On a Winning Streak
Hibbett Sports Adds JDA Markdown Optimization to Its Roster, Continuing a Long Track Record of Successful Implementations
Hibbett Sports has grown from a single store in Birmingham, Ala., to more than 890 stores across the U.S. — all while retaining a strong local focus in each of its markets. In addition to selling sports equipment and apparel from brand leaders such as Nike, Under Armour, adidas, The North Face and Oakley, the sporting goods retailer sells fan apparel for college and professional teams that is specific to its local markets.
With an average store size of approximately 5,000 square feet, it is critical for the retailer to target its merchandise very carefully to ensure that consumers in every market will find exactly what they're looking for. To support this localized market strategy, Hibbett Sports has, since 2006, relied on a growing suite of solutions from JDA Software.
First, the retailer deployed JDA solutions for merchandise planning and store-level replenishment. “As we added JDA solutions, we increased our ability to establish and integrate our planning processes — including strategic, merchandise and key-item plans — at lower levels of detail,” said Mike McAbee, strategy officer and vice president of merchandise planning for Hibbett Sports.
The retailer also increasingly integrated these plans into its financial plans, so it could see the bottom-line impact of any changes in its key performance indicators. In 2010, Hibbett Sports added JDA solutions for assortment planning, channel clustering and size scaling, resulting in increased operational performance and efficiency.
Founded in 1945, Hibbett Sports operates more than 890 sporting goods stores in small and mid-sized markets, and employs approximately 7,400 associates. The company's fiscal 2013 revenues were $818 million, an increase of nearly 12 percent over the previous year.
Prove the sustainability of its expansion strategy by ensuring that its products were priced appropriately, given regional differences.
New Territories Change the Game
As the company expanded into new regions, it realized there were some new challenges it needed to address. “We began to open stores in the North and Northwest, and started to see how differences in regional economies, weather and sports seasons were affecting sales,” said McAbee. “In general, sports seasons are different by several weeks or months based on different parts of the country. This makes it very difficult to execute end-of-season markdowns at a chain level. The majority of the stores are either too early or too late.”
The company wanted to gain a better understanding of its regional selling seasons, as well as the differences in merchandise seasonality, in order to move products in and out of the stores quicker. Hibbett Sports evaluated a wide range of vendors, but once again, turned to JDA.
“By using JDA Markdown Optimization, we will look to minimize that challenge of executing end-of-season clearance pricing at a chain level,” said McAbee. “However, our decision really came down to the demand forecasting system. The other vendors we looked at provided a forecast that was just for the clearance items. With JDA Demand, we were able to get one version of the truth — one forecast for the life of the product — and then scale that into replenishment planning and markdown optimization.”
During the implementation, JDA Services played an instrumental role. “They were able to bring in people who not only had a lot of experience with demand forecasting, but also a lot of retail experience. Instead of trying to recreate what we were already doing, the Services team had the ability to look outside and envision what we could possibly achieve.”
A Targeted JDA Solution Joins the Lineup
Since implementing JDA Markdown Optimization, Hibbett Sports has improved its ability to anticipate changing seasons in different areas of the U.S. and price its products for optimal movement and margin protection. “The solution is helping us be much more efficient in our markdowns,” McAbee said. “It's a tool that our buyers use to accomplish what we call price-zone level pricing.”
As part of its price-zone level pricing strategy, the retailer has taken its store footprint in 31 states and segmented it into four groups. “Buyers can now take different price actions in these four areas of the country, whereas in the past we had one pricing strategy for the whole country,” said McAbee. “We're able to face those challenges that were related to our expansion in the North. We're able to mark down merchandise in the state of Iowa and still keep them at a regular price in Florida.”
Hibbett Sports is also able to respond appropriately to local demand surges or drops when popular teams are winning and losing during the selling season. “JDA Markdown Optimization enables us to look at team apparel a little differently,” he noted. “When a team wins or a team loses, we can react to that regionally and not necessarily have to mark down apparel pricing everywhere. That's been a big benefit for us.”
Impressive Stats Reflect Real Results
Hibbett Sports has realized some significant financial benefits following its pilot implementation of JDA Markdown Optimization in 20 product subclasses. “For the fourth quarter, we had a sales improvement of 25 percent over last year in those 20 subclasses. We had an inventory turn improvement of almost 21 percent, and we had a GMROI — gross margin return on investment — improvement of more than 25 percent,” said McAbee. “We're very pleased with those results, and because of that, we've begun to roll out JDA Markdown Optimization across our company.”
In addition to improving the accuracy of end-of-season pricing, the solution has also greatly enhanced the productivity of the Hibbett Sports purchasing team. “The solution has reduced the amount of ‘heavy lifting' required from our buyers,” McAbee said. “Because our buyers are so busy, markdown tends to be one of the last things that they look at. And when they do, they have hundreds of items to look through and are probably not always making the best decisions because they just really don't have the time. With JDA Markdown Optimization, we're able to leverage the software's capabilities to make good, strong decisions — and we've seen great results from that so far.”
The solution has also enabled Hibbett Sports to test and verify its pricing plans, proving the sustainability of its expansion strategy. “As we've moved out of our comfort zone in the Southeast, we've often asked ourselves, ‘Does our pricing model work in all 50 states?' As we work to expand outside of our current base of stores in 31 states, we can do that knowing that our pricing model works in all 50 states.”
JDA and Hibbett Sports: A Winning Team
When McAbee joined Hibbett Sports in 2002, the retailer was only operating about 350 stores. Today, the company is well on its way to realizing its goal of 1,500 stores, spanning the entire U.S. McAbee believes that the successful partnership between Hibbett Sports and JDA will continue to support that growth.
“Every time we go out to look for a new solution, we do evaluate everybody else in the marketplace — but that great partnership we have with JDA continually brings us back to their solutions and their offerings. Working with JDA has been great for our company. We started a partnership with them in 2006, and we're still together today. The experience has been phenomenal,” said McAbee.