Buoyed by response, JD Sports accelerates expansion

JDpacificfairWhen British sneaker giant JD Sports launched in Australia last year it was dubbed the “Rebel killer” in the local media.

One year and eight stores later the self-titled King of Trainers appears to have been encouraged enough by its initial performance to substantially increase its investment Down Under at a time when the broader discretionary retail market is under pressure.

Overseen by Next Athleisure chairman and Rebel founder Hilton Seskin, JD has spent the last twelve months laying bedrock and testing its brand on local shoppers but is now taking its next step.

Last month the giant made public an expansion of its local logistics capabilities, an initiative that will see Australia become a test market for a store-based fulfilment model.

“It’s imminent that each JD location will perform as a mini distribution centre,” Seskin tells Inside Retail. “We’re testing new fulfilment options within the global JD business given the size of the country.”

Store fulfilment will allow JD to localise its online delivery network, cutting costs and supporting its ongoing expansion without the capital outlay associated with a myriad of fully fledged distribution centres.

The move comes as JD, buoyed by what Seskin describes as a “fantastic” response to the business so far, accelerates its Australian store roll-out.

Over the last three months the sportswear retailer has significantly increased the size of its Australian store portfolio, launching stores in NSW’s Macquarie, Penrith and a location in Doncaster, Melbourne.

Next week it will open in Warringah Mall on Sydney’s northern beaches, a highly competitive centre that already houses a Rebel and Athlete’s Foot.

There are likely to be more launches before the end of the year, with JD’s global chief executive Peter Cowgill last month describing initial trading as “encouraging”.

“We’re looking to increase [our footprint] fairly significantly this year but in a considered and sustainable way,” Seskin says.

Staying off the discount drug

The expansion comes at a time of consolidation in the discretionary retail sector as low wage growth, high cost of living pressures and record levels of household debt weigh on shoppers.

The clothing, footwear and personal accessories category that JD trades in struggled in 2017, booking total turnover growth for the year of just 1.5 per cent, less than half the ten year average annual growth rate of 3.5 per cent, according to ABS data.

Persistent discounting has set into the malaise, weighing on margins and accustoming shoppers to steeper levels of markdowns.

But IBISWorld industry analyst Kim Do says exclusive products and price elasticity among millennial sneaker fanatics has helped JD steer clear of the discounting drug and carve out a section of the market.

“We don’t expect JD to be using any discounting techniques, unlike the broader retail market,” Do says. “They’re targeting younger consumers wearing activewear and streetwear as casualwear.”

“Price is not a factor, millennials would rather save up and spend a lot of money,” she explains.

The exclusive advantage

Seskin is also no stranger to the difficulties of the current retail market, having run the Australian Topshop/Topman franchise before it fell into administration last year.

While Topshop Australia struggled to source relevant and in-demand inventory from its parent, Seskin’s arrangement with JD has seen new and exclusive product fast-tracked from the UK for expectant customers.

“The scale of the global JD business means we can leverage the best offering and bring it to the Australian consumer first,” Seskin says. “There’s a large percentage of JD exclusive product and elevated styles that our competitors can’t access.”

It signals headwinds for Rebel, which doesn’t directly compete with JD but has been a go-to stockist for Nike and Adidas in Australia for years.

JD is currently retailing a range of exclusive Adidas and Nike sneakers in Australia as well as several categories of athleisure wear from brands like Puma and Ellesse.

IBIS’ Kim Do says that while JD is targeting customers that are more likely to wear its products casually than in the gym, its exclusive ranges are likely to weigh on the likes of Rebel and Accent Group’s Athlete’s Foot.

“The fact that consumers are more willing to buy these exclusive products does mean that the shoes and clothing competitors have will sell less,” she explains.

Last year Rebel’s parent Super Retail Group moved to merge its Amart Sports brand into Rebel in a bid to better position itself against JD and price focused entrant Decathlon.

JD’s Pacific Square store on the Gold Coast.

Now complete, the merger has pooled the retail group’s resources and extended the scope of Rebel’s offer, which the business believes leaves it poised to compete.

Speaking publicly on competition in the sportswear sector at Inside Retail Live in February, Rebel managing director Erica Berthold indicated that Rebel would look to combat pressures on both sides of the market by mixing brand curation with competitive prices.

“Our ability to remain relevant and compete in this marketplace is that we’ll be competitive on price … we’ll match any price in the marketplace,” she said.

CBD and suburban focus

Seskin says JD is getting traction in CBD and suburban malls so far with a tech focused store layout that’s typically in the 400-700sqm range.

“Our store size provides an expanded space to tell compelling retail stories from our global brand partners,” he explains.

JD generally devotes as much as half of their stores to sneakers alone and has thus far targeted top-tier high traffic centres with its concept.

Seskin is also clearly not scared of competition. In addition to the upcoming opening in Warringah Mall the recently opened Macquarie centre store places JD in direct competition with existing standalone Adidas and Nike stores, as well Rebel.

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