Sports Direct – A Brief Corporate Insight
Sports Direct International Plc (Sports Direct) is a chain of a retail store that was established in 1982. The entity was formed by Michael James Wallace Ashley, prominently known as Mike Ashley, who is also the owner of a football club, Newcastle United. Sports Direct is an origination of the United Kingdom (UK) and has more than 670 retail stores globally (Sports Direct, 2016).
The corporate operations are segmented into two divisions namely Sports and Leisure, and Fashion and Lifestyle (Sports Direct, 2016). The Sports and Leisure division offers multiple and popular brands to target audience such as Nike, Addidas, Puma, Dunlop, Slazenger, Everlast, No Fear, Los Angeles (LA) Gear, Carlton, etc (Sports Direct, 2016). Brands that operate under Fashion and Lifestyle are Fabric, Firetrap, Crafted, Soviet, Voodoo Dolls, Rock & Rags, etc (Sports Direct, 2016). Reportedly, in 2014, the founder and executive chairperson of the board, Mike Ashley has sold £200 million shares of Sports Direct after the proposed bonus agenda was turned down by other shareholders. Mr. Goldman Sachs purchased the share from Mike Ashley, which reduced his stake in the company to 57.5%. It was claimed that acceptance of bonus scheme would increase the net worth of Mike Ashley by £72 million, which is equivalent to eight million shares of Sports Direct (Robehmed, 2014).
According to the company, Sports Direct is a leading retailer in terms of revenue and profit throughout the UK. The Financial Year (FY) 2015 of the company recorded £2.8 billion as total sales. In the FY 2016 (H1), the company has reported generating £1.4 billion revenue, which is still counting (Sports Direct, 2016). The company has major numbers of retail stores situated in the UK, which are approximately 440 in total. The second region with majority stores is Republic of Ireland and Northern Ireland having 27 stores and 15 stores respectively. The remaining number of stores is situated throughout Europe and has prominent market positioning (Sports Direct, 2016).
The corporate strategy of Sports Direct depends on four basic principles namely Identity, Invest, Develop, and Promote. The Identity of the company is developed through in-store enhancements and acquisitions. The in-store enhancements are done through investments in specialized products, which is sports merchandizing. The retail stores have visual merchandizing to improve the shopping experience of customers. On the contrary, the company tends to acquire other entities in sports and fitness industry. According to the company, 25 acquisitions were done until 2016 of LA Fitness gyms throughout the UK region. For Sports Direct, acquisition is a priority conduct to attain significant market leadership (Sports Direct, 2016).
The principle of Invest focuses on expanding store portfolio and skill portfolio of people. Until 2016, 39 stores were inaugurated in the UK and 16 retail stores in other European regions. Regarding people, the company tends to acknowledge inputs and productivity of staff in order to sustain the tendency of dedication. Since 2011, the company offers motivation and staff retention through “2011 Share Scheme” (Sports Direct, 2016).
The principles of Develop and Promote focus on corporate website and brands respectively. Besides in-store experience, the company tends to engage customers through e-commerce utilities, which recorded 20% share in generated revenue of FY 2015. In compliance with ethical practices, the company offers legal licensing for wholesaling for improving product distribution of collaborates. More than 40% of total revenue is engendered through wholesaling activities, for the company and collaborated brands (Sports Direct, 2016).
Consumer Decision Journey
Court et al., (2009) studied the initial stage of consumer decision journey that leads to store visit, physically and digitally. According to the authors, the marketing activities of companies tend to influence consumers for visiting stores by targeting various touch points through different mediums. Among those mediums, an electronic promotional technique such as television is the most effective and productive. Audiences tend to accept promotional appeals and remember a specific brand and/or entity among millions of alternatives. As evidence, the authors conducted a longitudinal research that involved observation of more 20,000 retail consumers of five distinct industries throughout three continents. The results suggested that promoting brands through attractive mechanisms initiates the consumer decision journey, which is carried forward in four pivotal and systematic phases; initial consideration, the process of investigating available alternatives, closure, and post-purchase experience.
