The world's most slammed shopping mall, selling 100 billion yuan a year

Image source @ Visual China

Wen | Deep Krypton New Consumption, author | Mu Jiujiu, editor| Huang Xiaojun

Decathlon is known as the "IKEA" of the world of sports.

In 2016, physical retail was forced into a depression by e-commerce, but the brand added 164 new stores around the world and achieved revenue of more than 10 billion euros for the first time.

In 2020, most similar brands suffered greatly from the impact of the epidemic, but Decathlon achieved global retail sales of 14.4 billion euros (about 101.232 billion yuan) and a net profit of 550 million euros (about 3.866 billion yuan).

Today, Decathlon has more than 1,300 stores around the world, making it a leader in the sports world.

01, cut the door Tocklon, rely on cheap to penetrate the mass market

In 1976, MichelLele Releck, who originally ran a sock shop, founded Decathlon's first shopping mall in a small village in northern France. On that day, the mall's sales were short of more than 10,000 francs, just one pair of socks.

Why did it explode when it opened? The answer is cheap enough.

At that time, France could be said to be the home of luxury goods around the world, and luxury brands such as Hermès, Louis Vuitton, chanel and so on were all born here. Expensive, is their unified label.

But Decathlon, which was also born here, changed the luxury and took the cheap route. Walking into this mall, 29 yuan backpack, 30 yuan of quick-drying T-shirts, more than 100 yuan of sneakers... On the blue discount label, even the gloves of 9.9 yuan are available.

Low prices seem to have become a key magic weapon for Decathlon.

But in fact, there are very few brands that can fight Taobao and Pinduoduo, and the simple price reduction cannot guarantee the steady growth of performance for many years. So, how did Decathlon break through the market at low prices?

The answer is to "cut the door".

Unlike other brands that make great efforts to ask celebrities to endorse and promote marketing, Decathlon is more like an "invisible person" in marketing, without large-scale co-branding, marketing and promotion, even if it is publicity, it is just ordinary advertising.

The media manager of Decathlon China has said that Decathlon advertising costs account for only 1% of turnover, so small that they are almost negligible.

For consumers, the most direct door cutting is reflected in the packaging savings.

The importance of packaging is self-evident, in addition to conveying the culture of goods and highlighting brand value, it may also assume the role of brand premium in the sales process. To this end, there is no shortage of brands that spend energy on creating packaging to raise the price of goods.

Earlier, the seller network reported that a children's water brand relied on packaging premiums of 4 times, and the price was as high as 65 yuan / bottle. During large festivals, the phenomenon of packaging premium is even more prominent.

Just when the brands "angrily denounced" the funds to create packaging, Decathlon went against the grain.

Not only did Decathlon have no outer packaging for many of its products, but even the shoe boxes for shoes were saved. They believe that the abandonment of flashy outer packaging can maximize cost savings and give profits to consumers.

02, do not obey to do it alone, 96% of their own brands to create cost-effective

The front-end "door-cutting" is just one of Decathlon's measures to achieve low prices. In order to ensure that the product quality can still be improved under the condition of low prices, Decathlon has long carried out the whole industry chain business model.

Within a few years of development, the fast-growing Decathlon and upstream suppliers had a conflict of interest, the latter hoping that Decathlon would take advantage of the scale effect to raise prices for profit, and even limit the supply everywhere.

In order to get rid of such constraints, Decathlon began to change its business model.

At that time, Decathlon not only established its own purchasing company, but also established the "Decathlon Manufacturing Company" in 1986 and began to design and produce its own brand products. Gradually, Decathlon began to design a series of its own brands such as water sports brand Tribord, mountain sports series Quechua, team product series Kipsta, etc., and finally achieved full category coverage.

While the product category has increased and the market has been expanding, Decathlon has also changed from the initial sales of only foreign brands to its own brand sales.

Today, more than 96% of Decathlon's stores are owned brands. All this benefits from the complete whole industry chain behind it.

At that time, most of the sports industry was inseparable from two production models: one was the brand agents such as Taobo and Cross-world, operating multiple foreign brands at the same time to enhance the value of channels through the layout of terminal stores; the other was the OEM foundry production mode that other brands focused on R & D design and brand marketing promotion, and subcontracted production.

Compared with most enterprises focusing on a certain link in the industrial chain, Decathlon has created a rare whole industry chain system in the market from product design and development, production and processing, logistics and distribution to retail terminals.

Taking Decathlon's first overseas Chinese market with a whole industrial chain as an example, although Decathlon already had a production base in Guangzhou before officially entering China, China at that time was only produced as a foundry, and most of its products were sold around the world.

It was not until it realized the potential of the Chinese market that Decathlon officially entered the Chinese market and quickly laid out the entire industrial chain in China.

