Mon 24th Sep 2012
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So it’s finally happened – it was announced today that JJB Sports is to call in the administrators. It’s been mooted for a while but the management had kept things going by restructuring through two company voluntary arrangements and four emergency fundraisings.
In the end though they have had to bow to the inevitable – the company could no longer afford to service its debts. How has a business worth more than £500m two years ago and more than £1bn 10 years ago ended up like this?
Basically not enough shoppers have been walking through JJB’s doors and spending enough. Why? Well essentially JJB got caught in the middle between the relentlessly price focused Sports Direct and the upmarket sports-fashion focused JD Sports.
We’ve seen it in other categories since the financial crisis hit – consumers who are still spending are going one of two ways, either looking for the best possible price or heading for the premium more expensive end of the market. It’s happened in the car market where the previous volume powerhouses of Ford and Vauxhall are now struggling between the newer, cheaper brands from the far east and the premium brands of Mercedes, BMW and Audi.
Why are consumers looking at opposite ends of the spectrum? They’re looking for that stalwart of marketing speak – differentiation. Sports Direct has clearly claimed the value territory in the category and achieved recognition for this. JD Sports on the other hand embraced the fusion of sport and fashion typified by adidas Originals and differentiated itself on this basis.
Both give consumers a clear reason to visit their store or website and offer them choice at each end of the spectrum. Companies and brands are increasingly finding that it’s easy to get caught in the middle and that unless you take quick and decisive action the middle ground can quickly and ruthlessly turn into no-man’s land. Just ask JJB.
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