Presented By:
Stephen Fishel
Kaitlin Arbogast
Grafton Elliott
Company Profile: Background
• One of the leaders today in the sporting clothes and accessories industry.
• Based out of Baltimore, MD.
• Annual sales around $2.25 billion dollars and continuing to grow.
• Biggest competitor is Nike (Reebok, Adidas, Puma)
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Annual revenue of around $25 billion
(Yahoo Finance, 2014)
Company Profile Cont…
• Under Armour offers a total of five product lines:
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Cold Gear
Loose Gear
Turf Gear
All-Season Gear
Heat Gear
• Firm focuses on innovative products
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Shirts that monitor heart rate
Shoes that mimic the human spine
Tape-replacing cleat
http://www.youtube.com/watch?v=oYCvIr0fWnM
Sporting Apparel Industry
• Industry is expected to exceed $126 billion by 2015.
• Market is driven by a trend toward healthier, more active lifestyles.
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Older demographics and women becoming more active.
• Consumers are demanding more versatile wear with wider functionality.
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Retailers continue producing new styles of sports apparel.
• Challenges faced by companies include fashion trends, tough
competition, and more price-conscious shoppers.
• Industry is highly fragmented with many brands competing with each
other.
(Report Linker, 2014)
Target Market
• Main Target- Athletes of both genders and all ages.
• Also cater to every-day person
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Loose Gear product line is catered to every-day casual wear.
Stage #1: Need for Channel Design
Decision
• Today, UA uses a selective distribution strategy (multi-channel design).
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Sell to both wholesale and retail as well as directly
• Principal customers: Dick’s Sporting Goods, Eastbay, and Sports
Authority.
• Approximately 90.5% of net revenues are made from wholesale
distribution.
Selling Directly
• Selling directly= competitive advantage.
• E-commerce is growing and becoming the preferred way to shop by
consumers.
• Online retail sales expected to grow from $225.5 billion today to $434.2
billion in 2017 (U.S. E-commerce Sales).
• Focus more on e-tailing while still selling wholesale.
Selling Directly
• UA could find a niche provided customers with personalized and
customized products.
• UA must keep up with competitors such as Nike and offer similar options.
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Nike ID
Stage #2: Distribution Objectives
• Change is not necessarily needed but more focus on directly selling to
consumer.
• Overall distribution objective: Be the market share leader in the sporting
apparel industry (UA Executive Summary, 2014).
Congruency in Marketing Mix
• Product, price, and promotion must be congruent with overall
distribution objective.
• Raised prices due to the nature of the product.
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Customized and personalized products cost more to manufacture.
• Promotion needs to be ramped up to raise awareness to consumers.
Stage #3: Specifying Distribution Tasks
• Effective distribution= sustainable advantage in online retail market.
• Customization is a value co-creation method for consumers.
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Involving customer in production process= attachment to company.
Distribution Tasks
• First task: Gathering marketing research on buying habits of target
market.
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Identification of products to customize.
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Explore customization options.
• Second Task: Promoting online sales/customization to target market.
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Promotion in sporting goods stores and other retail locations.
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Advertising (Internet and TV)
Distribution Tasks
• Third Task: Maintaining inventory storage
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Customization option leads to new manufacturing methods and materials.
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Maintaining inventory=ability to keep up with demand.
• Fourth and Fifth Tasks: Successfully selling the product to consumers.
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Fulfilling online orders
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Staying ahead of the competition.
Stage #4: Alternative Channel
Structures
• Everything begins with manufacturing plants.
• UA’s products are primarily manufactured in Asia, Central and South
America, and Mexico (Under Armour, 2014)
• UA channel members MUST have the ability to perform multiple
manufacturing steps.
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Reduces costs
• “Quick-Turn Special Make-Up” manufacturing shop in Glen Burnie,
Maryland.
Alternative Channel Structures
• Two-level Channel Design:
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Exclusive Distribution
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Customers purchase products directly from Under Armour website .
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Products are shipped using facilitating organization s (ship, plane, truck).
• Three-level Channel Design:
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Selective Distribution
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Flow of products from manufacturer to wholesaler/retailer to end user.
