Tag Archives: stock

Hunt or Be Hunted in the Outdoors…Industry (pt. 2)

When it comes to Millennials and marketing, the secret is out. For industry drivers looking to realize green profit margins for decades to come, it is now necessary to leave behind the antiquated methods of catchy jingles and subconscious implications that more is synonymous with better. Like it or not, the impending “internet of things” and the generation at the forefront of integrating ever-evolving technology into daily life will perpetually become more vital to consumerism for the foreseeable future. What’s the difficulty with that? Well, Millennials are proving to be a demographic wholly different from preceding generations.

In order to better understand who Millennials are and gain insight to marketing opportunities, reviewing the circumstances and events that shaped their lives is an excellent place look. Recession, divorce, internet, education, diversity and Wal-Mart are just a few buzzwords that come to mind. These factors have confected a consumer who does buy, but buys deliberately. Born into a world of planetary conscientiousness and dwindling Social Security benefits, Millennials tend to seek relevant products with minimal waste and are not averse to research their options prior to making a decision. This is a telling peek into effective twenty-first century marketing.

With staggering commercial activity taking place on Amazon.com and a Facebook population larger than that of most nations, the question is not whether online advertising is effective. The question is: “What is most effective?” The answer may not be simply one way or the other. The differences in opinions on the answer to this question may be partly responsible for some of the surprising M&A activity markets have recently undergone. Arguably most noticeable among tech giants, buying big seems to be all the rage right now. Might this be a defensive measure taken by companies lacking the innovation to effectively reach out to that younger and hard-to-reach market? Without a proper answer to that question, shareholders demanding explanations for questionable purchases often find themselves disappointed as they’re left waiting for next quarter’s EPS.

As outdoors merchants continue to grapple for market totalitarianism, perhaps making acquisitions isn’t a bad path to follow. Given the right circumstance, a company with deep pockets such as Dick’s could completely restructure the way they interact with their target audience. Take the startup Gearmunk as an example. With a little-to-no product offering of its own, Gearmunk is a mobile app akin to a travel guide for outdoor adventurists. Before embarking on a trip up a mountain or enjoying a day of intense bicycling, all a smartphone user needs to do is consult Gearmunk to find the best testimonials of products and “must-have” guides for their journey. It’s not hard to imagine the implications of such an app for advertisement opportunities. A prospective customer is more apt to believe what they read from other users online because the anonymous person reviewing the product has nothing to gain by selling the product. Once the customer has determined which supplies they need, a simple tap can show them the price, the nearest Dick’s location and give them the option to purchase online.

An attractive feature of buying a startup is low cost in relativity to growth potential. A company such as Gearmunk could likely be picked up within a small player’s budget, but could provide ground for much firmer footing within the space. Today’s industry giants need to keep that in mind as they seek a competitive advantage. If there is one thing certain for the outdoors industry, it is a need for innovation and acquisition before a kingpin can be identified.

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Hunt or Be Hunted in the Outdoors…Industry

Yes, you read correctly. With more than three out of four Americans regularly participating in active outside recreation in 2013, the outdoor industry has become a $730B giant on the radar of active sectors. Wrought of specialty dealers and small-town shops, the sector seems to be maturing into a battleground for powerhouse players. With plenty of recent action pointing to a narrow future of competitors, many investors are left questioning which companies are poised to survive the bottleneck.

In order for a company to survive the imminent evaporation of market share unaccounted for, it is crucial to define the term “outdoor” so as to decide in what direction the company will barrel on. The broad title “outdoor” is inclusive of everything from jogging shoes and footballs to camouflage coolers and ammunition, but not all companies boasting sizeable wallets have expanded to such a diverse menagerie of products. Could this be a strategy to avoid alienating your clientele and clasping for a splintered branch amid the fall, or a blind spot in the foresight of a company destined to fall behind in a rapidly progressing race to total dominance? It could be that, much like a well allocated portfolio, the secret sauce is in diversification.

Dick’s Sporting Goods (DKS: NYSE $51.19) is a paragon of diversification of product offerings. With a market capitalization at $6.4B, it out-values its closest competitor, Cabela’s Inc. (CAB: NYSE $63.82), by almost 43%. While that gap may not be due to Cabela’s lack of affordable hockey sticks, there’s a strong argument to be made that Dick’s benefits from its varietal array of shelf material. Simply put, the more you can offer a customer in one location, the longer that customer will remain in your store and the more money they are likely to spend.

A veteran of the Wall Street world, Alliant Techsystems Inc. (ATK: NYSE $152.95), is another prime example of a company sticking its hands into as many jars as possible. After seeing its military defense contract division slump 13% YTD at mid-year 2013, it made a bold, if not aggressive, $1B acquisition of both Bushnell and Savage Arms in order to better penetrate the commercial space. With Primos and Hoppe’s in their arsenal of marketable brands, and products ranging from golf gear to performance eyewear, ATK plans to split into two individual companies; one with an emphasis on defense and aerospace, the other a sporting goods provider. Alliant President and CEO Mark W. DeYoung voiced anticipation to see profit from its recent purchase by Q2 2016.

Finally, how could this list be complete without Bass Pro Shop? Though superfluous in store size and racially prejudice by reputation, Bass Pro seems to have quite the stronghold on its loyal fan base. Surveys show that the average customer drives more than fifty miles to the nearest Bass Pro Shop and spends an astounding two hours per visit roaming the gargantuan store. Once again, the longer their feet are on your floor, the more likely they are to break out the credit card. This in mind, many of Bass Pro’s locations now feature full-service restaurants to ensure customers are equipped to spend the entire day traipsing up and down the abysmal aisles of the unapologetically oversized supercenter.

This is only a small sample of the innumerable outdoors competitors in the climb to reign as King of the Hill. With the intimidating buying power and solid, time-tested operational strategies implemented by these players, how is anyone to gain the competitive edge and win the game? Enter technology. Enter innovation. Enter a bright dawn of new marketing strategies and risky usurpation which time-tested strategies no longer apply to. Enter the buying power of the Millennial.