SPORTS DIVISION
Donald Gedye
The Sports division continues to occupy a leading position in its space in the retail sector.
POSITIONING
The Sports division, comprising the Totalsports, sportscene and DueSouth chains, continues to occupy a leading position in its space in the retail sector. Its product ranges, rival those obtainable anywhere in the world. It is well represented in shopping centres, CBDs, high streets and rural towns throughout southern Africa and has built up an enviable reputation with the sporting fraternities and other interest groups which make up its target markets. It maintains a policy of clear differentiation between the chains in products, presentation and branding, generating this differentiation by active product innovation and selection, and continuous updating of layout and display in the stores.
Totalsports retains its position as South Africa’s premier chain for sportswear and basic items of sports equipment, including ranges which are in particular demand in the lead-up to the 2010 FIFA World Cup™. It stocks leading international and local brands of products to meet the everyday needs of sportsmen and sportswomen and supporters, together with complementary fashion products. The chain has well-trained and knowledgeable staff who provide customers with premium-level service in stores where there is a vibrant atmosphere.
The main sports and activities for which the chain caters are football, running, fitness and rugby, and customers have a wide choice of contemporary sportswear (including footwear) and essential items of equipment. For football enthusiasts keenly awaiting the 2010 FIFA World CupTM events, its stores are virtually a one-destination venue for the garments and equipment they are likely to want, down to vuvuzelas.
The sportscene chain stocks a blend of fashion and sports products directed at youthful and fashion-conscious customers. Outside the stores the chain keeps in touch with the target market through focused promotional and other initiatives. The image which sportscene cultivates is that of a fast-paced, urban, street-smart, energised shopping venue.
| 2010 | % change | 2009 | ||
| Turnover (R million) | sportscene | 511,4 | 8,8 | 470,2 |
| Totalsports | 878,5 | 20,2 | 727,5 | |
| DueSouth | 106,8 | 7,8 | 99,1 | |
| Total | 1 496,7 | 15,4 | 1 296,8 | |
| Number of stores | sportscene | 114 | 8,6 | 105 |
| Totalsports | 148 | 10,4 | 134 | |
| DueSouth | 29 | 16,0 | 25 | |
| Total | 291 | 10,2 | 264 | |
| Floor area (gross m2) | sportscene | 26 436 | 12,6 | 23 474 |
| Totalsports | 39 226 | 10,0 | 35 645 | |
| DueSouth | 9 128 | 11,2 | 8 206 | |
| Total | 74 790 | 11,1 | 67 325 | |
| Number of employees | 2 144 | 2 132 | ||
| Most significant countries from which merchandise is imported | Total | China | China |
DueSouth, now in its sixth year of trading, caters for modern, hi-tech, outdoor enthusiasts who enjoy shopping in an environment which provides a wide range of products that correspond to their lifestyle. The target market comprises the middle- to upper-income groups. The chain constantly updates its product range in order to cater fully for the market’s perceived tastes and to strengthen its market position. In its current phase it is consolidating its market position with a broader base of products than previously.
The Sports division continues to be recognised by leading international suppliers of sportswear and sports equipment as a key retail distribution channel in South Africa. While the success of these international products is crucial to its continued growth, the division also supports a number of local manufacturers. In-house brands are furthermore used to provide margin flexibility and to enhance growth. Having access to a stable local manufacturing base is particularly important when the multinational players undergo periodic stock shortages, as has happened in recent times.
The division has spared no effort to prepare itself for the public interest which the 2010 FIFA World Cup™ events will awaken and the consequent demand for products stocked by the division’s chains. This activity began to make its contribution to turnover in the past year and will persist until well after the 2010 FIFA World Cup™ matches come to an end.
The three largest organisations active internationally in sportswear, Nike, Adidas and Puma, have officially recognised the Sports division as a preferred partner for the 2010 FIFA World Cup™, a status which will position the division to reap excellent benefits.
REVIEW OF THE YEAR
The impact of the global economic crisis continued to be felt in the division’s stores. Despite this, the division achieved total turnover growth of 15,4% with growth of 6,1% in comparable stores. This result enabled the division to maintain its position as a market leader. Growth in comparable stores in the first half was 7,8% and in the second half was 4,6%. A total of 27 new stores were opened.
