Why are we celebrating 1% growth in the core channel when the broader economy has been on fire for years?

The short answer is because 2018 is the first year since 2014 that the ActionWatch panel sales went up.

Source: US ActionWatch Same Store Panels 2007 to YTD Feb 2019 All Categories

So why has it been so tough for this industry to grow while the broader economy has enjoyed one of the longest periods of economic growth ever?

Why has it been such a struggle?

There are likely several factors that have contributed to the decade-long challenges for the core channel, including the evolution of consumers shifting buying preferences toward on-line, the proliferation of manufacturer direct retail stores as well as declining core participation rates in surfing and skateboarding.

It also didn’t help that these trends coincided with strong interest by private equity firms like Kering and Oaktree Capital, who were lured in by the promise that this market is bigger than it actually is. Unrealistic growth aspirations coupled with the above mentioned evolving consumer preferences led many brands down a path of having to chase short term growth at the expense of authenticity, brand integrity, margins and staying close to their core retail partners.

Brands and specialty retailers that were slow to adapt to these changes suffered the most, resulting in mergers, acquisitions, bankruptcies and hundreds of closed doors.

However, some retailers and brands not only survived, but they even thrived. Those specialty retailers that were able to weather the storm are in better shape now than they were 10 years ago. For the first time since the existence of the ActionWatch panel the average $ sales per door topped the $1 million mark in 2018, perhaps an indication that the fittest have survived.

Why some retailers thrived

More than likely the core retailers that are doing well now not only benefited from favorable locations, but have also doubled and tripled down on their grass root efforts to engage with their core consumers to offer them a unique experience when they visit their store. Those retailers that have appealed to and resonated with the women have been rewarded as in many categories the sales growth of women’s and girls has been outpacing men’s and boys.

In addition, some core retailers have either established their own e-Commerce platform successfully navigated Amazon’s third-party marketplace. More recently quite a few retailers have adopted a new alternative – Exchange Collective – which enables an “endless aisle” concept by giving retailers the ability to sell products they don’t have in their inventory by working with brands so sales staff on the retail floor are able to search the desired brand’s inventory and fulfill orders they otherwise would have lost.

Collaborating for a better future

Going forward core retailers need to put aside some of their (understandable) negative sentiments, and be open to innovating with their brand partners. Brands can help soothe some of the wounds by using their powerful digital platforms to benefit their core retail partners by sharing on-line purchasing trends of consumers within the geographic reach of the specialty retailers, as well as driving customers to local retail partners through their digital marketing programs.

Core retailers, on the other hand, could contribute by sharing sales, inventory and turn information more frequently and consistently with their brand partners. This is common practice for big box retailers in many industries, including the sports industry, and means that brands can service their retail accounts much better, resulting in faster sales growth and better margins for the retailers. As specialty surf and skate retailers continue to adapt to the ever changing consumer landscape they would be wise to at least explore some of the methods that have been already been tried and proven in other industries.