Consumer Insights

When Merchants Don’t Change But Shoppers Do

Mondays can be rough, but at Vestis Retail Group, the start of the work week signaled a different kind of end entirely.

Not only did Vestis itself file for bankruptcy protection, but its retail holdings — sporting goods stores Sport Chalet and Eastern Mountain Sports and apparel brand Bob’s Stores — were suddenly thrown into financial turmoil as well. While Eastern Mountain Sports and Bob’s Stores will likely be absorbed by Vestis’ parent organization, private equity firm Versa Capital Management, Sport Chalet’s 46 stores are in no such luck.

Not only is Sport Chalet’s online store down, but its former customers have until April 29 to return rented equipment and use up balances on gift cards or transfer them to other stores in Versa’s retail family.

As with any store closure, a proper postmortem is in order, and Vestis CEO Mark Walsh was happy to offer his own.

“The continuing shift in consumer behavior away from traditional brick-and-mortar retailers and toward online-only stores, together with increased competition from big box and specialty sporting goods retailers, have contributed to an industry-wide weakness,” Walsh said.

The first half of Walsh’s retail autopsy holds at least some water. Omnichannel is a fact of life now for merchants on either side of the digital-physical divide, and those that can’t cater to that new reality won’t last very long at all. However, is it right to shift the blame for bankruptcy onto “specialty sporting goods retailers?”

For that matter, is it right to use the term “specialty” in this context at all?

It seems beyond argument that the growth of the athleisure market had at least some hand in the profitability decline of Vestis’ retail holdings, but couching the rise of leggings as both yoga- and work-appropriate wear as something niche or with limited appeal might explain how Sport Chalet and EMS found themselves in this place to begin with. Several retailers have conducted stunning turnarounds by pivoting toward the market Walsh puts down. U.K. retailer JD Sports saw year-over-year sales jump 20 percent after focusing on women’s athleisure products over the course of 2015. Even Lululemon, one of the pillars of the supposedly specialty market, has started to expand away from its “niche” products with new stores that combine the fashion appeal of its athletic wear with less exercise-focused purposes.

“We have a whole range of product, and some of it is not meant for sweat at all,” Marcus LeBlanc, design lead at Lululemon’s NYC lab, said of the opening of a new Manhattan storefront. “We’re really addressing your whole day.”

It might be comforting for Vestis to couch its failings as the fault of a plucky underdog sniping consumers away from it, but the reality appears just the opposite: Consumers, their expectations and what they’re willing to pay top dollar for outpaced Bob’s, EMS’ and especially Sport Chalet’s abilities to keep up.

It’s worth noting that Vestis’ bankruptcy isn’t a complete collapse. Versa has issued an offer to retain control of Bob’s and EMS, seeing at least some potential for those brands to perform well in the future. In fact, Walsh took the time to praise the performance of those retailers, saying that, since acquiring both brands on the verge of bankruptcy themselves, “EMS and Bob’s are now delivering solid performance but have been burdened by limited financial flexibility due, in part, to the unique competitive pressures facing Sport Chalet.”

If anything, this is what should worry legacy retailers in every industry and especially so if they have a boom market, like athleisure, not just breathing down their necks but actually occupying rungs on the ladder above them. Traditional retailers may very well have a place in even the most integrated omnichannel markets, but if they don’t have the financial leeway to spend as necessary on digital innovations to stay nimble enough to compete with newcomers (that soon become pillars of new markets) in a cross-platform retail ecosystem, it’s only a matter of time before they get the Sport Chalet treatment in order to cut the chaff weighing down other brands with a better chance of survival.

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