Apart from lower demand which can be attributed to the economic downturn, the division also found itself short of stock at times and somewhat dependent for maintaining and, when necessary, boosting stock levels on the supply lines of multinational suppliers, which are beyond its control.
The division’s mark-down levels have remained well controlled and at acceptable levels.
The 2010 FIFA World CupTM has created intense interest among football followers and this is reflected in the mix of goods passing through the division’s stores.
Emphasis continues to be placed on training programmes for staff members in order to ensure that customers entering the stores will receive technically competent and superior all-round service.
| Mark-down statistics | |||||
| 2006 | 2007 | 2008 | 2009 | 2010 | |
| Mark-down value (Rm) | 132,0 | 133,8 | 160,8 | 152,0 | 176,2 |
| % of sales | 12,8 | 11,1 | 12,3 | 10,3 | 10,3 |
The prevailing shortage of skills in South Africa and the intense competition which takes place to attract and retain talented employees, is an ongoing challenge. Details on the group’s human resource activities – including employment equity, skills development, and occupational health and safety – are provided in the Human Resources review.
Co-operation with suppliers of major ranges of products continues to be good and the division has again participated in launches of new products in a strategic process to attain first-to-market status and reputation.
Progress has again been made in the group’s supply chain initiative, with tangible benefits in terms of the time spent by merchandise in the division’s distribution centre and elsewhere in the supply chain. Further details on the nature of the group’s supply chain management and auditing activities are provided in the Supply Chain and Group Merchandise Procurement reviews. The aim of these activities is to ensure reliability, speed, quality, value and flexibility in the group’s supplier relationships, while also maintaining appropriate ethical, labour and environmental performance standards amongst suppliers.
During the year various measures were implemented to reduce the environmental footprint and increase the energy efficiency of our stores. Details on these initiatives are provided in the environmental performance review in the services section.
Totalsports
Totalsports achieved turnover growth of 20,2% for the year, with growth of 11,5% in comparable stores. The expansion policy continued with the opening of 14 new stores. No store refurbishments took place.
Football is the predominant sport followed by customers of the division, with exceptional interest being shown in the past year in the lead-up to 2010 FIFA World Cup™ competition. Sales volumes of Bafana Bafana shirts were far beyond expectations.
Rugby continues to gain momentum and fitness and running remain key sports in the strategy of this chain.
Streamlining was undertaken to remove overlapping and substitutable product lines and add others in order to remain relevant to key sports categories. The objective has been to supply customers with ranges of products clearly defined by sport and gender.
Another innovation was the broadening of the range of Fusion own-brand products by the introduction of new core products in apparel, accessories and equipment.
The Totalsports chain also increased its participation in co-operative events with manufacturers and distributors of internationally branded products in order to reinforce relationships both with these suppliers and with the public, and to raise awareness of the availability of these products in the stores. These relationships and the resulting consumer awareness have been important in the build-up to the 2010 FIFA World Cup™ and to the overall business climate that will confront Totalsports in the coming years.
Because of the growing public enthusiasm for football, the chain has maintained and extended its involvement in grassroots football events, interacting with more than 100 football clubs at various levels. These initiatives with the target market are supplemented by sports clinics for the staff of the chain, so building up the knowledge base and increasing commitment and energy at store level.
sportscene
Competition was again intense in South Africa in the past year particularly as a result of the entrenched position which international market participants have attained for themselves through strategies which include the opening of own-label stores and initiatives at various levels to attain dominance in segments of the retail industry.
The youth fashion market is recognised internationally as presenting opportunities for suppliers of major brands of sports products. This has led to the arrival of waves of new products and the heightened participation in the market by the major multinational players referred to above. In the jousting for retail presence which occurs, local retailers with limited competitive muscle can easily be displaced, but the division’s strength enables it to hold its own and to some extent to turn the international pressure to its own advantage.
The sportscene chain has again played a role in the participative activities of the big international players, including the launches of new products, so ensuring that it can be first-to-market and can gain publicity in its own right.