The initial phase of decision-making process engages consumers to line up different brands that are present in a retail store such as Sports Direct. Considered brands among minds of consumers strictly based on perceptions, preferences, and influence of social circle. Subsequently, consumers tend to perform market research in order to shortlist various brands in relation to current needs and utilities. Further, the consumer tends to select a specific brand after visiting retail store (Court et al., 2009). It must be notified that the concept of servicescape is instituted in the third phase, which also influences the final phase of decision journey. Lastly, the consumer develops an expectation after the introduction of servicescape while calling the next journey of purchase (Court et al., 2009).
The Concept of Servicescape – Binter’s Servicescape Model
The servicescape is a phenomenon that focuses on the physical environment of the company, which is determined by services offered to the customers. The servicescape distinct the customer experience when visiting different stores offering products of similar nature and quality. For instance, a customer exhibits the preference of visiting a specific mall for the similar scale of shopping due to the ambience and environmental feasibility. However, other malls in the radar offer similar stores and brands but the preference is higher for specific mall due to physical appearance (Chuah, 2003).
The servicescape comprises of an exterior of the facility such as signature appearance, adequacy in parking space, outside utilities, and store reach. Moreover, the concept focuses on interior elements such as décor, product placement, store crowd, temperature, ambiance, and appeal in interior designing. The concept of servicescape defines the period when customers experience the offered services while interacting with decorated physical environment of a store (Chuah, 2003).
Originally, the servicescape model was proposed by Booms and Bitner in order to study the influence of physical environment on shopping experience of a customer, purchasing decision towards products, and a probability of revisiting the store. According to the developers of the model, servicescape is an environment that aligns various services while the sellers and customers are interacting. Moreover, the environment comprises with tangible goods, which conveys the performance of the facility and offered services simultaneously (Chuah, 2003).
Figure 1: Bitner's Servicescape Model
Source: (Carly, 2014)
In context to Sports Direct, the company is constantly engaged in renovating, upgrading, and maintaining expanded retail stores and websites in order to provide a feasible and convenient shopping experience to customers. The core focus of the company is on the specialist segments, which is sports, fitness, and robustness products as a third party. The company aims to provide sports products of leading brands to diversified and loyal customers under single roof.
Physical Environmental Dimensions
Ambient Conditions
Ambient conditions play a pivotal role in attracting and keeping customers towards and inside a store respectively. According to Rashid et.al, (2015), ambient conditions communicate intangible features of the environment that stimulate universal sensations of humans (the five basic senses) in order to develop perceptions, interests, and responses. The perceptions, interests, and responses are created when shoppers interact with visual aesthetics such as lighting, colors, comfortable temperatures, ideal audibility, and a warm welcome inside the store. The authors claimed that cozy environment of stores would create mood and behaviors for making purchase decision unintentionally. Ideal ambient conditions would assist in triggering emotions that allow store visitors to spend maximum time within servicescape. Moreover, the approach made by staff would help in sustaining the emotions and increase the probability of revisiting the facility.
Based on personal observation, Sports Direct has varied ambient conditions that could not be specified accurately. Their stores have an ideal temperature, lighting, and audibility that have the potential to keep the customer engaged with servicescape. However, the motivation of attending customers varies among employees of each store and does not have a standard. In some stores, employees are highly active in attending walk-in customers and lead them to purchase decision. However, few stores have a deficiency of approaching customers, which results in store isolation and least purchase interest.
Space & Equipment Functioning
Spatial arrangements signify efficient placement of products that have the potential to institute feasibility among new visitors and develop a relationship with frequent visitors of stores. Special arrangements have a significant role for entities such as Sports Direct since such companies offer multiple products to customers simultaneously.
An adequacy in spatial features such as upgraded equipment, precise placement of furnishers, and arranged number of racks influences both customers and employees. Customers find easiness in moving and roaming around the store while observing products in surroundings. With the accurate placement of furnishings and racks allow them to access products and spend maximum time with the environment. On the contrary, employees utilize the equipment, furnishings, and product racks to deal with the customer queries promptly. Similar to customers, the employees also develop a strong relationship with the environment and remember product placement, which results in quick service delivery (Kearney, Coughlan and Kennedy, 2013).
The spatial features of retail stores that are owned and regulated by Sports Direct are highly effective. The store on Oxford Street has the capacity of 50,000 square feet (sq. ft.), which is adequate for both employees and customers (Sports Direct, 2016). Space is divided appropriately based on different brands offered by the company. Regardless the portfolio of brands offered by the entity, the customers and employees have zero complications in detecting the desired brand, which influences the purchase decision positively.
