Paisa vasool!
It’s a cry of triumph we hear in street markets and, believe it or not, in high-end boutiques, especially when the buyer has managed to wrest an elaborate customisation. Value buy is irresistible to us Indians. We aren’t looking to buy anything cheap, really, but are just trying to get our money’s worth, and are willing to go long, long distances for that.
Decathlon’s success is proof. The sports goods brand has had people go to dead malls in the outskirts just to try out running shoes, and gawp at rock climbers’ ice axe and karabiners. Industry watchers say we aren’t even a sporting country!
In 2009, when the company launched its first store in the country, it was viewed as yet another expensive, international name. Almost a decade later, it has cemented its place as one of the leaders in sports goods retail followed by international brands like Adidas and Puma. The French brand has created a retail category of all-things-sports under one roof in India. In FY20, Decathlon India reported a total income of Rs. 22.31 billion, an increase of 75% from Rs. 12.78 billion in FY18.
So, how did the French company do this? Cracking the value buy formula isn’t easy, and it did more than pricing its products right.
Breaking trail
While Decathlon had been manufacturing in India since the ‘90s, it began its retail journey in the country only in 2009 with its first cash-and-carry store in Sarjapur, Bengaluru. In 2013, it opened its store to all its customers after becoming one of the first sports retail companies to win government approval for 100% foreign direct investment (FDI) in single-brand retail.
India is a tough market. Despite the country’s obsession with cricket, the sports retail segment is rather small and fragmented. “More than 70% of the market is unorganised,” explains Rachit Mathur, partner and India Head – Consumer & Retail Practice at Boston Consulting Group.
Technopak’s senior vice-president for retail and consumer products Ankur Bisen adds, “Sports retail segment is a nebulous concept.” It could include shoe companies selling sporty shoes, garment brands selling track pants and athleisure-focused brands such as Nike, Puma and Decathlon, and he estimates that the market in which all of these operate adds up to $15 billion annually.
The sports goods retail market, according to Mathur, has been growing on a small base at 7-10% over the last decade. However, it is expected to grow faster over the next decade.
Decathlon and some other international names such as Adidas and Puma are the only significant players in this market. Select forays made by Indian companies haven’t really been successful. Future Retail’s Planet Sports, for instance, shut down after posting losses.
Decathlon’s India spokesperson says that their strategy from day one has been focused on accessibility. That is, bring all the products under one roof, provide experience zones and playgrounds, and adapt products to the Indian user’s needs. It is a strategy that has worked in all the markets they are present in. Started in 1976 in Lille, France as a local sports equipment retailer, they have now grown into a global brand with 1,647 stores in 1,000 cities in over 57 countries.
Decathlon has over 40 brands dedicated to one sport or another, and they aim to offer more than 100 sports to its customers by the mid-2020s. “End goal of Decathlon is to become Ikea for sports goods — sports goods for everyone,” says Agilio Labs’ Sanjay Tripathy. The company is looking not just to cover as many product categories as possible, but also to grow deep roots in each one of them. Each of them has its own identity in the market and has its separate R&D unit, supply chain, and sales channel. This also helps the company bypass middlemen and it has never believed in increasing its marketing spends and pouring money into sponsorships. This, along with locating their stores in the outskirts where real estate prices are low, helps them keep their products in a price range right for the mass market which is 30-40% lower than that of its competitors.
“Their main target group is the beginners… the ones that can be converted into lifetime customers,” adds Tripathy.
BCG’s Mathur says that pricing has been the single most important reason for the low penetration of other global brands. “The balance of maintaining the aspiration value of these brands while driving volume sales in a low per capita income country has been hard to do,” he says. On the other hand, pricing that compromises on good quality has been a concern with the Indian brands. The local players, Mathur says, have created products to match some lower price points – but the product design, functionalities and distribution have been under-invested.
Bisen says that low-priced is not an accurate description of the brand and a more accurate term would be ‘value fashion’. “The price is an outcome of their efforts to keep their retail spaces simple, and rental and marketing expenses low, and so on. It is not a discounted model like the other brands that price it high because of the costs involved and then offer discounts. Decathlon works with vendors and is involved in the manufacturing and such, which helps decide the pricing,” he says.
While the brand still depends on imports, the company says that they are committed to moving a large percentage of their production to India. The spokesperson says that 54% of the products they sell in India are manufactured here and they plan to take that up to 75% in the next two years.