The relentless pace of change in the youth market requires ongoing review of the chain’s marketing strategy. This brings about continuing change in the “look and feel” of marketing communication in order to keep it in step with fashion and hence deal effectively with competition.
A more intensive focus on sneakers and other footwear, aimed at enhancing the division’s leading position in this product category, has paid dividends. The own-label brand of Redbat continues to expand. Cellphones and airtime have been added to the ranges of products on offer.
sportscene opened nine new stores during the year and no refurbishments took place.
In another year of volatile trading conditions the chain’s turnover grew by 8,8%, but turnover in comparable stores was marginally lower by 0,4%.
DueSouth
DueSouth is the newest of the division’s chains. Effort is still being expended on raising public awareness for it and strengthening its reputation in the outdoor lifestyle market. The chain has one exclusive international range, The North Face and this exclusivity has helped to enhance the chain’s market position.
The chain also provides products under the in-house DueSouth trademark which play an accessible alternative and complementary role.
The product range continues to evolve and in the past year additional well-recognised and internationally known ranges of apparel and footwear, both for women and men, were introduced, together with an enhanced range of accessories and equipment.
A visual merchandising process has been undertaken to demarcate clearly in the stores the lifestyle and performance areas and to identify the trail-running, mountain-biking, outdoor and exploration categories. It is clear that this process, which is continuing, has been welcomed by customers since it enhances the character and individuality of the DueSouth stores.
Four new DueSouth stores were opened in the past year.
Total turnover growth of the chain was 7,8%, while turnover in comparable stores was lower, by 2,9%. This result can be seen as a reflection both of the difficult economic climate and the teething stage of a young chain. Steps have been taken to widen the appeal of the product ranges and to secure more favourable sites for the chain in shopping centres.
STRATEGY
In the Totalsports chain there will be great emphasis in the coming year on maximising the public’s growing awareness and enthusiasm for the 2010 FIFA World CupTM and providing an optimal selection of products for players and supporters.
There will be continued interaction with the customer base through targeted local events, promotional initiatives around the introduction of new products and the division’s own national event sponsorships. These are all tools to gain awareness in the market-place.
In the sportscene chain, following the strategy review undertaken previously, there will be ongoing action to keep the chain aligned with its fast-moving target youth market. Emphasis will again be placed on building strength in the footwear category and in strengthening the chain’s position in popular internationally branded products. Revised store layouts are being introduced, with less emphasis than in the past on maintaining uniformity between stores. Non-uniformity saves costs and appears from market research to have no unfavourable effects on customer perceptions and spending patterns.
DueSouth will retain its existing objectives and its product ranges will be supplemented by new products and new categories of products. Sponsorship of the DueSouth Xterra Multisport event continues and includes a DueSouth television programme.
The division will again participate actively in the group’s supply chain initiative with the objective of bringing products into the stores even faster and thus improving efficiency and stock turn.
PROSPECTS
Trading conditions are expected to be difficult in the new financial year, particularly the first half, with an expectation of an upturn towards the end of the year. In spite of these conditions the division expects to produce acceptable growth, with the 2010 FIFA World CupTM providing a welcome stimulus.
Good expansion opportunities have been identified in several geographical regions and the division intends to open 31 new stores. Of these, 20 will be Totalsports stores, ten sportscene and one DueSouth stores. Opportunities for further space acquisitions in good locations are being pursued.
| Store statistics | |||||||
| Projection | |||||||
| 2006 | 2007 | 2008 | 2009 | 2010 | 2011 | 2012 | |
| Totalsports | 97 | 106 | 112 | 134 | 148 | 170 | 180 |
| sportscene | 79 | 86 | 90 | 105 | 114 | 124 | 130 |
| DueSouth | 14 | 16 | 19 | 25 | 29 | 30 | 34 |
| Total No. of stores | 190 | 208 | 221 | 264 | 291 | 324 | 344 |
| Franchise stores | 1 | 1 | 2 | 2 | –* | – | – |
| Closures | 2 | – | 3 | 2 | – | – | – |
| Floor area (m2) | 44 221 | 48 858 | 54 338 | 67 325 | 74 790 | 81 730 | 88 480 |
| * Now consolidated | |||||||
