Dick’s Sporting Goods’ Strategy, 4 Things to Watch
The sporting goods industry is one of the fastest growing sectors of the retail industry. It is valued at $67.2 billion and with a 14.2% share, Dick’s has the highest share in the industry, ahead of rivals like Foot Locker. If you are curious about how Dick’s plans to make the most of a great market opportunity then consider these four elements of its strategy.
1. Store expansion. Dick’s is planning to spend between $600 million and $800 million to expand its store footprint and this will primarily be driven by opening new House of Sport stores. These stores, which debuted in 2019, are huge coming in at around 100,000 square feet, twice the size of an average Dick’s store. House of Sport stores have a number of features including a 17,000 square foot outdoor field and running track, which turns into a skating rink in the winter and an outdoor movie theatre in the summer, an indoor batting cage, a racetrack, three virtual golf bays, a putting green and a 32 foot high rock climbing wall. House of Sport stores also offer exercise programs like yoga.
“Dick's House of Sport is redefining sports retail. It's an experiential destination…that fosters deep community involvement, goes well beyond traditional retail, and has become a destination where athletes can fuel their passions,” said Lauren Hobart, Dick’s Sporting Goods’ CEO. “House of Sport will be a significant part of our future growth story. And over the next five years, we could have as many as 75 to 100 Houses of Sport [stores] across the country.” Dick’s is focusing on these stores because they deliver “much higher sales and profit,” said Hobart.
Dick’s is capitalizing on a trend towards healthier lifestyles that took off during the pandemic. “The sporting goods retail sector continues to benefit from a fundamental shift in consumer behavior including increased focus on health and wellness, participation in outdoor activities and a higher interest in athletic lifestyle products,” said analysts from Wedbush.
Continuing along the theme of expansion, Dick’s Sporting goods opened a new store banner in 2021 called Public Lands. These stores are around 50,000 square feet and cater to customers who love the outdoors. Public Land stores have a number of features including a climbing wall and specific areas for activities such as camping, biking, and hiking. With this store concept Dick’s is trying to capture sales from the $100 billion outdoor hunting gear market.
Around three quarters of sales in Public Lands stores are expected to go to footwear and the rest of the sales are supposed to come from hard goods like bikes, tents, and camping cookware. Merchandise sold in Public Lands stores will have a 20% overlap with merchandise sold in Dicks’s stores. “This boom in the outdoors [market] is not because they necessarily want to go backcountry skiing in Alaska, but because they want to go for a hike on a trail versus going for a walk on concrete,” said Dick’s executive chairman Ed Stack.
2. Footwear. Dick’s sees footwear as a high priority and is increasing its investment in this category. Expect to see full service footwear sections in 75% of Dick’s 800 stores. “We think footwear is the engine that drives the train,” said Hobart. “Footwear is a really important part of our entire assortment. And so, we're not looking at a time when footwear becomes less of a driver to top-line sales. We just continue to try to elevate our assortment and our products for our athletes to come in.”
Dick’s focus on footwear is expected to put pressure on Foot Locker. “Our premium footwear DICK'S have enabled us to expand our access to a wider assortment of differentiated product from key brand partners, as well as new and emerging brands,” said Hobart. “We're confident that our ability to provide an elevated footwear experience will continue to foster strong engagement with our athletes as well as drive sales growth and robust margins.
3. Outlet stores. Three years ago Dick’s began opening outlet stores. These stores help to improve margins on clearance items and it allows Dick’s to sell more full priced items in Dick’s Sporting Goods stores. Outlet stores have also proven to be a good customer acquisition tool. “We've had great success with our value chain concepts,” said Hobart. “We do see that we can optimize our margin on our clearance better. We also have great success when we clear products online, but it also enables us to bring product -- fresh product into the Dick's stores, which also helps us drive margin.”
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4. Omni-channel. Dick’s is also focused on providing its customers with a beneficial omnichannel experience that includes one-hour in store or curbside pickup and same day delivery. 70% of eCommerce orders are fulfilled from Dick’s stores. These omni-channel customers generate 65% of Dick’s sales. Foot Locker, on the other hand, only generates 7% of its sales from omni-channel customers. Dick’s says omni-channel customers are important because they spend more than the average customer that only transacts within one channel.
“In combination with our stores, our digital experience remains an integral part of our success, and we continue to invest in technology to strengthen our athletes' omnichannel experience,” said Hobart. “Recent enhancements are being well received by our athletes, including easier access to ScoreCard rewards, access to upcoming launches through a native sneaker release calendar and in-app reservation capabilities, as well as in-store mode in the Dick’s app, which offers product scanning, access to ScoreCard offers and free shipping. Furthermore, our expansive database of our 150 million athletes is a tremendous asset that enables stronger, more personalized relationships with our athletes.”