Signs, Symbols and Artifacts
Signs, symbols, and artifacts are considered as service script for consumers. Signs and symbols in stores must communicate a clear message to customers in order to avoid environmental vagueness and confusions. The signs and signatures should be unique and appealing to customers in order to create a benchmark in servicescape. Particularly for retail stores, that usually comprise with a range of products to offer to customers. The ranges are enough source of creating panic and anxiety among store visitors, which are not favorable elements in context to consumer decision journey. Signs and artifacts inside a store should provide the rational meaning of services that visitors might expect throughout the span. It communicates store image and assists customers in evaluating alternatives prior to a purchase decision.
Based on personal experience, the Sports Direct is extremely responsible and effective in placing signs. These signs help customers in self-guiding throughout the floor, which helps in engaging and retaining customers while avoidance. In the case of approach, the employees and floor staff of the company provides accurate guidance to customers. The accurate guidance helps in increasing trust levels and probabilities of revisiting the store subsequently.
Internal Responses
Cognitive Responses
The cognitive response of the retail stores regulated by Sports Direct has a direct relationship between employees and customers. Since the process of cognition is nonverbal communication between the two figures and direct stakeholders of the company, a strong relationship was observed based on dimensions of perceived servicescape. It was observed that visitors tend to believe Sports Direct as a successful entity due to ambient conditions and effective in-house management. This response has a subsequent impact on employees since they perceive each customer as a potential buyer. The employees tend to attend these customers rather leaving them isolated in the store environment.
Emotional Responses
The emotional response of employees and visitors has another systematic connection, which is highly influenced by ambient conditions. As detected during shopper observation, the music, lighting, colors, product placements, signs, and special adequacy had a synergy impact in generating influential response towards store environment. Sports Direct had integrated an environment that extracts positive moods among customers, which is essential for servicescape interaction. Further, the employees tend to remain motivated and hyperactive in conducting their roles while attending customers. In personal opinion, Sports Direct should acquire or license more brands in order to generate maximum revenue due to emotional loyalty among customers.
Physiological Responses
The size of a retail store offered by Sports Direct is an evidence of healthy environmental physiology, for both employees and customers. The 50,000 sq. ft. store on Oxford Street has large-scale in-store visitors with least possible noise. The characteristic allows the customers to feel and enjoy the environment without potential disturbance. Further, the maintained and controlled temperature of store provides another soothing experience to customers throughout their span inside the store. Regardless the number of people present inside the store in a specific period, the customers shed the feel of discomfort in breathing, mobilizing, and visualizing. They stay for longer periods and enjoy the servicescape offers to a maximum.
On the contrary, employees also have similar physiological experience at Sports Direct, which allows them to respond actively and indulges in playing in store roles. Due to the comfortable store environment and adequate space of mobilization, employees offer excellent attention and service assistance to customers. The level of engagement because of environmental comfort leads customers towards feeling of personalization, which is essential for the healthy interaction between the two significant influencers of the company. Supporting the personal observation during in-store investigation, Butler (2013) stated that Adidas is willing to invest and sell their premium products through retail stores of Sports Direct due to an in-store environment and strong customer service. Adidas claims that Sports Direct is a fundamental retailer for the company that assists in selling premium products to target audience on massive scale.
Variations in Internal Responses
Until now, it is clear that internal responses extract in three ways; cognitive, emotional, and physiological. These elements influence the behavior of people and vary from one store to another. However, it must be notified that internal responses of individuals, considering both customers and employees, are distinct completely. The distinctions are a result of cultural and personality variation, tentative situations during store span, the purpose of visiting stores (in the case of customers) and attending people (in the case of employees), and quality of servicescape.
During the shopper observation, these variations were common to detect among people. Detection and identification do not demand an extraordinary observatory skill since people demonstrate their interests through actions. For instance, cultural differences were demonstrated through the selection of colors while evaluating products. The Chinese people preferred red color in sneakers, joggers, and sports apparels while British people tend to opt for white and royal blue. Further, the variations of responses were also subject to age and lifestyle. It was observed that soccer kits and team jerseys were preferred by high school and college students. On the contrary, adults mostly shop for fitness apparels, equipment, and machinery rather flagship clothing of football clubs. The final observation was response towards servicescape, particularly during hyper-activation of floor employees. It was observed that Americans enjoyed spending their in-store time without assistance and disturbance. However, the environmental response differs from the Asian customers since they desire to receive quality protocol and assistance from floor employees throughout their visit.
