Nike’s policy of not supplying smaller retailers comes as no surprise to South African retailers — especially independents, who have for many years been denied access to certain products or brands. And Nike is by no means the only brand to do this. While retailers have learnt to trade without these brands and aspirational products, they are not happy about it.
As things stand, independents are treated with disdain, with restrictions on what you can buy, a retailer responded to our anonymous survey on whether retailers can survive without big brands. His feelings are echoed by many others, who point out that big brands restricting supplies to smaller retailers is nothing new … but, announcing it openly as policy is new.
Just a few samples of the comments we received:
- It is very sad as independents helped build these brands. We put them on the map, because we could pick up and analyse on market trends. Now, they limit our purchases more and more;
- We looked after the Big Boys before the development of the Sportsmans Warehouses, Studio 88’s and so on (all the chains);
- I may not stock the products my customers want;
- Only the top 5% retailers get access to the premium product;
- At one stage (1995-1997) I was the biggest seller of [Brand A] in town, today [Brand A] does not supply me. In 1995 and 1996 I was in the Top 10 stores in KwaZulu-Natal selling [Brand B], today [Brand B] does not call on me!
- We are not at all happy with the so called big brands.
Nike may be the #1 multi-sport athletic brand in the world due to its dominance in the American market, but in South Africa more retailers who responded to our survey stock PUMA (23%) and adidas (22%) than Nike (20%), closely followed by Asics (19%).
Retailers also consider other brands as more essential to stock — for example, adidas (68%) and PUMA (61%) are considered to be essential by more retailers than Nike (58%).
This is not because there is no consumer demand for Nike, but due to the brand’s stratified distribution policy favouring a small number of key retailers, and restricting products to others, an independent explains. This meant that independent retailers have become accustomed to trading around the brand and to compensate by offering other brands.
The shift by the big brands to communicate directly with consumers via digital can be turned into a positive, believes an independent retailer — especially in South Africa, where online sales comprise less than 1% of total retail sales.
“The only way to survive is to offer something different to what any media platform can — and that is customer service,” the retailer wrote. “This is a huge challenge as the right people have to be employed and continual and repeated training needs to be given … sourcing and admin have become critical too. The positives are that we can adapt and modify a lot quicker than the big boys can — we must just be willing to make the effort!”
Can retailers survive without brands?
The retail respondents are equally divided on the question whether independents can survive without the big brands: 48% say yes, 52% say no.
Several respondents qualify this, for example with comments like ‘we can, it will just be more difficult and we will probably have to cut down on staff; it is getting harder but we have to survive!; it might be difficult or it would need a change of business model; these brands may be good sellers, but they are not the foundation of our business; it will be very difficult, but it depends if he (the retailer) has his own brand and if he is in a niche market’, and other similar comments.
Most (59%), however, believe that an independent retailer can overcome losing the essential brands by stocking a wider range of other brands. And these substitute options mentioned are numerous — even though many are not exactly multi-sport athletic brands. Bronx, Brooks, Converse, Ellesse, Hi-Tec, Kappa, Le Coq Sportif, Lotto, Olympic, Salomon, Skechers, Soviet, Under Armour, Umbro, or Vans have all been mentioned as substitutes for the big brands.
Sadly, 3% of respondents believe they will have to close their stores if the big brands turn off the taps completely.