The 3 Biggest Threats Facing Big-Box Retailers Right Now

Sports Authority Store
Inside a Sports Authority store.
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Months have passed since the demise of big-box sporting good retailer Sports Authority, but implications and questions still linger.

While company-specific challenges — namely the enormous amount of debt imposed on the chain by its owners — have since come to light, the case of Sports Authority is rife with lessons for other companies.

“There were just too many boxes and similar concepts in the sporting good space, and something had to give,” B. Riley LLC analyst Jeff Van Sinderen told Footwear News last month, speaking on recent sporting goods bankruptcies. “The strongest players have survived and are now vacuuming up market share, which is creating a healthier environment for that niche.”

The recent shaking out may have narrowed down intense competition in sporting goods, but the absence of opposition doesn’t necessarily yield success.

And what about other big box retailers that do not play in the sporting good space?

Certainly, there are lessons to be gleaned for them, too.

Here are the three biggest threats to big-box retailers right now.

Lack of Differentiation

A key criticism of Sports Authority and its bankrupt peers City Sports and Sport Chalet has been a lack of distinction in product as well as store layout/design.

Experts say many a consumer would be hard-pressed to relay the differences between garden-variety sporting goods stores and often hinged their decision to visit a particular retailer on variables such as proximity to their homes or jobs.

For big-box retailers finding and marketing a strong value proposition is crucial to survival. Customers should seek out a store for variety of carefully crafted attributes and a decision to visit should not be based on happenstance.

Price is often a key source of distinction for many big boxes, but competing to be the cheapest is a surefire route to killing margins.

The answer, experts say, comes from investing in customer experience — online and in brick-and-mortar stores — and tapping the right executives to curate unique compelling product offerings.

Too Many Stores

A big-box retailer’s golden ticket in the brick-and-mortar heyday was a steadily increasing store count. A large number of stores meant demand was high and revenues were even higher so a company could afford to expand its footprint.

Today, with ramped-up competition from e-commerce giants — namely Amazon — a big box’s survival is predicted on a lean and rational store fleet.

Not to mention, high real estate costs can pummel profit margins. Big boxes and their large-scale buildings of more than 50,000 square feet can run into significant SG&A hurdles when trying to secure competitive leases.

The Big Bad Internet

Online competition continues to take a toll on large brick-and-mortar businesses. Since big-box stores are defined by their practical and minimalist designs, many of them were never intended to offer an in-store experience — which is one way that stores effectively compete with e-commerce players.

The big-box proposition was based on simply offering useful product in a bare-bones layout. At the same time, a significant portion of the core big-box customer base never cared to visit a brick-and-mortar store to begin with — their primary goal has always been access to the product.

For this reason, many big boxes have an even tougher time competing for customers who simply want to get their hands on goods and could care less visiting a store — never mind an in-store experience. How does one get this type of shopper into a store when they now have the convenience of purchasing nearly everything online?

More and more, retailers are learning the hard way that they must strike the right omnichannel balance — i.e., they too must operate in the online realm but they must also find strategies to do so effectively. Creating a mobile app and offering buy-online, pick-up in store are two such tactics.