Sports Direct takes aim at sports giants' distribution strategies

By

Sandra Halliday

Published
Oct 15, 2019

Sports Direct issued a media statement on Monday slamming into the distribution strategies of giant global sports brands such as Nike and Adidas.

Its statement said it believes that the industry as a whole “would benefit from a wide market review by the appropriate authorities in both the UK and Europe” in relation to the way the brands control supply.

This followed a Sunday Times report suggesting Nike had notified independent retailers that access to its products would end in two years. The US firm had reportedly said that “their way of stocking its goods was ‘no longer aligned’ with Nike's distribution strategy,” Sports Direct explained. The article had also raised the issue of retailers being concerned that Adidas might follow suit.

Sports Direct has long criticised the distribution policies of the big names as it has often struggled to get access to the ‘must-have’ products that are the lifeblood of the sports shoe market in particular. Its big rival JD Sports, by contrast, has strong relationships with the two dominant  brands and has frequently benefited from being able to stock items that other retailers can't get access to.

The company said: “The sports industry has long been dominated by the 'must-have' brands such as Adidas. These brands hold an extremely strong bargaining position vis-à-vis the retailers within their supply networks and use their market power to implement market-wide practices aimed at controlling the supply and, ultimately, the pricing of their products.”

It added that practices include 'segmentation' policies restricting the range of products available to retailers; the withdrawal of the supply of products; and "an outright refusal to supply”.

The company also said it "has long fought against such practices and has historically sometimes found itself at a disadvantage, with brands like Adidas withdrawing supplies of key products (such as replica football shirts i.e. Chelsea shirts in 2013) or simply refusing to supply key products at all with no apparent justification.”

In response, Nike told the BBC that it “continually evaluates the marketplace and competitive landscape to understand how we can best serve consumers. As part of this, from time to time we do make adjustments to our sales channels, in order to optimise distribution.” Adidas has made no comment so far.

Being able to access the most desirable brands is key to any multi-brand retailer, even those where own-brand product makes up a large percentage of its mix. Sports Direct has also found issues with House of Fraser where the chain’s administration filing and subsequent buyout by Sports Direct left a number of labels pulling their brands from the stores. 

However, the firm’s expansion strategy for its upscale Flannels chain doesn't seem to be suffering from any issues with brand availability with the retailer offering a raft of designer labels such as Burberry, Gucci, Valentino, Dolce and Gabbana, Saint Laurent, Jimmy Choo and many more. Its new more upmarket strategy for its to-be-launched Frasers chain will also be dependent on accessing the most desirable brands.