Behaviors
The behavior is a subsequent effect of responses that were exhibited individually by employees and customers. It was studied during shopper observation that behaviors were two-dimensional: employee-customer and customer-employee.
Employees-Customers
During the observation, it was studied that employees tend to offer services to customers through assisting and attending during shopping journey. However, floor employees of Sports Direct failed to understand cultural and personality differences significantly. The verbal responses between employees and customers carry forward the effect constantly. While attending customers that enter the store with calm temper, the employees entertain them with utmost dedication. Customers with opposite mood would not accept the similar treatment, as they prefer of roaming around the store in isolation. Such treatment of employees is disregarded by customers, which influences the customer decision journey adversely. Employees at Sports Direct fail to understand the distinctions among personalities and cultures.
Customers-Employees
Based on a personal observatory, behavioral outcomes of customers is dependent on backgrounds, cultures, and appeal towards the store environment. The target audience of Sports Direct was least founded to value servicescape in relation to employees’ activation. Their value of servicescape was based on environmental feasibility within store and purpose of visit. Most visitors belonged to the American background that leads them to shop in isolation. The Asian visitors display positive behavior towards purchase decision when entertain by employees of similar genders. However, the behavior of European customers towards servicescape was not influenced by moods and personalities majorly. The social interaction between customers and employees is difficult to specify throughout the process.
Strategic Recommendations
Throughout the shopper observation at Sports Direct retail stores, it was found that employees were not trained for cross-cultural management. Cross-cultural management is an important discipline to study, particularly for multinational retail stores such as Sports Direct. The target audience visiting the stores belongs to different cultural backgrounds, racial backgrounds, and ethnicity. Store employees cannot serve every customer with a similar attitude, indulgence, activation, and approach. It may prove complicated but customers need individual treatment from employees in order to attain effective shopping experience and positive decision-making process. In personal opinion, Sports Direct should equip their floor employees with cultural management education so customers should receive precise and adequate servicescape treatment during each visit. Furthermore, employees at Sports Direct should respond to queries and concerns of each customer promptly. The preciseness and promptness in servicescape of Sports Direct are essential for gaining the sustainable and hardcore loyalty of target audience. Since the company claims the acquisition as one the unique selling points (USPs) and industrial competitive advantage. It is strongly recommended that Sports Direct should initiate acquisition of customer loyalty through effective servicescape, which is possible after the institution of cross-cultural management.
Besides cross-cultural management, Sports Direct needs to enhance few elements of physical environmental dimensions. For instance, the 50,000 sq. ft. retail store may result in exertion and tiredness among customers. Offering them hoverboards on each floor would increase the probability of revisiting the store on a frequent basis. Moreover, hover boards would increase the effectiveness of servicescape because customers would value the in-store utilities and convenience on each visit.
Furthermore, the stores should have more Liquid Crystal Display (LCD) screens on each floor that display attractive promotions and commercials of brands under the portfolio of Sports Direct. This approach would improve signs and symbol appeal among customers and persuade them to make purchase decision subliminally. Moreover, the company can charge these brands for running their commercials in order to generate financial resources, which Sports Direct can allocate to manage routine petty issues of stores.
Lastly, the company should introduce gaming and interacting activities in order to provide a charismatic and enthusiastic in-store environment to customers. Providing discounts and related promotional schemes are effective but old school approaches. The society is transforming due to exposure of media and technology, which encourages customers to indulge and espouse contemporary activities. The interactive and gaming sessions within retail stores would allow customers to develop a relationship with brand and stores. The development of a relationship is significant to attain sustainable loyalty of target audience and competitive advantage within industry simultaneously. This contemporary approach would improve the ambient conditions of stores along with social interaction between employees and customers.
It was studied that Sports Direct is focusing on expanding and improvising their operations through social media platforms and related online mediums. The company is suggested to adopt the attributes of writers in regulating their social media campaigns. These specific attributes are important to keep the target audience engage throughout the campaign and increase the reach of market. Without appropriate audience engagement, the success of social media campaign and effective online servicescape is impossible to attain. Hence, Sports Direct needs to deploy a separate and specialized social media teams to regulate a productive and successful campaign.
References
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