The case of Decathlon - Strategic Brand Management

Few stores reveal as much about modern distribution as Decathlon and the key role that its own brands play in its growth. In are cent article, Anglo-Saxon academic research notes that the share of shelf space given over to distributor’s brands among US distributor sis less than among European distributors(Crustiest al, 2006). The US distributors allocate shelf space according to a simple short-term profit equation.

It is true that in the United States distributor’s brands have poor reputation, and are all considered ‘sub brand’s . They do not allow for positioning of the store or the loyalty generation through attachment to the store. The situation is different in Europe and Canada, where, very early in their brand history, distributor’brands had a combative vocation: fighting not to launch a price war, but to offer the consumer genuine value.

Just think of Amigos, the dominant chain in Switzerland, which does not sell products by Nestle, the world’s leading food company with its headquarter sin Switzerland, but rather Amigos products. In this case, the long-term strategic dimension takes precedence in decisions on shelf space allocation: this is the best way to get consumers to try the product, and therefore to begin a cycle of loyalty generation.

In our view, the main difference between the approaches of the distributors themselves in the United States and in Europe is that, in the United States, it is a question of selling the store’s brand alongside the big brands, whereas in Europe it is a question of making it the store of the brand, with a few other brands alongside it. Decathlon has now become designer of brands that controls its own distribution.

This is what differentiates it from the sports section of Al-Mart or Sports Unlimited. Even its lowest-price products relabeled as ‘best-price technical’ products, to remind us that the ethics of sport forbid sacrificing everything for money: there is threshold below which a football is no long era genuine football in terms of quality and security. Others might sell it anyway, in order to maintain the image of always having the lowest price, but not Decathlon.

This process, which transformed the store into a brand, may also be illustrated by Gap. The Decathlon ideal is the same as Gap’s – to reduce its main manufacturer brand (in this case, Nike) to 10 per cent of sales in the running department. This is already the casein the camping department: all the rucksacks, sleeping bags, and tents are private label products. In order to succeed, Decathlon needs to do much more than buy and sell: it needs to innovate, design, establish its own production plans, and choose its own partners. This is why Decathlon is now the world’s fifth largest producer of sports goods. Its business model is the integration of design/production/distribution.

Decathlon Business Model

Decathlon began life 30 years ago as simple discount store. It sold all branded products, and only branded products, in all sports. Today, more than 55 per cent of its turnover is made on store brands, although, in accordance with its company culture, Decathlon never speaks of store brands, only of passion brands. The word ‘passion’ here is not a slogan, but a true understanding of the brand in sport. The sports brand is built first internally; it is a true culture. Then it miscarried outward by those who are passionate about it.

Moreover, few stores take their own brands as seriously as Decathlon does. Decathlon shows how the organization must be able to adapt to the brand, rather than the reverse . Finally, Decathlon enacts its brand policy worldwide, which is all the more challenging since Decathlon dominates its original market, France, by some distance, but is only just making its debut in China, where its products are produced, and has pulled out of the United States. It has 340 stores.

Decathlon’s vocation is to give as many people as possible access to the pleasure of sport. The key values are vitality, truth, fraternity and responsibility. It is a low-cost operator, but one that has always favored quality over selling at the lowest possible price. Loyalty is not generated through prices, but through client satisfaction. At the same time, it is the best way of defending the chain against the entry of discounters from the food sector, such as Al-Mart Sport.

This policy is a success: in the bicycle sector, for example, not only is Decathlon the brand that first comes to mind for French consumers, but in addition it is also the one that is necessarily taken into account when making the next purchase, with consideration score double that of the first producer’s brand (Raleigh or Peugeot Cycles).

The store was founded in 1976 by Michelle. It quickly took the distributor’s brand option, capitalizing on the strong name awareness of the Decathlon company, and its dominant distribution. Decathlon seeks the development of the largest possible number of its clients through sport. The store is positioned on the hedonistic side of sport, and designs very comfortable products, aimed datelining, with emphasis on safety. It is diffuser of pleasure.

The components of its success in France were like those of any store: the quality of its store sites, the range (that is, the choice of goods for 60 sports under the same roof), unprecedented low prices, remarkable logistics that avoid stock breakdowns by supplying stores once or twice daily, young, helpful and competent salespeople, and finally the freedom to choose, with aisles so well constructed that customers could easily dispense with the salesperson.

