By Jon Marcus Via, Runner's World - Wednesday, March 9, 2016, 2:36 pm
Locals wandering in from the Over Easy diner lately have been asking the employees of the Colorado Running Company what they’ve heard about the competition across town, 4.4 miles away. They mean the Boulder Running Company, which has been bought up by a company called RSG, or Running Specialty Group. Like the other 71 stores RSG has acquired in 16 states and the District of Columbia, it soon will change its name to JackRabbit.
And that’s been getting runners’ attention.
“They’re starting to realize it’s not the same store and not the same people,” said John O’Neill, co-owner of the Colorado Running Company, which is in Colorado Springs. And when customers do ask about this, O’Neill said, “My staff is instructed to say, ‘We’re local. We’re not owned by some chain out of New York City.’”
In fact, RSG is based in Denver. It, in turn, is owned by Finish Line, Inc., a publicly traded footwear, apparel, and accessories chain headquartered in Indianapolis with more than 600 stores.
Whatever the addresses of these big players in the $3.3 billion-a-year athletic shoe business, O’Neill is not the only independent running retailer keeping a wary eye on them.
A market levels off
Local running stores face this new threat from industry consolidation at the same time as they’re being squeezed by flattening sales. The number of specialty athletic footwear stores peaked at 1,343 in 2007, but declined to 1,254 by 2012—the last period for which the figure is available—according to the Census Bureau.
It was 2012 when RSG began to buy up individual stores and small chains across the country, ranging from Roncker’s Running Spot (four Ohio locations) and Garry Gribble’s Running Sports (five Kansas stores) to VA Runner in Fredericksburg, Virginia, and JackRabbit Sports in New York.
Other big companies have also gotten into the race. Fleet Feet, whose locations are mostly franchised, now has 162 locations, up from 138 in 2014. Dick’s Sporting Goods opened TrueRunner stores in Pittsburgh, St. Louis, and suburban Boston. The Sports Authority spun off S.A. Elite.
And with growing online competition—the proportion of running shoes now being sold online is 18 percent, up from 12 percent in 2010, the National Sporting Goods Association reports—this has pushed the share of total sales left for independent local retailers down even further, from 4.7 percent in 2010 to 3.9 percent today.
“We do have to work at it harder than we ever have, not just to remain relevant, but to stand out and maintain our uniqueness,” said Kris Hartner, owner of the Naperville Running Company in Illinois and a 30-year industry veteran.
It would seem at first look as if there’s business enough for everyone. The number of serious runners—those who have entered and finished an organized event—has nearly tripled, from 6.9 million in 1995 to nearly 19 million now, according to the industry association RunningUSA. But that huge increase has been flattening out in the face of new interest in such fitness options as stationary cycling, CrossFit, and yoga.
“The number of running participants has just skyrocketed over the last 10 years, but over the last two years that’s plateaued,” said Parker Karnan, a consultant to running retailers. “And now we’re seeing the market catching up with that.”
This has taken a particular toll on small shops owned by avid runners who almost consider them a hobby, Karnan and others said.
“You might lose a little of that store [with comparatively low annual sales] where the guy just came back from a run himself and you’ve got a bunch of guys sitting around and talking about running all the time—that may not continue,” Karnan said.
Can runners tell the difference?
Many runners may not notice. RSG’s stores try to provide “the same core brand experience with a unique community tie,” said Frank Pruitt, the company’s senior vice president of brand strategy and consumer experience.
That means customers get the feel of an independent running store with enough buying power to make sure they find a shoe they want, when they need it, in their size.
When a new shoe is launched, for instance, and there aren’t enough pairs to go around, it’s likely customers of the stores under the RSG umbrella still can get it through the parent company’s network—something they couldn’t do at an independent store.
“We see that as a distinct advantage for us,” Pruitt said.
Advocates of independent running stores countered that their strength is in actually being local—supporting local running clubs and road races, for example.
“Beyond the service that the locally owned specialty running stores provide, it’s their community outreach and investment in the community that sets them apart,” said Terry Schalow, executive director of the Independent Running Retailers Association.
“They’re investing right back into the local community,” Schalow said. “That might not be the case with a specialty store that’s owned by a chain that’s 1,000 miles away.”
But RSG’s stores do the same things, Pruitt said. Its JackRabbit locations in New York, for instance, in partnership with Nike, threw a 10-mile shakeout run before the New York City Marathon. And the company has been careful to continue many of the local running-club events and fun runs sponsored by the other retailers it has acquired.
Schalow conceded that some customers won’t care who owns the store. “There’s a certain number of consumers out there that, if it looks like, and sounds like, and smells like a specialty running store, it’s a specialty running store,” he said.
Suppliers, too, have been affected, said Sally Bergesen, CEO and founder of Oiselle, which has elected, for now, not to sell to RSG.
Doing business with just one buying department instead of 72, “theoretically would be a great advantage,” Bergesen said. “Better to hit one target instead of  separate ones.”
But big companies “basically use their size and their distribution and buying power to just get everything they can out of the vendor, which can mean everything from demanding discounts on orders to wanting really long payment terms. In general, it’s very difficult for smaller brands to operate that way,” she said.
Beside, she said, “People like their local running store. The local running store that I’ve been shopping at forever in Seattle, I’d be really sad if they were purchased and rebranded. There’s been this across-the-board disregard for the role of the independent running store.”
Pruitt said the RSG stores do make an effort to support small and local suppliers, notably in the offerings of their nutrition departments, and carry products from not just the best-known athletic shoe and apparel makers, but also from companies including Deckers Brands, which makes Hoka One One.
Widening their appeal
Differentiating from larger competitors is up to the independents themselves, O’Neill said.
“We had it so good for so long that you used to be able to just hang ‘Running’ above your door, and people would walk in,” he said. “We’ve had to become much better businesspeople.”
O’Neill said that stores like his must widen their appeal beyond obsessive runners.
“We have to be unintimidating and try to attract that person who runs 10 to 15 miles a week. That’s where our growth can come from,” he said. “That’s really the audience we need.”
He’s an optimist, said O’Neill, a former collegiate runner. “When you own a retail store, you have to be.”
So is Karnan. Strong independents, he said, will also start to pick up smaller ones. And “the impact on the consumer is that, in the long run, the stores that are left are going to be great, great stores.”
The independent shops are also adding employee benefits, raising pay—and doubling down on service. “You have to provide the customer experience, and that’s what I believe people who love and have a passion for running appreciate about us,” Hartner said.
As for that store 4.4 miles away from O’Neill’s that will soon change its name to JackRabbit? “I’ve always been of the impression that, if we all work together to grow running, we’re all going to win, and I view RSG buying up stores as a huge, huge opportunity to me and my independent store,” O’Neill said.
“Bring it,” he said. “I’m not afraid of them at all.”
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For an in-depth look at specialty shoe stores, see Runner’s World May issue feature “Do You Have That in Joy?"