Mike Ashley’s Sports Direct empire has always been known for its value and discount proposition but it appears the retail mogul is making a departure from the “pile it high, sell it cheap” mantra in favour of a more elevated, premium positioning.
Last week at the firm’s annual general meeting, Ashley, who is executive deputy chairman of the retail group, said he wanted to make Sports Direct the “Selfridges of sports retail” in terms of attracting the best brands and the best products from their collections. He added that the retailer’s large-store format will help it achieve this goal.
“There has been a shift in what brands expect from retailers in terms of presentation, customer service, stock availability,” said Ashley.
“The store at [Sports Direct’s headquarters in] Shirebrook is the blueprint for Sports Direct’s future: that store concept will take us to the Selfridges of sport. You need those massive stores, which are executed joint with third-party brands, to succeed.”
Sports Direct will open between 12 and 18 stores of these large, 60,000 sq ft-plus stores a year. He added that the company would buy freeholds, as he believes that if you are “committed to it and believe in it, you should own it”.
The bigger units will allow Sports Direct to showcase key brands such as Adidas, Under Armour and Nike, giving them space to display their product in the same manner as they would in their own stores.
“The ‘pile it high and sell it cheap’ format is not acceptable for brands any more. They want the standard lifted,” added Ashley.
John Stevenson, analyst at Peel Hunt, agreed this was the only way forward for Sports Direct: “The product Sports Direct is receiving is not good enough, and the only way to get back in suppliers’ good books is to show that it can merchandise third-party product well, and to respect brand equity.
“More of the same will not work and, while 12 big stores a year will not come cheap, restoring Sports Direct’s own brand equity is crucial here.”
In this quest to appease his brand partners, Ashley said he will respect their pricing policies. Sports Direct will offer more full-price product moving forward – a departure from its usual business model.
“You will see an increase in prices where necessary to align our product to the brand, and to respect the brand equity,” said Ashley. ”If Nike wants to sell a football boot at £500, it will be sold at £500 in Sports Direct rather than £400 like it would have previously. You will see a lot more full RRPs [recommended retail prices] in Sports Direct stores.”
Another aspect of this focus on brand relations is the expansion of premium multi-brand chain Flannels.
Flannels bought the former BHS store in St Helier, Jersey, and plans to open a 35,000 sq ft store there in time for Christmas. It is also recruiting employees for a new store in Milton Keynes and plans openings in Solihull and on London’s Oxford Street next year.
This follows the opening of a retail and fitness destination in Southport last week, which houses Sports Direct alongside Flannels and USC.
Yet Ashley said he cannot guarantee his plans for Flannels will prove a commercial success.
Rather he is using the premium labels attached to Flannels as bait for other brands.
“Sports Direct isn’t just sports equipment – we have to be fashion as well and there is a weakness in that sports fashion offer. Flannels will help us. We are beginning to make a small advancement in that fashion sector. We might have Armani and Boss in USC or Flannels but it’s in the same building as Sports Direct – it lets us show brands that we can look after them.”
Ashley branded the Flannels store concept as the “future of Sports Direct”, adding that, although the investment won’t benefit the bottom line for investors in the short term, it will in the medium and long term, and so is the “right way to go”.
He said it may take up to nine years to change the business into a “modern-day retailer” that works “in partnership” with brands.
There is an obvious need for Sports Direct to attract the best labels and top-tier product to compete with rival JD Sports Fashion. But if it does not start to bear the fruits of its premium venture quickly, its shareholders may bay for blood.