After a stunning opening ceremony, all eyes have been fixed firmly on China as the Beijing Olympics got under way this week.
The games are China’s chance to prove itself on the global stage, but also serve as a reminder that in just four years it will be the UK’s turn to impress when it hosts the world’s biggest and most lucrative sporting event.
As the countdown begins to the 2012 London Olympics, retailers – particularly sports groups – will be looking forward to how they can make the event successful and profitable for their businesses.
The stalwart behind many sports retailers, particularly in the UK, is football. When England failed to make this year’s Euro 2008 finals, Sports Direct founder Mike Ashley deemed it one of “three train wrecks” to hit sports retail alongside the credit crunch and last year’s bad weather.
In response to a changing market, sports retailers such as JD and JJB have realigned their operations. Last month, JD changed its name from John David Group to JD Sports Fashion, following its acquisition of fashion chain Bank and reflecting its increased emphasis on style rather than sports participation. JJB, whose core business operates under the “serious about sport” positioning, has widened its interests by establishing a separate lifestyle division after the acquisitions of Original Shoe Company and Qube.
But the London Olympics will bring a chance to profit more fully from a traditional sports offering. Verdict lead analyst Maureen Hinton says that sports retailers will look to the Olympics to generate more interest in sport. “They will be hoping for the halo effect after these Olympics, because big events tend to drive the most interest in sport,” she says. “The Government will now need to really drive sports focus in the UK leading up to the next Olympics.”
The China Olympiad will unfortunately do little to stimulate sales for sports retailers in the UK. JJB chief executive Chris Ronnie says: “We don’t see an uplift in sales yet, but certainly will in 2012 and hopefully in the run-up to it we’ll see confidence build.” JJB is already in talks with the London 2012 Committee to see how it can benefit when the Olympics reaches Britain’s shores.
“We are in early discussions with the 2012 Committee about linking up with them and how we can get people here more interested in sports. There is an ongoing review to see how we can get involved,” says Ronnie.
At the Beijing Olympics the leading sports brands, including Adidas and Nike, have been taking full advantage of the event both in China and internationally, including the UK.
Nike is opening the equivalent of three shops every two days in China at present. A spokesman for the brand says: “China and the malls there are experiencing a huge surge of energy and excitement as a result of the games. 2012 will be a huge moment for the brand in the UK. We will connect with athletes and consumers using the games as an energy moment in London and the UK, just as we are doing in Beijing and China.”
Nike plans to have at least three standalone stores in and around London by 2012, in addition to Oxford Street’s Nike Town flagship. The brand opened a pop-up shop in Wimbledon for this year’s tennis tournament, which it said was very successful. It has not ruled out similar formats for 2012 if the right commercial partner can be found.
The brand has also generated much success through its partnerships with athletes. Hinton says that this is also a key opportunity for UK retailers to grasp. “A lot will depend on if our athletes do well this year. Everyone here seems to want to be a footballer and we need the same level of excitement in other kinds of sports,” she explains. “There has, for example, been a great deal of hype around the 14-year-old diver Thomas Daley and hopefully there will be more hype if our teams do well.”
Useful springboard
Adidas, which runs eight Sports Performance and Original stores in the UK, has used the Beijing games to start generating excitement about British athletics. It is running an exhibition on London’s Southbank featuring images of Team GB. The brand has been involved heavily in the Olympics, opening its largest shop to date in Beijing last month; a 34,000 sq ft sports store in one of the city’s new shopping malls.
In the UK, the retail landscape is likely to change as the Olympics approaches. Westfield has begun constructing a shopping centre in Stratford, which it plans to finish by the end of 2011. It hopes that the£1.5 billion development will win significant spend from the estimated 500,000 people that will visit Stratford each day during the games. The London 2012 Committee has also announced its intention to open a chain of shops across the country in the run-up to the games, while London’s West End should experience a boom as visitors throng to the city.
One limitation of the Olympics’ effect on retail may be its London base, which could focus sales on the capital rather than nationwide. Events such as the World Cup, which takes place in numerous cities, can lift sales across a country.
In the 2006 World Cup in Germany, for instance, retail sales rose almost 2 per cent in the month they were held, according to the German Federal Statistics Office.
When Sydney hosted the Olympics, sales in the month the games were held rose£70 million in the city alone, which came mainly from clothing, merchandising and souvenirs.
AT Kearney head of global sports and entertainment practice Emmanuel Hembert says local team qualification in sporting events leads to the sharpest increase in sports sales. “The British Olympic Association wants to send a much larger team to 2012 than in previous years,” he says, which could be good news for retailers.
Hembert adds that, although the International Olympics Committee already has main sponsors, the London Organising Committee is still looking for sponsors and has reportedly been in discussions with some UK retailers to ink local agreements.
It is forecast that the Olympics could generate revenues of more than US$7 billion (£3.65 billion) by the time the games take place in London and sports retailers in particular will be keen to play their part in a unique opportunity.
Although global brands will dominate the London Olympics, if plans are set in motion early there is every chance that UK retailers can be key contenders in the race to generate cash and restore UK consumers’ sense of excitement in sport.
Postcard from Beijing
One World, One Dream – the motto of the Beijing Olympics can be seen everywhere in the city. And the expression is as applicable to the shopping scene here. The city has changed a lot since Beijing was awarded the games – not just through infrastructure and the dramatic Olympic venues, but also in retail.
Beijing’s retail landscape plays host to the entire spectrum of retail propositions. At one end, there are the street hawkers who provide a masterclass in changing the retail proposition to adjust to customer demand. It takes just a nanosecond after the rain starts to fall for the street sellers to switch from what they were selling to umbrellas and then back again when the last drop has stopped.
At the other end of the scale, there are the luxury brands, which have arrived in the city in force. Louis Vuitton, Armani and Prada are some of the biggest and well-merchandised stores that I have seen in the world, and with prices to match. If you think you can pick up cheap designer brands in Beijing, think again – they will be less expensive on Oxford Street.
Like much of the city, Beijing retail has been caught in Olympic fever. This highly patriotic nation has taken the Olympics to its heart as a symbol of China’s progress and a showcase to the world of the ambitions that New China has globally. You can’t walk five paces without seeing an array of flags, from large ones on buildings to small ones painted on people’s faces.
It feels like all stores have some Olympic reference inside. The retailers that sell products manufactured by Olympic sponsors have featured products and in-store displays. The best of these was Coca-Cola’s promotions in Wal-Mart (pictured below). The smaller mom-and-pop retailers have brought the family TV into their store, so that they and their customers can watch the games.
The retail in the main Olympic park and the surrounding event venues is, by contrast, poor. There is the ubiquitous official merchandise (and the non-official in other parts of the city), but it is not merchandised well and the selection is eclectic. Even the sponsors’ pavilions could do with some retail sparkle.
However, there is no doubt that Beijing retail across the spectrum is trying hard to capitalise on the Olympic market opportunity, whether it be directly, with Olympic merchandise and sponsors’ products, or just by trying to attract the impressive footfall that has descended on the city.
There are many lessons for London retailers looking towards 2012 that we will explore once the games are over, but the first few days of the Beijing Olympics have highlighted one overriding lesson for me. As the London opening ceremony gets closer, arguments about costs, venues and logistics will fade as an infectious enthusiasm and pride sweeps the city. Retailers must be part of the mood of the nation, but if you wait and do nothing until then, it will be too late.
David Roth is chief executive of The Store, part of WPP
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