JD Sports has hit the acquisition trail hard recently, but key to the success of its spending spree will be digitally integrating its businesses into a global network.
The sportswear specialist, which last week reported a 24% rise in pre-tax profits and a 33% increase in sales in its last full year, peppered its results statement with references to digital transformation, business integration and catering for its youthful customer.
JD is in the process of knitting its fast-growing group together, making sure that a consumer in South Korea will have an equivalent experience to one in South Kensington.
The retailer said that it was dedicated to “satisfying a demanding digital-first consumer with innovative technology which can be rapidly evolved to react to dynamic consumer expectations”. In plain English, that means marrying adaptable technology with consumers’ actual habits.
This is illustrated by its “app first” mentality, which already sets it ahead of much of the pack, where “digital first” is the common aim. JD has made that mindset a reality, creating an app in every country it operates in.
Its UK app, in particular, clearly resonates with JD’s customer base – it was the most downloaded retail app during the last Black Friday week, according to JD’s finance boss Brian Small.
JD doesn’t confine its presence on a customer’s smartphone to its own app. The retailer has around one million followers on Instagram and launches its many exclusive products on its feed, tapping into the youthful trend for athleisure, which shows no sign of abating.
“JD behaves the way their shoppers do,” says Peel Hunt analyst Jonathan Pritchard. “These are 15- to 20-year-old kids – they are completely obsessed with their phones. JD has a very good, very functional app and they are very, very good at social media.
“They think that they know 16- to 18-year-old boys better than anyone.
“Their brand ambassadors include [Grime artist] Stormzy and their language and voice on social media is very much on their customers’ wavelength. They understand what makes a teenager tick and have managed to connect with their customers digitally.”
JD also offers its customer unlimited next-day delivery for £9.99 a year – but this offer can only be accessed through its app. This gives customers a reason to download and use the app.
“We know with Amazon Prime that people are loyal to the service and not to the brand,” says Salmon global head of retail Patrick Munden.
“We also know that free next-day delivery is very important to them. So what JD has done is work on an app mentality but created a very strong multichannel presence around that.”
“They think that they know 16- to 18-year-old boys better than anyone”
Jonathan Pritchard, Peel Hunt
JD’s app and social media presence are complemented by in-store technology such as kiosks, which let customers browse and buy online product in-store, and digital screens, which dominate its flagship stores, making bricks and mortar an interactive digital experience for shoppers.
Because those kiosks allow customers to pay in cash at the tills, teenagers with money made on paper rounds or cash-in-hand jobs at the local café can access a huge online stock pool and still pay in cash.
Of course, digital transformation does not stop with shiny apps – it needs to permeate through everything that a retailer does.
JD is developing its logistics capabilities so that its kiosks and apps will be serviced by “multichannel infrastructure, which provides consumers in multiple territories with access to a universal stock pool and enables them to shop with us in the channel and at the time of their choice”.
“A lot of multichannel retailers keep stock for online and offline separate,” says Munden. “JD Sports has one stock pool. It’s all seamless. And they have put in systems that can work across channels really well.
“JD is driving cross-channel sales through what they offer digitally,” adds Retail Week head of data and research Rebecca Marks. “Customers can see in-store stock online through the app and on mobile and desktop, and knowing that availability drives in-store purchases.”
“When they knew what they were doing, their foot went to the accelerator and digital penetration shot up”
Patrick Munden, Salmon
This is the result of years of work on JD’s part, which has “internationalised” its logistics capabilities over recent years, creating a universal stock pool supplemented with local inventory in individual markets.
“JD started quite slowly online,” says Munden. “They didn’t race for sales on day one, they took a view and looked at models around the world and didn’t throw money at it.
“Then when they knew what they were doing, their foot went to the accelerator and digital penetration shot up.
“They haven’t been first-movers here, they have been cautious. Now they have a single view of stock – they have one stock pile so every store has access to everything they sell.”
In a globalised world populated by digital natives, this is the gold standard. Small tells Retail Week about the importance of creating a “seamless experience”, allowing that universal stock pool to be accessed in-store and online at the touch of a button.
Across the Finish Line
Those multiple territories will soon receive a large boost when JD formally acquires Finish Line. The retailer is waiting for shareholder approval for its acquisition of the US business, which should bolster its top line by £1.3bn and propel its already significant international business to new heights.
It plans to convert some Finish Line stores into the JD fascia and will monitor how successful that transition is in an effort to avoid a Bunnings-style disaster.
Brand recognition is a powerful factor in attracting and retaining shoppers, but although the JD name is not known in the US, the retailer has an advantage – it is selling world-famous sports brands.
“When you start in a new territory, your brand doesn’t have the recognition that you want,” acknowledges Small. “What is different about JD from lots of retailers going into the States is that our business is founded on accessing the best product from the best brands.
“If you open with those brands in the window and exclusive product, the consumer switches on to that pretty rapidly.”
That strong relationship with brands typifies JD’s network-style strategy. It elevates the retailer in the eyes of consumers through their existing relationship with desirable brands.
“JD’s customer is very brand-oriented,” says Munden. “That, together with their universal stock pool means they are in a great position to trade a loyal customer for exclusive product deals with brands. And that creates a virtuous circle.
“You put a loyal customer, excellent systems and exclusive product together and you get a multiplied effect.”
So long as JD’s weaving together of its customers, brands and digital and logistics capabilities doesn’t snag, the business looks match fit to replicate its UK success overseas.