The defeat suffered in the United States also hinged on the fact that the majority of these success factors could not be implemented in the discount chain acquired, first among them being the site quality. Secondly, the US discount store was renamed Decathlon before the stores could be ‘Decathlon’s . It is not easy in the United States, a country with low unemployment, to find passionate and motivated young people, genuinely attached to their store.

In 1999 in France, after 23 years of uninterrupted growth, for the first time in its history its turnover per square met re fell. The diagnosis was simple: the policy of a single brand, Decathlon, strongly emphasis ed in all its stores, together with its dominance of the national market, created a monopolistic situation and a ‘Soviet-like’ brand. Whether on the beach, on the ski lift, while hiking in the forest, everyone wore Decathlon-branded products. Customers increasingly got the impression of a lack of choice.

The strength of distributors, often faultlessness, is their ability to take decisions quickly, and to enact radical changes. hese are enacted in order to produce tangible, measurable results, allowing them to take the necessary corrective measures. This is what Decathlon did:

• It abandoned nearly 25 years of store brand policy, in France and abroad, to move towards a portfolio of brands segmented by sport. In order to create these brands, it began with the observation that there were60 sports under Decathlon’s roof. For each brand to reach critical mass and justify its overheads, a shortlist of 17 was drawn up, combined into seven finally. Then it was decided to increase this number, since modern sports are ‘tribe’s that cannot easily be brought under the same tent in the name of ‘critical mas’s . Thus Dionysus separated into roller sports and running. Tennis and golf were also separated, having previously been united under the common brand Kinesis.
• These brands are autonomous, decentralized business units, with dedicated teams. Their goal is for each to become leaders in its sport. Now treasurers the operational budgets are spent on the brands, with one quarterremaining for transverse tasks. Decathlon abandoned its historical organization Antillean d’Masc in order to turn these brands not into labels on products, but forces for creative proposals at the best prices, based on passionate men and women. At Decathlon, semantics are crucial: these brands are named passion brands, not as a slogan or an advertising gimmick but as a profound reality, first internally, and then externally.
• These brands need to be located close to where the sports are practiced, so that the internal teams can live them out, and local opinion leaders can play a role in their creation: Triode by the sea, Quench in the mountains. They communicate independently of one another. For example, Chula Quench’s magazine, distributed in stores: it circulates 2 million copies. This is the highest circulation of any of the mountain magazines.
• The 15 brands are named passion brands because they are each entrusted to passionate manager, who creates and carries them, with a dedicated team, on autonomous sites, with a genuine business plan and a high degree of autonomy. In the stores, the salespeople are also passionate. In time, the goods may be distributed beyond the flagship Decathlon store. In December 2006, Decathlon announced historic agreement with independent ski equipment hire stores in the mountains. This very lucrative market had previously been locked up by the manufacturer brands. This will make it possible for skier sand snow boarders to try Quench product sin the stations themselves. The internet will be the medium for hiring: clients can reserve in advance and at low prices.
• In order to build these passion brands, with imaginary qualities that are weaker than those of the major brands, the only thing that matters is product innovation and quality levels. This is why the Decathlon Group also invests in ingredient brands that lend credibility to the offer, becoming technological labels themselves.

It is question of prying open the vice like grip on costs exerted by the technological brands such as Elyria, Gore tex Angola. For this reason, the ingredient brands of the Decathlon group are also autonomous business units, seeking to increase their opportunities outside thermo’s challenge is international . Decathlon is currently the 10th largest sports distributor in the world: the margin of progression is still strong. The brand policy described above is global. Decathlon’strength was built in France, progressively (over 30 years) using a different model – that of the single brand (Decathlon) which was also the name of the store. This contributed to creating enormous communication synergies.

The country manager’s situation, for example in China, Hungary or the United States, will be very different. The start-up will be implemented with the passion brands: in China they represent 70 per cent of the range . However, the store is not known there, and will not have 20 years to build recognition . Therefore the pricing policy must be mo rediscount-based. The name Decathlon, however, should no longer in theory be visible on the products, since they all now stem from one of the passion brands. The principle of the passion brand, as with any brand, is in fact autonomy. Only the back office cuts across all brands. This consideration, a pragmatic one at the international level, explains the maintenance of a ‘Decathlon creation’ brand inside the product, in order to establish the link between the store and its brands.