Headquartered in Portland, Oregon, Columbia’s trademark Bugaboo parka with weatherproof shell competes with some UA products, as does Columbia’s performance apparel for a variety of activities and Columbia’s sportswear accessories, boots, and rugged footwear, sold under brands Columbia, Mountain Hardwear, Sorel, and Montrail. Columbia brands are used globally during outdoor activities, such as skiing, snowboarding, hiking, climbing, camping, hunting, fishing, running, and the like. Columbia operates about 50 outlet retail stores and 10 branded retail stores in the USA, as well as 10 in Europe, 2 outlet stores in Canada, and about 300 stores in Japan and Korea. Thousands of other stores sell Columbia products globally, including even Dick’s Sporting Goods and The Sports Authority that UA counts on most.
The apparel industry has a mediocre outlook given weak economies in which consumers are faced with less discretionary income. Items expected to maintain strong sales are those that are well differentiated from competing products, where consumers value the extra features and are less price sensitive to products they deem necessary. More luxury items in both sporting activities are expected to have modest growth. In 2011, the apparel industry reported sales up 5.9 percent over 2010, however much of this gain was the result of inflation and the rising prices of commodities such as cotton, increased labor wages overseas, and increased freight fees. Nevertheless, the S&P Apparel Retail Index rose 22 percent versus a 12-percent increase for the S&P 1500 Index from March 2011 to March 2012. The S&P Footwear Index rose only 11.5 percent during this same time frame.
Apparel sales totaling $77.7 billion was imported into the USA in 2011, up nearly 9 percent from 2010. Approximately 38 percent of all apparel imported came from China. The apparel industry is extremely fragmented with many firms competing for the same customers. For example, the top 10 national brands only account for 16 percent of wholesale apparel sales in the USA with 84 percent of apparel distributed coming from smaller brands and store brand goods. Women’s segment has traditionally accounted for significantly more sales at 55 percent. Men only accounted for 28 percent and children 17 percent of apparel sales in 2011.
The footwear industry grew at a slower rate than apparel in 2011. Fashion footwear accounted for 48 percent of total footwear sales, with performance footwear accounting for 27 percent, sports footwear 13 percent, outdoor footwear 8 percent, and work and safety foot-wear 4 percent. Fashion and sports footwear are expected to be the most significant areas of growth moving forward as people look to improve their fashion looks and the growing health-minded concerns of the public.
Nike was one of the first companies to understand the importance of producing better sporting apparel and footwear for athletes, when Phillip Knight and his track coach Bill Bowerman developed a better shoe for members of the University of Oregon track team. Since the 1960s, there have been many developments and improvements in shoe and apparel design away from the traditional cotton sweat suit and basic tennis shoe. Today, apparel hugs the body and insulates the wearer from cold and keeps them cool from hot. Shoes can be synced to computers to determine performance and impact points for the runner and t-shirt fabrics can even help manage odors. These types of technological offerings keep customers purchasing new items and can create intense competition and brand loyalty.
Where to Produce
China has historically been the low-cost alternative for apparel firms when selection a nation for the production of their products. In 2011 alone, 38 percent of all apparel imports and 74 percent of all footwear imports into the USA came from China. However, with rising production costs, higher wages in China, increased transportation costs and less control over quality, Chinese imports may be waning in the eyes of large U.S. apparel corporations in favor of facilities in Mexico and the Caribbean. UA currently produces many of their items in Mexico and enjoys quicker turnaround and more quality control than some rival firms who import a large percentage of their inventory from China.
UA needs considerably more global presence to gain economies of scale versus its large rival firms. Increasing downward pressure on prices could necessitate that UA effectively expand globally. The primary strategic issue facing UA therefore is how and when and where to expand globally. Other secondary strategic issues facing UA include whether to diversify into other accessory items to reduce the firm’s reliance on apparel and whether to increase its expenditures on R&D to keep pace with changing technological advancements in the apparel industry. UA is strong financially, which does enable the firm to make strategic acquisitions as needed, so the firm should identify potential acquisition candidates around the world. Effective global expansion is an important key to UA’s growth and prosperity in the future. Even South America, Central America, Mexico, and Australia are all sports-minded areas in which UA products should be well received. Perhaps what UA needs most is to fulfill CEO Plank’s vision: “Our long-term vision is to one day have our Women’s business larger than Men’s, our Footwear business larger than Apparel, and our International business larger than our USA business.”