Selling experience
It is not unusual for families to take a weekend trip to Decathlon’s large, warehouse-like stores outside the city limits. “Larger stores help the company in building an active sports community,” says Tripathy. The brand has other community-building initiatives such as an ‘All for Sport’ blog that also hosts live events led by certified trainers. Inside their shops, you can find children playing table tennis or adults taking a cycle for a short spin, or friends trying their hand at a game of darts. “It is a total experience that results in visitors buying something even though there is no plan to purchase. Better customer experience drives repeats,” adds Tripathy.
According to the company spokesperson, the design of the stores was meant to make them comfortable for anyone to walk into and discover products related to over 50 sports. “Our people and playgrounds made the difference; they act as living billboards to share what sport has to offer,” the spokesperson adds. Their people, or their employees, are carefully chosen for their expertise in a sport which adds to the shopping experience.
“As a customer, you love to chat with an expert or someone who knows about the sport before buying any item of sports and fitness. Decathlon got it spot on,” says Tripathy, “You will find the staff fit, knowledgeable, with a good understanding of the sport and, most often, can suggest the right product based on your level — beginner/intermediate/advanced — irrespective of the price point. It builds a great relationship and helps in repeat buys.”
With the brand and its experience firmly established, the company is now opening convenience stores across the country, too. These, found in city centres or malls or tech parks, are for those who know what they exactly want to buy. The spokesperson says that even in these smaller-format stores, they stay committed to 50 sports under one roof.
COVID-19 gale
The company has created a category with its business model and is well-placed to make the best of India’s changing attitude towards sports. According to Tripathy, India’s recent sporting successes outside of cricket have resulted in huge interest in sports such as athletics and badminton, which has helped sporting retail brands.
“Sports, as a business, is going through a massive cycle of change, which is headed towards a year-on-year upward trend,” he says, adding that the COVID-19 pandemic has been a speed bump with most companies posting weaker sales numbers.
But, Mathur adds, despite the pressure in discretionary retail during COVID-19, sports and fitness-led categories have been less hit as compared to the other segments. Between October 2020 and March 2021, while the overall fashion and apparel segment gained back 70-80% of the pre-pandemic sales levels, the leading sporting brands reached almost pre-COVID-19 levels of sales, showing a better business regain trajectory.
While store sales have been lower, e-commerce sales have gone up. Leading sports and footwear brands in India make over 40% of their sales through e-commerce (a combination of marketplaces and D2C hyperlocal models). That is a 10-15% salience gain over the last 12-15 months. “Some categories such as home fitness equipment, running shoes and ‘in-home’ gameware have shown stronger than normal growth rates. Consumers, post COVID-19, will be more inclined towards health and fitness activities,” adds Mathur.
Of course, Decathlon has not been immune to the challenges that have impacted the larger market. In January 2021, it was reported that they had closed down their Ahmedabad store, which was said to be one of the largest sports stores in India. While the company did not release an official statement, media reports pointed towards a reduction in footfall as the reason.
The company does agree that there have been challenges and that now, customers want different things. More of their customers are opting for home workout equipment, safe means of commuting such as cycles and also indoor games such as carrom. Since they retail in everything related to sports, this is an easier transition for them to make as compared to the other brands.
In their physical stores, they have worked on zero-touch shopping which includes scan-and-pay booths or allowing customers to reserve a product online and dropping in at the store to pick it up.
New paradigm needed
Tripathy says that the pandemic has given rise to behaviours such as higher interest in athleisure fashion, sustainable products and exercise communities, and these trends will dominate in 2021 and 2022. According to him, sports brands need to ride on these trends to get ahead.
“To attract consumers back to the stores, retail needs to find a new purpose, new experiences, and new levels of convenience that cannot be offered digitally. We will see shorter demand cycles, e-commerce and closer direct-to-consumer relationships. Any brand doing it well will significantly gain market share,” he says.
He also believes that brands should increase their marketing effort through word-of-mouth and digital platforms, and shift from TV and print.
The virus and its waves have upset the old ways of doing business.
When they die down, sports brands will need to find new ways to connect with their audience and convince them that being outdoors and socialising is safe once more. Who better to welcome them back into a sporting life than a store with lots of space and many toys?
Decathlon wanted to make sports integral to people’s lifestyle and has succeeded by bringing its experiential stores to India. Their massive stores and the unique layout ensure you discover more items or new sports before you reach the aisle where your sports goods are stacked. Also, once inside the store, you can play with hula hoops, dart boards, basketball hoops, TT boards and mini football goals and enjoy an immersive experience. It has started a family buying trend and many families tried out new things / new sports together which helped in a lot of first time buying leading to a bigger sales funnel. With their offerings and price points it has made itself relevant to beginners and intermediate-level sports lovers.
