Many department store retailers have initiated and maintained off-price operations, from Nordstrom to Macy’s to Kohl’s. Their popularity may have been the spark for Dick’s Sporting Goods to give this business model a chance in its specialty retail sector. But why is the company opening not just one, but rather two, options for off-price shoppers?
In particular, Dick’s Overtime chain will follow a widely used business model for off-price retailing, planning about a dozen stores in various states. These ongoing locations will offer good discounts on the items that its regular stores stock too. But Dick’s also announced a limited time version, called the Warehouse, that it plans to maintain for only about six months. The Warehouse will offer even deeper discounts, in five select pop-up locations.
The combination likely reflects several macroeconomic influences. Obviously, the coronavirus pandemic hit many retailers hard, and Dick’s was no exception. Consumers shopped and bought less, leaving the chain with an oversupply of inventory; they also stopped attending team sports, cutting into its market for equipment like hockey or baseball gear.
But the macroenvironment features other effects too. For example, the exit of Sports Authority from the sporting goods sector several years ago already had created excess in sporting goods supply chains. As a result of its proactive efforts to deal with and eliminate these excessive inventory concerns, Dick’s even noted recently that it was seeking new product supply—hoping to be ready for the moment that shoppers return, ready to refresh their exercise gear.
Discussion Question:
- Are two distinct off-price models appropriate or just inefficient? How can Dick’s Sporting Goods ensure their differentiation?
- What other options do specialty retailers have for dealing with excess inventory, resulting from factors outside their direct control?
Source: Tom Ryan, “Dick’s Goes Off-Price with Two New Clearance Concepts,” Retail Wire, June 23, 2020; “Dick’s Sporting Goods Announces the Grand Opening of Two New Concept Stores,” PR Newswire, June 16, 2020