In 2011, Super Retail Group (SRG) bought out sporting good retail chain Rebel Group for $610 million.
Since then, the group's sporting division, which includes the Rebel and Amart brands, has grown steadily year-on-year with sales reaching $869 million in FY16 and expected to hit $920 million in FY17 (subject to final review).
SRG CEO Peter Birtles says the company's market share, while difficult to narrow down, takes up almost a quarter of the Australian sportswear market.
“It is something we sort of piece together from a variety of sources of information, there is no one complete source that looks at the whole sports market. You need to piece together sporting goods, apparel, footwear and so on. But the best information we have suggests we are around a 25% market share.”
As a league of international activewear entrants zone in, including Decathlon and JD Sports, Birtles admits standing still is no longer an option.
“The retail market is changing and evolving as we all know and we call out two particular changes that we see and these are things that Super Retail Group have been contemplating for some time. The first of these is that our customer's expectations are changing. Customers are increasingly knowledgeable about the products that they are looking to buy.
“We need to think about how do we continue to connect and change or respond to the change in that customer behaviour. At the same time, we're seeing a change in the competitive environment with global competitors coming into the Australia retail environment.
"Both in the physical world with the advent of Decathlon and JD Sports opening stores but also in the online world with Amazon about to come into the market next year.”
These changes have led SRG to abandon its once two tier sporting division, with the group announcing in July that it will cease to operate the Amart brand.
All remaining Amart branded stores will instead be converted into Rebel stores by October 31, a move Birtles believes will drive the growth of the soon-to-be singular brand.
“Following this change, we will have around 160 stores under the new Rebel brand name and our plan is to grow that to around 200 stores over the next five years and to sustain our position as the market leader in sports across Australia.”
As the Australian sportswear market continues to grow at a like-for-like rate of between 3-4%, Birtles points out that the Rebel and Amart brands perform at a slightly higher rate, giving way for greater expansion opportunity, even in the face of current market challenges.
“Our like-for-like growth has been at around 4.5% in our sports businesses and both of the brands have been around that type of level. When you look at the market, the market has been growing somewhere between 3-4% so we do feel that we have been growing ahead of the market in both brands.
“We are very pleased with the performances of both businesses but it is the time to really reflect and set ourselves up for the future.”
Birtles believes the market share held by SRG will be enough to remain profitable in the sportswear space, despite the growing amount of international sports retail entrants making a play for the lucrative Australian market.
The decision by the group to have a singular sports brand is already forecast to generate an annualised gross margin uplift amount of circa $15 million after two years.
“If we look at the shape of the marketplace today, it is quite fragmented as we go outside of Rebel and Amart. What we've seen in international markets where Amazon and other like Decathlon have operated, [is] that the market leaders have generally been able to grow their market share. And that is our intent.
“When we look at our plans going forward, we have a view that we will see an increase in our market share. We do believe there will be some changes in participants and we will see that some players will see it tougher to operate going forward but we won't be one of those because of what we are doing.”
Euromonitor International senior research analyst Bettina Kurnik thinks differently. She believes it would be hard not to see these international players as a threat, even if they operate in different areas of the sportswear market.
“It will be interesting to see how the battle for market share plays out in the sports goods stores category in Australia, as JD Sports looks to roll out a local store network and Decathlon launches its bricks-and-mortar presence from October 2017, because the two international brands have such different positioning.
“JD Sports, the 'undisputed king of trainers', has a strong brand offering across performance, outdoor and sports-inspired footwear and clothing. Decathlon, on the other hand, is best known as a private label sporting goods retailer.
“JD Sports taps into the athleisure trend well and is likely to offer an appealing range of fashion-conscious activewear. The concept of Decathlon is highly likely to take off in Australia – but more due to its combination of design, quality and low price for a range of sporting equipment and apparel, rather than the desirability of any given brand.”
Decathlon Australia CEO Olivier Robinet believes his brand won't impact Rebel's market share. In fact, he argues it could boost its profitability.
“These brands are not our competition, we don't see it like this. We just want to give a new response to sporty Australians. This will change nothing for them because we don’t sell the same product or have the same business concept.
“I think we are just about creating a new offer. This could even help Rebel, it can make the market more dynamic but it is not direct competition and we will not look to take that market share.”
Kurnik is unconvinced.
“Like JD Sports, Rebel Sport is primarily associated with its brand offering, but its all-codes, all-seasons, one-stop sports solution positioning may lack a degree of lustre for a fashion-forward athleisure shopper.”
The announcement that all Amart stores will be converted to Rebel Sport is a timely move from Super Retail Group, as the company faces the arrival of French sports retailer Decathlon in October 2017.
“The news that Super Retail Group will scrap the Amart Sports brand to concentrate on the more upmarket Rebel brand indicates that the company is more likely to compete on brand offering, rather than trying to beat Decathlon at its own economy-tier game,” Kurnik says.
Even though Robinet acknowledges that Decathlon can sometimes be seen as a disrupter within a market due to its low price point products, he believes Australian sportswear retailers cannot afford to be distracted.
There is one player that has proven on numerous occasions it can dominate a retail category.
“I think with Amazon coming they will disrupt the global market for sports because they are very active in sports, especially now with their recent contract with Nike,” Robinet says.
“What's going to happen in the next 10 years? I'm not sure, but I think the share of online sales will grow in Australia and Amazon will disrupt this more so than Decathlon because where [Amazon] go they change the share of online sales.”