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Marketing Strategy of Dick's Sporting Goods, Inc.
Marketing Strategy of Dick's Sporting Goods, Inc. - December 17th, 2010
Dick's Sporting Goods, Inc. (NYSE: DKS) is a sporting goods retailer, headquartered on the grounds of Pittsburgh International Airport in Findlay Township near Pittsburgh, Pennsylvania, Dick's has 409 stores in 40 states as of August 1, 2009, primarily in the eastern half of the United States. The company also owns Golf Galaxy, Inc., a multi-channel golf specialty retailer, with 91 stores in 31 states.
Founded in 1948 by Richard "Dick" Stack at the age of 18, the chain has expanded enormously since the 1990s, in part through acquisitions, and is now one of the largest in the world.
Founded: 1948 as Dick's Clothing and Sporting Goods
Sales: $1.05 billion (2002)
Stock Exchanges: New York
Ticker Symbol: DKS
NAIC: 451110 Sporting Goods Stores
Mission: To be the #1 sports and fitness specialty retailer for all athletes and outdoor enthusiasts through the relentless improvement of everything we do.
1948: Dick Stack starts his own bait-and-tackle shop in Binghamton, New York.
1958: The small shop becomes a full-fledged sporting goods store, known as Dick's Clothing and Sporting Goods.
1984: After Dick Stack retires, his son Edward becomes CEO and president; plans expansion of sporting goods superstore concept.
1992: Dick's begins expansion outside Binghamton area.
1994: Dick's relocates to Pittsburgh; the company operates 22 stores in four states.
1996: Over 50 stores are in operation, generating an estimated $10 million in sales per store.
1999: Chain Store Age Executive names Edward Stack Retail Entrepreneur of the Year; company name is changed to Dick's Sporting Goods.
2001: Sales exceed $1 billion with more than 130 stores.
2002: Dick's Sporting Goods becomes a public company.
Dick's Sporting Goods, Inc. is a chain of sporting goods superstores offering equipment for every kind of individual and team sport, as well as such outdoor activities as hunting, fishing, and hiking. The company also sells fitness equipment, and sports apparel and footwear. Within the large superstore format, a wide variety and availability of merchandise is displayed in distinct, easy to locate specialty stores-within-stores. Dick's supplies name brand merchandise from Nike, Adidas, Columbia Sportswear, and Calloway, as well as its private label brands, including Ativa apparel for women and Walter Hagen apparel for men. Dick's Sporting Goods stores provide patrons an opportunity to test equipment onsite, offering golf driving ranges, running tracks, and cement inline skating areas, for example. Dick's operates more than 135 stores located in two dozen states in the Northeast, Mid-Atlantic, South, and Midwest.
Making a Father and Son's Dreams Real
Richard "Dick" Stack founded Dick's Clothing and Sporting Goods in 1948 at the age of 18. The idea for the store arose while Stack was employed at an Army and Navy supply store in Binghamton, New York. The storeowner asked Stack if he thought the store should offer fishing gear. Stack did, and formulated a comprehensive merchandising plan on his own time, losing sleep for several nights. He was stunned to hear the storeowner's brutal rejection that Stack "would never make a good merchant." Stack sought solace from his grandmother who, upon hearing the story, took $300 in cash from her cookie jar and gave it to him, encouraging the pursuit of his dream. An avid fisherman, Stack used the money to open a small bait-and-tackle shop. A decade later, at the encouragement of his loyal patrons, Stack began to sell a broad spectrum of sporting goods.
Dick Stack's son Edward worked at the store as a teenager, but did not join the business until 1977, when his father's emergency heart surgery required the younger Stack to become involved. A certified public accountant at the time, Edward Stack was interested in expanding the business. A second store opened in Binghamton by the time the elder Stack retired in 1984. Edward Stack became president and CEO; he intended to transform the business into a large chain of superstores. By 1986 Dick's Clothing and Sporting Goods offered a complete line of sporting goods, including athletic apparel, footwear, and sports equipment. Dick's developed several private label brands: Adirondack Trading Company for casual clothing, Northeast Outfitters for hunting and work apparel and boots, DSX and DSXT for cycling apparel, and Steve Hill and Stone Hill Clubhouse for golf apparel and shoes.
The Dick's Clothing and Sporting Goods concept involved a warehouse size store, 35,000 to 45,000 square feet, with not only a wide selection of goods, but deep offerings within each category. With high sales volume Dick's offered merchandise at lower prices than its competitors. The big box exterior of the store was countered by a warm interior, with soft lighting and wood accents. The store itself encompassed many smaller specialty shops, with each main category organized as its own business and each with a distinctive atmosphere and identity, including signage, graphics, and colors. For instance, the Pro Shop offered golf merchandise in a wood paneled background while the Sportsman's Lodge displayed hunting and fishing merchandise in an artificial log cabin. The Dick's Outlet store-within-a-store offered clearance and closeout merchandise on basic display racks. Dick's offered patrons the opportunity to test the merchandise, placing a real running track in the shoe department, a driving range at the Pro Shop, and an archery range at the Sportsman's Lodge.
