Super Retail Group (SRG) managing director and CEO Peter Birtles believes his plan to discontinue Amart Sports and convert its 65 stores into Rebel Sport will see the company increase its market share when international competitors establish themselves.
Speaking to Inside Retail after announcing plans to dump Amart by the end of October, Birtles said that the idea was hatched after consumer research found that Amart customers wanted more top-end products, while Rebel customers wanted more value.
“There’s a lot of discussion about Amazon and Decathlon, but the reality is we compete with discount department stores in shopping centre locations and the feedback we’ve had is that customers want to see a bit more of a value proposition in the Rebel brand,” said Birtles, who estimates the SRG’s sporting division maintains a 25 per cent chunk of the market.
“The strategy for both businesses responding to their respective customers was going to bring them closer together…we said let’s do it with one brand rather than having to support two in the market.”
The move will see Rebel become more value focused, but not everything in Amart’s offer will be making it over, with Birtles revealing that unprofitable lines like bikes will see a “significant reduction” in floor space in favour of brands Amart was unable to stock.
“Major trade partners limited the range that we could carry in Amart, they preferred us to carry that range only in Rebel, so we’ll be able to deliver a stronger offer in stores moving forward,” Birtles said.
He earlier told media that the consolidation wouldn’t change the sporting divisions plan to expand to 200 stores over the next five years, and that the plans would position the sporting division for further growth even amid the entrance of international players.
“When we look at our plans going forward we have the view that we’ll see an increase in our market share, we do believe there will be some changes in participants, we’ll see that some players will find it tougher to operate going forward, but we won’t be one of those,” he said.
Birtles is confident that Rebel’s brand can stretch across the market, and some investors certainly agree, with SRG’s share price up more than 4 per cent by midday on Tuesday – a welcome reprieve from a downward trend that’s seen the company’s value dip more than 15 per cent since January.
But the move doesn’t come without risk, Queensland University of Technology business school associate professor Gary Mortimer said that effective communication of the change in offer will be imperative in ensuring that SRG doesn’t lose Amart customers to the likes of Decathlon.
“There’s a risk that the core Amart value shopper will be disenfranchised when they see their local Amart store re-branded as Rebel,” Mortimer said. “It will be important that they communicate effectively that what Rebel offers tomorrow will be different to what it offers today.”
Mortimer said that it makes sense to merge the brands to streamline supply chain costs and decrease exposure to the discount side of the sporting goods market, but noted that increasingly knowledgeable customers play into Amazon’s online strategy.
“Amart was always the low-cost sports retail offer, whereas Rebel has always been considered middle-market and better quality, so moving to that part of the market makes sense,” Mortimer said.
“The challenge that Super Retail Group will face is that categories like automotive and sports are probably the most exposed to Amazon’s entry. If you know what Nike runner you want then you’re more likely to jump online than go to a store.”
Bettina Kurnik, senior research analyst at Euromonitor International, believes the move is a sign that SRG is more confident in its ability to compete in JD Sports’ part of the market then that of Decathlon.
“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,” she said.
“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.”