Under Armour’s latest priorities are to focus on consumer and to shift toward direct-to-consumer channels over wholesale channels in order to have more control over brand positioning, pricing and customer data.
Under Armour (UA) has a well-developed digital strategy that puts customers at the centre of UA’s business through data collection from owned apps such as MapMyFitness that includes MapMyRun and MapMyRide. The app helps the brand to build a strong connected community (1 million people have their connected shoes linked with MapMyRun) and to get better insights into its customer lifestyle (i.e. how much they sleep, eat, workout) in order to understand customer’s buying decisions and provide better products and experience in store.
At the same time, UA does not hesitate to sell apps that do not meet UA’s needs anymore such as MyFitnessPal which was sold in late October 2020 or Endomondo. MyFitnessPal, a database of foods for nutrition tracking, was acquired five years ago with the objective to give UA a direct way to connect with fitness-minded consumers, but now it does not “fully align with Under Armour’s target customer” said Patrick Frisk, UA’s CEO in a news release.
“This announcement reduces the complexity of our consumer’s brand journey by empowering sharper alignment with our long-term digital strategy as we work towards a singular, cohesive UA ecosystem” he added.
Along with its customer-oriented strategy, UA aims to enhance shopping experiences by using an Augmented Reality app at sporting goods chain store Scheels to allow customers to wear virtually signature objects of sports stars such as the helmet of Tom Brady or the sunglasses of The Rock.
UA is shifting toward direct-to-consumer channels
Net sales share distribution of Under Armour worldwide in 2019, by distribution channel.
Source: Statista
However, regarding the distribution channel, UA still has to put more effort in order to maximise the DTC: in 2019 the DTC represented only 34% of the total sales share compared to 60% for the wholesale channel.
On Oct. 30, 2020, UA reported third quarter 2020 results. The brand reported overall flat revenue of $1.4 billion on the year. Wholesale revenue dropped 7% over last year and direct-to-consumer revenue increased 17%, driven by continued strong growth in e-commerce (50% growth during the quarter). Last July, UA launched its revamped e-commerce platform and “now aligns with the majority of our global [e-commerce] business on one platform”, the brand said in its Q2 2020 earnings.
Following these results and UA’s aim to be more customer focused, UA announced to overhaul between 2,000 and 3000 wholesale partnerships in North America in the next few years. UA is actually going the Nike route by focusing on its DTC business. UA is looking for more control on distribution, on how products are presented, for more premium positioning with fewer promotions and discounts, thus yielding better margins. Currently, 90% of UA’s North American stores are outlets, so they usually sell products with low price. The direct-to-consumer sales can also give UA a direct relationship with customers.
References:
· Dowd, J. (2020, November 3). Under Armour Will Exit up to 3,000 Wholesale Partnerships to Focus on DTC. Retail TouchPoints. https://retailtouchpoints.com/features/news-briefs/under-armour-will-exit-up-to-3000-wholesale-partnerships-to-focus-on-dtc
· Salpini, C., & Salpini, C. (2020, October 30). Under Armour to exit up to 3K wholesale doors, sell MyFitnessPal. Retail Dive. https://www.retaildive.com/news/under-armour-to-exit-up-to-3k-wholesale-doors-sell-myfitnesspal/588131/
· Germano, S. (2020, October 30). Under Armour calls time on connected fitness business. Financial Times. https://www.ft.com/content/7e16038b-6e65-4970-bac4-d6d829b5202e
· Virtual Reality Marketing. (2019, November 30). Under Amour Augmented Reality Face Paint. https://www.virtualrealitymarketing.com/case-studies/under-amour-augmented-reality-face-paint/
· Statista. (2020, March 3). Under Armour's net sales share worldwide in 2019, by sales channel. https://www.statista.com/statistics/259180/net-sales-share-of-under-armour-worldwide-by-channel/
· Schwartz, S. A. (2020, September 28). Under Armour’s digital push continues through slumped financials. CIO Dive. https://www.ciodive.com/news/under-armours-digital-push-continues-through-slumped-financials/586002/
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