Retailers prepare to tap World Cup fever

The faces of Wayne Rooney, Steven Gerrard and John Terry are already staring out from the windows of sports retailers, even though there are still another 10 weeks to go before the World Cup kicks off in South Africa.

Between now and early July, certain retailers - at least in their English stores - have the opportunity to try to tap into the excitement that is generated by the biggest event in world sport.

In the summer of 2006, retailers from Sainsbury’s to JJB Sports to Currys all reported strong sales off the back of the World Cup in Germany, but will this year’s event get shoppers spending and, if so, how can retailers capitalise on the opportunity?

Asda is expecting to reap the rewards of the global deal parent company Walmart has signed to operate FIFA World Cup official event stores; selling merchandise that is customised for England in selected Asda stores.

The grocer expects to reveal further details for its plans regarding the World Cup imminently, and describes it as “one of the biggest sporting events in history” with matches screened at times in the UK that will ensure high viewing figures. Asda’s plan appears to be to use its value price messaging in tandem with the FIFA merchandise, with Asda chief marketing officer Rick Bendel saying that it would “lower the price of the nation’s favourite tournament”.

There is only so much revenue that cups, keyrings and cuddly toys can generate - even if they do carry the all-important 2010 FIFA World Cup logo. However, Planet Retail research director Greg Hodge says that the real value of this deal will come from what else customers buy while they are in Asda stores.

He says: “Retailers are looking to use licences to boost their private label ranges and create themes within their stores that act as footfall drivers. The World Cup will be a classic example of this, making Asda the go-to supermarket for the weeks before and during the tournament and allowing the retailer to benefit from consumers completing their weekly shop at the supermarket.”

Another consequence of this deal is that Asda may well find favour with manufacturers that want to run football-themed promotions.

Hodge explains: “Certain manufacturers have exclusive partnerships with FIFA and bodies like the FA, making it difficult for rival brands to muscle in on the event. However, there is the opportunity to run promotions with supermarkets during the tournament and brand manufacturers will look to Asda. We have seen a number of our clients enquiring about circumventing exclusive deals and looking to partner with Walmart to gain shelf space.”

Hot on Asda’s heels

While Asda may have taken an early lead from its official association with FIFA, the other supermarkets are not going to just sit back and let it eat all the half time oranges. Sainsbury’s is upbeat about England’s chances in the competition and the sales uplift it expects, particularly as a result of matches played at the weekend.

A spokeswoman for the supermarket group says: “We’re expecting people to party this year, and we will be a one-stop destination for all our customers’ World Cup needs. We’ve got some fantastic deals and offers in the pipeline on everything from traditional football fare, barbecue food and drink to, of course, World Cup memorabilia.”

During the last World Cup, Sainsbury’s was the official supermarket of the England football team. It said that sales of World Cup-related merchandise, alongside the warm weather that was experienced, combined to produce a particularly good trading performance over several weeks after what had been a slower level of growth immediately after Easter. Now Tesco holds the title of ‘Official England Supermarket’ and is able to sell official England merchandise in the run-up to the tournament.

Verdict senior retail analyst Matthew Piner thinks that Asda will gain only a small advantage over its competitors from its official association with FIFA, and believes the other supermarkets will promote quite heavily around it too. In addition, he expects other retailers to cross-merchandise in a way that was seen during the last World Cup. For example, Piner says electricals retailers sold party snacks and football shirts in stores, to boost basket sizes.

Both Hodge and Piner agree that how well retailers do, and particularly the supermarkets, will depend on the England team’s progress in the competition.

“On a sliding scale - the further England go then the better the grocers will do,” says Piner, pointing out that the weather will again have an impact on the grocers’ football-attributed sales.

And Hodge adds that as none of the home nations qualified for the European Championships two years ago, consumers are likely to see the biggest ever sports-based campaigns from retailers this summer. He forecasts that the England team making it through to the quarter- or semi-finals could be worth as much as an additional £500m to the retail industry on top of what football fans will have already spent during the competition’s earlier stages.

Aside from the grocers, sports retailers obviously do well off the back of the World Cup. This time around, Sports Direct has already run a promotion offering to refund customers the cost of their England shirt if the team win the competition.

They shoot, they score

More such promotions should be expected, says a source close to the company. He adds that Sports Direct is making a massive commitment to the tournament to ensure that it is the most competitive of all the sports retailers.

