It isn’t just advertising where Decathlon ditches conventional wisdom. In its quest for lower prices, the company also junks the usual approach to retail locations. Indian retail, in general, suffers due to high rentals and a dearth of good locations. Brands like Puma, Nike or even H&M spend months looking for prime real estate locations to attract consumers.
“We don’t make luxury stores. It’s not that we don’t have the money but we don’t invest in anything that doesn’t add value to the final customer.”
—A DECATHLON EXECUTIVE
It has to be avoided
On the other hand, you’ll find Decathlon’s warehouse-like stores in the most off-beat locations, sometimes even outside cities. The objective is simple—avoid high rentals. Decathlon stores are built and managed by the company itself; the land, however, is taken on lease with a few exceptions, such as the Bengaluru head office where Decathlon owns the land.
Decathlon avoids the flashiness associated with its rivals’ stores. Instead, it adopts a no-frills approach. Stores resemble hypermarkets. Fancy window displays aren’t a thing. There are no fancy mannequins. Instead, there are long aisles with products on display, usually arranged according to various sports. Decathlon stores are also characterized by play areas just outside, where groups of people (including Decathlon employees) play badminton, basketball, or at times, football.
Pricing is also kept affordable through a tight supply chain and vendor management system. The company outsources manufacturing to different factories across Punjab, Karnataka, Delhi NCR, Tamil Nadu, and Uttar Pradesh. However, its teams collaborate with these partners to closely control the quality and design of its products. This allows Decathlon to ensure its products look and feel premium, even when its prices are anything but.
Everything after manufacturing, including logistics (Decathlon has its own warehouses) and distribution, is taken care of by the company itself, said at least three of its executives.
Decathlon sells through its own stores, website, as well as online marketplaces like Flipkart and Amazon. “We do not have any third-party involved in the entire process. Hence, the margins don’t go out,” said a company executive, adding that more than 40% of the overall goods are produced locally, while the rest is imported from countries like China, Bangladesh, Vietnam, and Pakistan.
In contrast, a Puma or Nike also sells via multi-brand store outlets like Shoppers Stop and some standalone stores are opened through franchise partners. This raises their overall costs. “If the MRP of the shoe is Rs 4,000, the revenue for Decathlon is Rs 4,000. Others like Nike, Puma, Adidas don’t retail directly and hence, have to pay margins to their partners,” said Mehta, adding that these margins can go as high as 50% of the MRP.
In 2018, Decathlon introduced new digital experiences like self check-out at one of its Bengaluru outlets. While the technology is limited to a single store currently, a company executive said that the trials, if successful, would see a phased roll-out in other stores.
This combination of the supply chain, minimal marketing, and smart real estate selection allows Decathlon to offer the cheapest active lifestyle in town.
“It’s not that we cannot afford to advertise or open stores in prime locations or do all the other things that regular brands do, it’s just a conscious decision to not do those things,” said a Decathlon executive. “80% of the people come back to us because of word of mouth,” he added.
Going forward, the company has an exceptional internal target for India—open 1,000 stores by 2040, according to the executive quoted above. Yes, Decathlon has a 20-year target in India, a timescale no other retail company operating in the country goes by. This target, however, isn’t set in stone. “It’s revised regularly and may now be down to 800. But the price reduction goals are constant,” said another executive at the company.
But while Decathlon’s business in India may be prospering, all is not well back home. Globally, Decathlon is a multi-brand retailer. It also sells third-party brands such as its rivals in India—Adidas, Nike, and Puma. However, last year, the company decided to stop selling international brands and focus on its own portfolio instead. This, it reasoned, would bring better margins. But this move wasn’t taken unanimously.