Tantalizing was a release by the National Sporting Goods Association (NSGA) recently that stated department stores have increased their share of three pieces of the most popular home exercise equipment. And the release of information was published as is by other trade media sources.
But SNEWSÂ® felt there was more below the surface of the numbers and decided to get some additional insights from the NSGA, as well as a couple of manufacturers that supply Sears (or will be).
What the release didn’t say
First of all, the NSGA release said “department stores” have taken more share in fitness sales. Wait, hmm, what other department store sells any significant quantity of exercise equipment? Well, none really, NSGA’s Tom Doyle told us, noting that the “department store” category is actually owned more than 90 percent by Sears.
Secondly, although the NSGA (www.nsga.org) is fastidious about its research and its quality, that’s not to say that sometimes it can’t be skewed a little. What’s not in the information you may have seen is that very fact. Doyle said the results, drawn from its report, “The Sporting Goods Market 2004,” likely underestimated specialty shop sales across the board. Why? Because of the type of family panel that was polled for the results.
“I’m quite sure fitness specialty stores have higher percentages (of sales),” Doyle said, adding that doesn’t of course mean that the department stores haven’t gained share. “Probably, it doesn’t adequately reflect total sales.”
The consumer panel used by the NSGA is based on a survey of 100,000 U.S. households and is maintained by National Family Opinion Inc.
The numbers, as reported, plus moreâ€¦ Â
For the record, the released information showed more “Sears” dominance of the three categories — treadmills, home gyms and stationary bikes — with some variations between categories.
>>Treadmill sales at Sears are growing in dominance, according to the NSGA report. The percentage of total unit sales of treadmills from 1998 to 2003 grew from 38 percent to 54.1 percent, while dollar share increased from 41.4 percent in 1998 to 50.6 percent in 2003. Discount stores (the likes of Wal-Mart and Kmart) experience the largest declines, as reported, while specialty fitness stores and full-line sporting goods stores experienced modest declines. Specialty fitness stores saw their share of unit sales slip only a smidgen — from 6.3 percent to 6.2 percent; however, their dollar share fell from 16.4 percent to 13.5 percent. Full-line sporting goods stores’ share of unit sales dropped the same smidgen — from 15.1 percent to 15 percent, while dollar share slipped from 19.4 percent to 14.8 percent.
“I don’t know if I can believe what the study says,” said Bill Sotis, vice president of marketing for Horizon Fitness, which began testing a new “CFS” brand at Sears almost a year ago. It is now selling at 80 stores — but is still being “tested,” Sotis said.
Said another fitness insider, “Sears management definitely wants to give the consumer a choice.”
>> With home gyms, a similar pattern is reported by the NSGA, but specialty sales aren’t reported as having dipped as dramatically. Still, Sears showed double-digit growth in unit sales (15.6 percent to 24 percent) and an even greater increase in dollar sales (15.3 percent to 27.7 percent). Again, discount suffered, while specialty fitness stores showed slight increases in both units (4.2 percent to 5.2 percent) and dollars (9.6 percent to 9.8 percent), and full-line sporting goods stores produced strong increases: Unit share rose from 15.6 percent in 1998 to 29.4 percent in 2003, while dollar share increased from 16.2 percent to 23.3 percent.
The dramatic increases in home gym sales, Doyle said, could also simply be indicative of a larger national trend of more interest overall in strength training. But a lot of home gyms aren’t as easy to simply take home and setup on your own, allowing specialty fitness stores to perhaps not lose as much ground there, he added.
>> Bikes have a slightly different story, according to the report. Both department stores (oops, there we go againâ€¦Sears) and full-line sporting goods stores showed improved share in sales of stationary exercise bikes, while specialty fitness stores saw their share drop sharply. Department stores grew their share of units (24.5 percent to 35.4 percent) and dollars (21.3 percent to 41 percent), and full-line stores also grew by double digits (10.8 percent to 23.3 percent in units and 11.9 percent to 24.7 percent in dollars). Specialty took a huge hit here, with their share of units dropping more than half, from 6.9 percent in 1998 to 3.4 percent last year, while dollar share sunk even more — from 23.2 percent to 5.9 percent during the same period.
Nautilus’ Tim Hawkins said Schwinn will begin testing bike sales at Sears by the end of August. That’s partly because Sears is big into brands (think Kenmore and Craftsman), and Schwinn is a brand that a Sears customer remembers from his or her childhood. Higher-end equipment should still sell well too at specialty stores, he said.
“I believe there will always be a consumer who wants to buy high-end, more expensive fitness products,” Hawkins said. “We just have to work harder.”
When it comes to product that is sold at Sears or even sporting goods stores, simplicity is key, Hawkins said, since customer service and home installation may not be what it is at specialty stores.
“It makes us work harder to make sure a product sells itself,” he explained. “It’s about simplicity in offering.”
Now, what about Sears?
Sears has been struggling for a number of years to re-invent itself, particularly in light of competitors like Target, Home Depot and Kohl’s. In the store’s most recent quarter, profits plunged 83 percent, from $309 million to $53 million, sending warning signs to Standard & Poors, which lowered Sears’ debt ratings. Only a few months ago, the management did a shuffle and long-time fitness equipment buyer Dave Breed was out and Guy Rita is in.
“They’re looking for some ways to accelerate growth,” Sotis said.
Doyle pointed out that the store has also gotten out of or dramatically decreased most of its other sporting goods categories, such as bikes and camping.
“They’ve made the sporting goods department very focused on fitness,” he said, “and they’ve been moving up in their price point.”
Remember when it would be a cold day in you-know-where to find a non-Icon-brand treadmill or even one that cost much over about $400? Now, you find other companies, plus prices for treadmills that can reach to $1,200. But so far retail experts and analysts aren’t turning around their ratings, but are sitting and watching. In an Atlanta Journal Constitution (AJC) story, called “Sears in battle for its life,” experts warned that Sears needed to be more aggressive in its transformation — or go the way of Montgomery Ward and the gooney bird.
“Sears stayed with the big mall format too long,” Erik Gordon, a marketing professor at Johns Hopkins University in Baltimore, told the AJC paper. “They’re so far behind now, and they’re still not making the right moves.”
SNEWSÂ® tried for a number of days via email and voicemail requests to get background from Sears, which was promised repeatedly via email and telephone calls. But none was forthcoming by deadline.
“There’s nothing in Sears’ modus operandi that screams of something unusual,” analyst Daniel Poole of National City Corp. told the AJC. “Sears is an interesting case study. Their business is being attacked on all fronts.”
Growth, brands and more consumer choice seem to be the MO for Sears in its quest to stay viable in today’s retail world.