The expansion of Dick's as a chain of sporting goods stores started with the opening of two stores each in Syracuse and Rochester, New York. The company opened the first Buffalo area store, in Cheektowaga, in March 1992. Two stores opened in the Hartford, Connecticut area, followed by another store in western Massachusetts, and a store in Erie, Pennsylvania. The company's focus of growth involved small and medium-size cities, such as those in upstate New York, where the company opened stores in Albany in both 1993 and 1994.
The company relocated its headquarters to Pittsburgh in July 1994, coinciding with the opening of four stores in the area ranging in size from 32,000 square feet to 70,000 square feet. Stack chose Pittsburgh because of its access to airports and its national sports teams and as an area of extensive growth for the company, with a local population of outdoor enthusiasts. At the end of 1994, Dick's counted 22 stores in its chain in 11 markets in Pennsylvania, Connecticut, New York, and Massachusetts.
Growth accelerated in 1995 as Dick's opened several stores in major markets nearly simultaneously. The plan allowed for effective use of advertising dollars. That year the company opened six stores in the Cleveland, Ohio area, including one 60,000-square-foot store. Other stores in Ohio opened in Cincinnati and Youngstown. Dick's planned to open a total of 14 stores in Ohio, taking advantage of the vacuum created by the dissolution of Herman's World of Sports stores. Dick's opened three stores in the Baltimore area in October, including the 60,000-square-foot Hunt Valley store which acted as anchor store for the shopping mall. Dick's preferred shopping mall locations with larger stores, at 60,000 to 70,000 square feet, acting as anchors. Two additional stores opened in the Buffalo area and another two opened in Pittsburgh in 1995. Dick's funded expansion with private investment from Carrefour, a French retailer, and Donaldson, Lufkin and Jenrette, a New York underwriter.
The rapid pace of growth continued in 1996. The company opened four stores in the Philadelphia area, including one 70,000-square-foot store. Four stores opened in the Detroit suburbs, with additional stores in the planning stages. Other new stores were located in existing markets. By January 1997, Dick's operated 51 stores; industry insiders estimated company sales at $10 million to $12 million per store, in contrast to The Sports Authority, with sales of $7.7 million per store.
Midwest Expansion, Northeast Reinforcement: Late 1990s
Expansion continued at a steady pace during the late 1990s, with Dick's opening ten stores in 1997, nine in 1998, and 13 in 1999, for a total of 83 stores in operation at the end of 1999. Dick's continued to open stores in Pennsylvania, New York, Ohio, Delaware, and other Northeast markets. New markets in the Midwest included Lexington and Louisville, Kentucky; Clarksville, Indiana, near Louisville; and Champaign, Illinois.
At a new store in Columbia, Maryland, Nike introduced its new Women's Concept Shop, making Dick's the first sporting goods store to test the idea. The shop addressed the perception that athletic stores catered to men, though women accounted for half of shoppers at sporting goods stores, purchasing goods for their families as well as themselves. The Nike Women's Concept Shop attempted to address the needs of female athletes by expanding the selection of merchandise available to women.
In January 1999 Dick's successfully launched its Internet site on Super Bowl Sunday. The site was modeled on actual stores with merchandise organized in specialty shops. Customers could search by sport, brand, and price and ship to multiple addresses in one shopping trip by designating address book entries for each item purchased. The site performed well technologically and received positive consumer response in terms of interest and revenues, obtaining orders from all 50 states. During the first six months Dick's expanded the online product list to 34,000 units and the number of specialty shops from eight to 27. The company re-launched the web site in November, having changed the name of the company to Dick's Sporting Goods, and added name brand merchandise from Nike, Titleist, Adidas, North Face, and Columbia Sportswear. A $15 million promotional campaign supported the relaunch, offering coupons and seeking a national customer base with advertising on ESPN, CNN, and The Learning Channel.
In December 1999 Chain Store Age Executive named Edward Stack Retail Entrepreneur of the Year. With 83 stores in 15 states in the Northeast, Mid-Atlantic, and Midwest, Dick's Sporting Goods experienced a higher rate of merchandise turnover than the industry norm. The company reported $728.3 million in revenues for 1999, garnering a net income of $11.2 million.
