Sporting chance for Mr Price?
Cape Town - Fashion retailer Mr Price has now taken aim at the sporting goods market just like it did the homewares market with Mr Price Home to such great effect.
Talk in the market was that Mr Price had initially been interested in buying Moresport (Sportsmans Warehouse, Sports Shoe World, Outdoor Warehouse) before Massmart made a bid for that company in April last year.
Apparently, Mr Price balked at the price Vestacor was asking.
Vestacor is the private equity company headed up by Gerald Rubenstein which, along with its financial backers, controls Moresport.
It is, of course, ancient history that the competition authorities torpedoed Massmart's R400m acquisition of Moresport leaving the company to soldier along alone.
Meanwhile, it would seem that it was Mr Price's failure to reach agreement with Vestacor that was the spur which motivated the discount retailer to set up its own chain of sporting goods stores.
On paper, at least, it would seem that Mr Price is on a good wicket.
Looking for a 'big brother'
One of the reasons Moresport put forward to allow Massmart to buy the business was that it needed a "big brother" to enhance its competitiveness. The reason for this is simple: Massmart would have given Moresport better buying power.
Moresport would most certainly have been able to negotiate better prices on its sporting goods and clothing as part of the wider Massmart group.
One would also have to believe that it would have been in a better position when negotiating rentals with its landlords or looking for new retail properties.
It is these crucial competitive points that Mr Price is immediately able to leverage in its new sporting goods business.
And make no mistake, the market is huge. It is difficult to give an exact number though because nobody knows how many independent stores are out there, and how much they are selling. The bicycle business is a good example - no one has really got a clue how much the total market is worth.
"Our lowest estimates, based on Stats SA numbers, are about R6bn a year, but it could be as high as R13bn," says Alistair McArthur, CEO of Mr Price.
Market can absorb another player
Just over a year ago Massmart told the competition authorities that it had a turnover of nearly R675m in sporting and recreational goods.
What also emerged in the competition deliberations is that running shoes and other takkies account for nearly 40% of the sporting goods market.
Analysts say that this rises to nearly 50% if one includes soccer and rugby boots into the sports shoe category.
Given the size of the sporting goods market, it can, no doubt, absorb a new player. But that doesn't mean that the success of Mr Price Sport is a foregone conclusion.
After all, if Moresport was such a fantastic proposition, ask this question: why wasn't it gobbled up by another retailer the moment it became apparent that the competition authorities were going to nix the deal with Massmart?
After all, there are so few assets around in the retail sector available for sale, and surely this would represent an excellent opportunity.
The fact is though, that it is not an easy market in which to compete. Remember for a moment what happened to Moresport when it was a listed entity with Total Sports as its flagship brand.
Drowned in stock
Total Sports stocked up massively on all manner of sportswear and sporting goods, which then wasn't supported by subsequent turnover and the business was almost crushed by the debt it had used to buy the stock.
Eventually Moresport had to sell Total Sports to Foschini at almost fire sale prices to extricate itself from the hole it had dug.
The market for sports shoes and other sportswear is wide open and competition is tough with all the major apparel retailers and supermarkets vying for a share of the market.
The market for actual sporting implements - cricket bats, tennis racket, balls - is much smaller and is, in effect, dominated by Massmart and Moresport; well at least that was the opinion of the Competition Tribunal.
What Mr Price has done is to introduce its own brands.
"We discovered that we could purchase from the world's leading sporting goods manufacturers of brands and achieve significantly lower prices when these goods are sold under our own brands," says McArthur.
That then is a substantial marketing hook. Branded sporting implements are notoriously expensive and being able to offer good quality at bargain prices will no doubt win much consumer support.
Variety of golf gloves
Once the customer is in the store, then you can start selling him or her all the associated clothing and, dare we say it, fashion.
This is where Mr Price can make dent in the sports business applying the same principles that has made brought to bear on its fashion and homewares businesses.
"We created new categories in homewares, and we are doing the same in sports," says McArthur.
He gives the example of golf gloves which usually come only in black or white. Mr Price, on the other hand, has a range of 14 different colours.
What Mr Price showed so well in its homewares business is that people want fashion, and that when you offer it to them, they buy more frequently.
So the argument is that sportswear is as much a fashion item as a pair of jeans. And this is where Mr Price has made its mark - good quality fashion at bargain prices.
That doesn't mean to say Mr Price is about to become the market slayer of the sporting goods sector - it just means that it wouldn't be a good idea to bet against them.
News source: www.news24.co.za
Posted by: www.SouthAfrica-CarHire.com