Sportswear sales soared 24% in the 12 weeks before the World Cup in Japan in 2002. However, during the last competition the potential value of sportswear sales was depressed by substantial discounting. In May 2006, Mike Ashley was solely blamed for reducing the value of the World Cup to sports retailers by selling replica shirts for just £11.99 - some 70% off the RRP. TNS said at the time that sales of full-price men’s sportswear had fallen 21% in just a year.

Even so, JJB was able to give the 2006 World Cup partial credit for the £35.3m uplift in revenue it generated from replica football kits it saw that year.

This time around, Sports Direct seems to have moved away from its bargain basement promotions. It has spruced up at least some of its store windows with displays dedicated to the new England strip and discounting on the price of the kits has been minimal so far - on Sports Direct’s website, the basic England World Cup away shirt is selling for £35, compared with JJB’s site, which is selling it for £39.99.

The other product segment to benefit strongly from the football fever in 2006 was consumer electronics. Comet commercial director Bob Darke says: “Prior to and during the 2006 World Cup, TV sales were up by 60% and we imagine there will be a similar spike this year as people look to upgrade their sets.”

Piner believes retailers should not expect sales trends to exactly mirror what was seen during the World Cup in 2006. Four years ago sales of flatscreen TVs, Xbox 360s and mini fridges were all strong, but Piner adds: “They were all reaching price points where they were becoming mass market, and people had money to spend. So we are not expecting as much of an uplift this year.”

High definition first

However, while sales of TVs so far in 2010 are down on last year, Nigel Catlow from GfK Retail and Technology UK is more optimistic for the sector in the second quarter.

He says: “2010 promises to be different and potentially more beneficial for the industry as it will be the first high definition World Cup. Up to 50% of homes should be able to receive HD broadcasts.”

Darke agrees that the penetration of high definition broadcasting by June will be a bonus, and Hodge points out how major sporting events in other countries have driven TV sales this year. He notes: “For the Super Bowl, 4 million Americans purchased new TVs.”

Ahead of previous World Cups, Catlow explains that TV purchases that would have occurred anyway were pushed forward into May. However, people purchasing HD equipment should provide incremental sales in terms of volume and value this time.

Catlow says: “The TV market will gain a value uplift by the purchase of sets with integrated HD tuners and full HD panels. The many millions who already own an HD TV will need an HD set-top box to receive the broadcasts and watch matches in HD.”

He adds that some other product types could also benefit. For instance, sales of DAB personal devices rose as a result of the last World Cup and cricket’s Ashes.

Footfall patterns from the run up to the World Cup in 2006 give a good indication of what retailers can expect in terms of visitors during the next couple of months.

Experian FootFall reported numbers were down 18.1% in 2006 when England beat Jamaica 6-0 on a Saturday in their last friendly before the competition began. And it reported a 20% fall in visitors for the England versus Ecuador game on a Saturday as “usual activities were abandoned” as the tournament reached the knockout stage.

The previous week, the company had reported a 9.7% drop in shoppers compared with the previous year for a Thursday evening group game; highlighting the bigger impact of Saturday games and games later into the competition.

A funny old game

While the segments that can directly leverage the interest in football will benefit from a sales uplift, other retailers are likely to lose out. DIY and fashion retailers suffered from the footfall trend last time.

While he’s at pains not to appear sexist, Hodge says there is a serious point to be made around trying to attract customers into store who aren’t interested in football.

He explains: “Jonny Wilkinson’s mother was famously shopping in her local supermarket when her son won the Rugby World Cup. She was not watching due to nerves, rather than a lack of interest, but I do feel that retailers miss a trick by not

catering for the proportion of the population that does not care about football. It is here that non-food retailers could really take advantage, by running promotions on things such as home improvement or gardening.”

And for those that can directly benefit, the competition could be the perfect chance to capture discretionary consumer spend before customers are likely to become more cautious later in the year.

A good run of form from the England team could provide just the feel-good factor recession-hardened consumers need to loosen their wallets before the predicted economic hardships of the UK tackling its public spending deficit begin to take shape.

Whether you are a football fan or not, expect the condition of Wayne Rooney’s knee to be a hot topic of conversation at Monday morning trading meetings during the next few months.