In 2013, Decathlon chose its racquet sports brand Atengao Artengo to start the whole industry chain to test the waters, moved the badminton R&D center from France to Shanghai, realized the seamless connection between the product development center and the production department, shortened the development cycle from two years to 6 months, and officially listed the first batch of rackets designed by the China R&D center in 2015.

In this way, Decathlon completed the first full industrial chain construction in China except for its headquarters in France. Today, Decathlon has 4 own factories and 12 production bases in China, and China production alone can meet 89.6% of China's retail sales.

This whole industry chain layout model is similar to IKEA, not only mastering the complete industrial chain, less middlemen to earn the difference, effectively controlling costs, ensuring low-price sales of goods, but also ensuring the initiative of product research and development and quality control.

Take the fleece jacket launched by Decathlon in the early years as an example, although the price is only 49 yuan, the fabric density of the product is as high as 200 grams, and the warmth is better, while other products at the same price point, the density is mostly less than 200 grams, and the warmth is obviously not keeping up. Because of this, Decathlon's fleece jacket has become a sales hit for several consecutive years.

Relying on the whole industry chain, Decathlon has successfully occupied a place in the sports market.

03, the shoddy behind the low price, is the commercial accident or the original sin of the model

Throughout the country and abroad, there are not a few successful companies that have successfully competed with low prices: Xiaomi, IKEA, Costco, Dell, etc. are typical low-cost well-known brands, and low prices are not lacking as a sword to enter the market in the early stage.

But is low price really the way out of industry competition?

Global Pricing Industry Expert Herman. Decades of research by Professor Simon and his Simon Advisory team have found that companies that succeed globally by positioning high-price strategies are much higher than those that succeed at low prices.

This is because the low-price strategy is fundamentally inseparable from cost control, that is, on the basis of controlling costs, the conversion between low prices and high profits is realized. This means that if companies can continue to maintain low prices, even ultra-low prices, they are likely to outperform other competitors and stay ahead.

In this process, price becomes the only, definitive measure.

In contrast, the core of high-priced products is to achieve high profits through high value. In this regard, value can often be achieved in a diversified way compared to price.

For example, if you buy a high-value product, some of its unique features may be the value of it, while for others, its appearance, color, and even limited edition may become value. Therefore, as long as it meets a certain high-value demand of consumers, it can be identified as a high-value product and achieve high profits.

Of course, we don't think that high-priced positioning is necessarily more advantageous than low-priced positioning. However, it is undeniable that under the low-price positioning, the requirements of cost control are indeed easy to cause price dilemmas for brands.

Due to cost control requirements, brands are often limited in product development and production, but the truth is that no one can completely avoid the conflict between quality and cost. What's more, high quality and low price may be used as a weapon for enterprises to charge in the early stage, but this advantage is also very easy to be noticed and copied. Once competitors come and brands fail to establish their own moats, they are highly likely to lose competitiveness.

This point is most obvious in the millet that initially entered the market at a low price, and after the rise of millet, a large number of mobile phone brands focusing on low prices have attacked the city, resulting in the problem of weak growth of millet.

Today, Decathlon may face the same problem.

At present, Russia's largest sporting goods retailer Sportsmaster (Meister) and Switzerland's Intersport have entered the Chinese market, although the number of stores is temporarily small, there is no ability to fight With Decathlon head-on, but when competitors target Decathlon, crises can occur at any time.

In addition, low prices do not mean that there will be less expectations for product quality. On the contrary, most consumers prefer good and inexpensive goods, and they can often accept products with good products and high prices, but they cannot accept products with poor products and low prices.

In the past two years, Decathlon has been blown up many times due to quality problems.

In September 2021, Decathlon (Shanghai) Sporting Goods Co., Ltd. was punished again. Prior to this, the company was repeatedly fined for manufacturers and sellers for adulterating and adulterating products, using false as genuine, shoddy products, or passing off unqualified products as qualified products.

In January 2022, China Consumer Daily reported that in the 2021 sports shoe comparison test report released by the Beijing Consumer Association, Decathlon's sports casual shoes did not meet the standard requirements.

Decathlon, which was originally favored for low prices, is now being complained about because of the reduction of product quality and category. At the same time, as a sports store that focuses on low-end entry-level sports, Decathlon may also face the problem of consumer loss.

After all, mass consumers go from "not understanding" to "understanding", from "making it up" to "wanting to be better", the process is too fast to be caught off guard.

In the past, the miracles created by Decathlon are obvious, but how far it can go in the future is still unknown.

Resources:

Why has Decathlon become a leader in sports brands? 》

"Sports Industry Retail Giant, Cost-effective Ten Billion Brands, Decathlon's Business Approach"

"Decathlon: How to achieve the ultimate price performance"

Deciphering Decathlon's Supply Chain Management Model

Price Positioning, "High Price" or "Low Price", which is more likely to succeed? 》