. Schalow said, “Many products are sitting on boats at anchor in Long Beach, and the lack of inventory arriving in warehouses will likely result in late shipments. A few brands are using air-freight as a solution but, of course, air freight expenses are enormous and a downward pull on profit margins.”

Vendor’s DTC Push Frustrates Some Shops
The fast shift to e-commerce has caused some tension between run specialty shops and vendors, many of which sell online themselves. Vendors to the run specialty channel have a reputation of supporting independent shops due to their ties to local running communities.

Asked if they felt their brand partners supported their e-commerce business:

Forty-seven percent agreed, “Yes, most of them support our e-commerce sales.”
Twenty-eight percent agreed, “Yes, but only some of them support our e-commerce sales.”
Twenty-five percent agreed, “In general, no, I only get support from a few brands.”
Six percent agreed, “I don’t get support at all from my brands.”
“The trend toward direct-to-consumer (DTC) sales remains fluid,” said Schalow. “We have yet to arrive at a mature business model that clearly defines best practices.”

He added, “That is not to say that many brands don’t know what they’re doing. They’re savvy and getting more defined in their DTC strategies. However, many of our retail members are feeling left out and are discouraged by what they see as direct competition from their brand partners.”

Asked in an open-ended question about their most supportive brands’ best practices, many involved online operations, including calls for drop shipping at no shipping charge. A few mentioned the importance of integration with platforms like Locally.com and Fittedrunning.com, enabling consumers to browse vendor websites to see whether inventory is available at a nearby store.

“The good news is that smart brands recognize that the hundreds of specialty doors in the market are like mini-warehouses, and each door represents an option for customers to shop local,” said Schalow. “Brands just need to figure out how best way to make DTC partnerships with their retail partners work within the constraints that they face.”

He also noted that each brand faces unique challenges. For example, brands that are part of a more extensive brand portfolio must align with the DTC guidelines of a parent, while privately-owned brands can navigate more freely.

“No one reading that statement should infer that privately-owned brands have DTC policies that favor specialty retail compared to portfolio brands. In some cases, it is quite the opposite,” added Schalow. “About the only definitive statement we can make about DTC sales is that it is here to stay, and it is evolving. To that end, the RIA is working closely with our brand partners to help inform best practices that ensure a healthy and cooperative business environment where all boats rise, pardon the cliché.”

Content originally published from SGB Executive and can be viewed here.

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