To accommodate continued growth of the chain and the addition of online sales, Dick's opened a new $20 million distribution center in Pittsburgh in February 2000. The 383,000-square-foot facility provided space for double the capacity required by its existing stores. With 34 shipping and receiving doors, Dick's contracted with a trucking company to service distribution with 100 new drivers. Dick's implemented a rapid computer sorting system and, in 2001, a group of integrated merchandise management applications for state-of-the-art analytic reporting, promotional price management, and advanced allocation and planning.
The initial success of the company's web site stalled in 2000. First Dick's needed to change the web site address to dickssportinggoods.com because family Internet filters prevented access to the site. While the earlier advertising campaign succeeded in increasing traffic to the site, the coupons offered cut too deeply into profits. By April 2001 the company decided to abandon active management of the web site because it had become unprofitable. The company then outsourced handling of the site to Global Sports Interactive (GSI), which specialized in online retailing of sporting goods. Through a ten-year agreement Dick's licensed the company name to GSI in return for royalty payments on goods sold online; Dick's opted to receive stock in lieu of cash.
Venture Capital and Public Stock Offering Funding Growth: Early 2000s
With investment from Vulcan Northwest Venture Capital, Dick's accelerated its pace of growth, opening a total of 22 stores in 2000 and 20 stores in 2001. In addition to expansion in existing markets, Dick's extended its reach farther west, to Iowa, Wisconsin, and Missouri, and south, to North and South Carolina, Alabama, and Georgia. The company tended to locate stores in smaller cities, rather than the more competitive major metropolitan markets. For instance, Dick's chose to open a store in Macon, Georgia, rather than in the Atlanta area. Dick's clustered stores to make effective use of advertising spending. Dick's entered the Kansas City market in the fall of 2000 with a spectacular grand opening of five stores simultaneously on one Sunday. New specialty shop features included the provision of hunting and fishing licenses at the Sportsman's Lodge and a swing speed analyzer to assist customers in selecting golf clubs at the Pro Shop.
Dick's initiated a number of marketing initiatives to attract and retain customers. The "Scorecard" gave rebates to loyal customers based on their record of purchases; by August 2002 the company counted over one million participants. A new call service provided in-store telephone call boxes to request sales assistance from the fitting rooms. Dick's sought to serve families better by adding more children's merchandise and expanding the women's department to nearly triple the amount of equipment, apparel, and footwear. The company introduced casual footwear from Eastland, Clark's, and Columbia Sportswear. Dick's launched two new private label brands of apparel, Ativa for women and Walter Hagen for men.
In February 2002 Dick's opened a new store in the Pittsburgh area that would serve as a prototype for future stores. The two-story, 80,000-square-foot store featured 60-foot-high ceilings and red brick walls to mimic the feel of a sports stadium. The store refined all of the features of existing stores, such as well-defined specialty stores with unique signage. Televisions displayed instructional videos and sporting events relevant to that area of the store. The store incorporated a new emphasis on families, with lifestyle photography that featured kids, such as members of a little league team sitting in a dugout, and everyday athletes--not just celebrities--participating in sports and exercise. Also, old photographs of Dick Stack at the original Binghamton store were enlarged and displayed in the store.
Other new store openings in 2002 included the company's first Nebraska store, which opened in Omaha in May. A total of 15 new stores planned for 2002 included units in Wichita, Kansas; Lansing, Michigan; Worcester, Massachusetts; Normal, Illinois; and Evansville, Indiana. By the time of the company's initial offering of stock in October 2002, Dick's operated 134 stores in 24 states, including 20 each in New York and Ohio, 22 in Pennsylvania, six each in Maryland and New Jersey, seven in Michigan, and 13 in North Carolina. Additional stores were located in Tennessee, Vermont, West Virginia, and Virginia.
In October 2002 Dick's went public, offering 7.3 million shares of stock at $12.25 per share. Dick's attracted investors in a difficult market based on reported sales of $1.1 billion and net income of $23.5 million in the fiscal year ended February 2, 2002. In the prospectus Dick's presented the company as "the most profitable full-line sporting goods retailer as compared to the six largest full-line sporting goods retailers in the United States which are publicly traded. ..." Shares offered directly by the company raised $27.9 million for debt repayment, new store openings, and working capital. Shortly after the initial public offering, Dick's opened stores in Barboursville, West Virginia, and Fredericksburg, Virginia. New stores were also under construction in Omaha and Wichita, with future plans involving expansion into Texas and Oklahoma markets.
Principal Competitors: Foot Locker, Inc.; Gart Sports Company; Galyan's Trading Company; Hibbett Sporting Goods, Inc.; The Sports Authority, Inc.; Wal-Mart Stores, Inc.
Re: Marketing Strategy of Dick's Sporting Goods, Inc.
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