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Customers are encouraged to but at “Under Armour Brand Houses”
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Only 5 brand houses on east coast making accessibility limited.
Under Armour seeks middle men who can perform a various number of production
taks
Channel Structures Cont…
• Four-level Channel Design:
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Most profitable channel structure used by Under Armour.
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Intensive form of distribution.
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Main benefit= increased level of customer service.
Manufacturer
Wholesaler
Retailer
End-user
Stage #5: Evaluating Variables
• Market Geography:
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Under Armour has approximately 120 US “Brand Houses” within 49 states.
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Speciality stores in Maryland, Massachusettes, and Illinois.
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Factory House locations in 34 states from Maine to California also California.
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International Locations: Hong Kong, Toronto, and the Netherlands.
• Market Size:
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Domestic and International operations.
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Opportunity to reach customers all over the world making their market size
substantially large.
Evaluating Variables
• Market Density:
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Areas with higher density need less channel member support
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I.e. Hong Kong, New York
• Market Behavior:
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Refers to customer buying behaviors.
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Under Armour divides their target market between high level sports teams and
individual consumers.
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Individuals typically buy in small quantities based on sporting season.
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Team orders are in bulk.
• Under Armour sponsors many college athletic teams as well as
professional teams such as the Baltimore Orioles and Baltimore Ravens.
Evaluating Variables
• Market Behavior:
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Repeat purchases come from customers that need different attire according to
sporting season.
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Purchases can be made directly or from a variety of retail locations.
• Who does the buying?
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Parents purchase for children
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College Institutions/athletes
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Well accomplished athletes
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Individuals themselves
Evaluating Variables
• Product Variables:
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Degree of Standardization: Less need for intermediaries for
customizable/personalized products.
• Company Variables:
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Most important are size, financial capacity, managerial expertise, and objectives
and strategies.
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Under Armour has high degree of flexibility in choosing channel structures due to
their size.
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Under Armour also has power bases:
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Reward
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Coercion
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Expertise
Evaluating Variables
• Objectives and strategies:
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UA needs a higher level of control over products since they are customized.
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Limits the use of intermediaries.
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Objectives include promotion.
• Intermediary Variables:
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Availability: Custom channel will be needed to provide strong technical expertise as
well as custom-designed apparel and footwear.
Evaluating Variables
• Environmental Variables: Competitive Environment
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Under Armour must be concerned about horizontal competition with companies
such as Nike, Adidas, and Reebok.
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Intertype competition with intermediaries such as Dick’s Sporting Goods and UA
retail brand outlets.
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Channel design should directly sell to consumer due to efficiency and effectiveness.
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Competitive edge
• Technological Environment:
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Technology allows for customization to exist.
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Internet provides Under Armour access to organizing and sharing unlimited
amounts of information for consumers.
Evaluating Variables
• Behavioral Variables: Use of legitimate power
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Under Armour has to be able to control its distribution objectives.
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The company will have most, if not all, control over distribution when selling
customized/personalized products.
Stage #6: Choosing “Best” Channel
Structure
• Best design for individual customized products is a two-level design
selling directly to the consumer.
• Warehousing is necessary to store products before being shipped (similar
to Amazon).
• Bulk orders can be manufactured at facilities such as the one in Glen
Burnie, Maryland.
Stage #7: Selecting Channel Members
• Selling directly to consumer, for the most part, does not necessarily
require the need for channel members.
• Current Under Armour distributors have:
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Sales Strength -Dick’s Sporting Goods Revenue 2013: $6 Billion. (Market Watch)
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Large Size- Large volumes of sales, established, profitable.
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Market Coverage
• Inducements from Under Armour:
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Strong Product Lines.
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Ability to provide advertising and promotional support.
Questions?
Sources
• http://money.cnn.com/magazines/fortune/fortune500/2013/snapshots/11
068.html (Market Watch)
• http://www.underarmour.com/shop/us/en (Under Armour)
• http://finance.yahoo.com/ (Yahoo Finance)
• http://www.reportlinker.com/ci02121/Sport-Clothing-andAccessories.html (Report Linker)