«ENTREPRENEURSHIP CASE JEUX DU COMMERCE 2013 Written by Jonathan B.-Mailhot for the Jeux du Commerce Context On November 18th 2012, Éric sits at his ...»
JEUX DU COMMERCE 2013
Written by Jonathan B.-Mailhot for the Jeux du Commerce
On November 18th 2012, Éric sits at his desk, in a large room surrounded by windows located on the top
floor of Candiac’s Hockey Supremacy warehouse, on the South Shore of Montreal. Before going over the
orders placed during the night, the Cyberpresse’s headlines caught his attention at first glance: Canadian
Tire takes over Sports Rousseau. This is the second major acquisition in Quebec's sport retail industry by massive Canadian Tire Corporation in less than two years. A year earlier, Canadian Tire had acquired the Forzani Group, which runs many national sport retail banners such as Sport Chek, Athletes World, Sports Experts, Intersport, Atmosphere and Hockey Experts. This latest takeover tightens Canadian Tire’s grip on the sports equipment niche, especially in Quebec, where there is only one other major group: La source du sport, a retail chain.
Over the past five years, online sales of hockey equipment has increased significantly in Canada.
Nowadays, most stores have a portal which helps them widen their commercial reach. This results in stronger competition within retailers, and this latest major acquisition announcement promises to shake the competition yet again.
With this in mind, Hockey Supremacy must reflect on its growth strategies.
It should be noted that this asymmetrical competition is highly regulated. For example, all new high-end products destined to top players must be sold at the manufacturer’s suggested price. For that reason, online retailers cannot compete with each other based on the selling price of these products. Hockey Supremacy, which targets mostly (but not exclusively) this demanding top-players clientele, is working on setting up an e-commerce strategy that would be successful despite the stringent terms imposed by manufacturers.
The Company Hockey Supremacy, founded in 2011, is an independent hockey equipment retailer. Its mission is to offer Quebecers and Canadians the best online shopping experience for their hockey equipment. Its vision: an easy, user-friendly and well-structured platform making it easy for their clientele to find all the necessary information related to their hockey equipment purchases.
The company is committed to selling hockey equipment at prices that are more than competitive, as well as offering several loyalty programs that allow clients to get the best deal when they shop.
Customer service is at the forefront not only during the purchase, but also after the sale is completed;
Hockey Supremacy’s employees are always available to guide the customers, ensuring that their whole shopping experience is seamless from start to finish. Hockey experts, via online support, are able to answer, without delay, every question related to equipment and prices, and even offer tips from the pros.
Hockey Supremacy's first store is adjacent to its head office. It was built at the request of suppliers, who insisted on Hockey Supremacy having an actual physical store prior to opening an account with them. In fact, a high level of local demand led the company to open a second store within the same year, though their focus remains on e-commerce.
History Éric Légaré is a young entrepreneur from the tourism and hotel trade. It is neither his education nor his
work experience that brought him to launch his business, but rather the practice of his favourite sport:
As a player, Éric was always on the lookout for the latest developments in hockey gear. Over the last few years, sport manufacturers have truly revolutionized hockey by introducing products allowing the players to give the best of their performance. When shopping for himself, Éric does not enjoy the large chain store experience. He prefers by far the expertise and the service of the small, mostly local businesses. However, those small retailers don’t have the necessary space to offer the wide hockey equipment selection that is now available. To get everything he needs, Éric shops at online stores such as www.hockeymonkey.com When ordering online, Éric enjoys substantial savings at purchase. Unfortunately, those savings are long gone after including shipping and handling fees in addition to custom charges. Furthermore, many regulations imposed by sport manufacturers forbid expedition in foreign countries and/or cancel warranties when the product is sold abroad.
After discussing with his sporting acquaintances, he soon realizes he is not the only one who is frustrated by this situation. After an exhaustive market analysis, Éric discovers an exploitable niche market and, in 2010, founds www.hockeysupremacy.com.
Partners and Corporate Structure Éric owns 80% of Hockey Supremacy. As its president and founder, he leads the business towards a constant growth while staying abreast of the market and new technologies. His expertise in ecommerce, the Web and online marketing allows Éric to remain up to speed with the changes in commerce 2.0.
Éric seeks management support from his father, who shares his experience of working for 35 years in the bank industry. His father takes part in the business’ accounting and provides valuable vision and knowledge. He owns 10% of the company.
Éric’s second business partner is his brother. A college anthropology professor, he is an advanced user of social media and the Web. He brings a modern vision and a critical outlook to every new project. He played a crucial role in conducting the market research and he is the owner of the other 10% of the company.
Besides the involvement of his family, Éric has also surrounded himself with skilled partners in order to develop Hockey Supremacy. Internally, he has five full-time employees, who run both Candiac’s and Brossard’s stores. They take care of customer service, they help with inventory management and the ordering process. Externally, Éric also does business with a highly qualified graphic designer, as well as a mentor for SEO/SEM management.
Marketing Strategy Hockey Supremacy understands the importance of an effective marketing strategy in order to continue its national expansion and increase its market share. Here are various current marketing campaigns.
SEO / SEM / Social Networks Hockey Supremacy wants to top the search engines' lists linked to hockey gear made available on the Web in Canada. Thanks to services such as Google Adwords, Éric and his mentor in Web strategy have elaborated a series of keywords and search expressions. They modified the contents of the multiple pages of the Web portal to be the automatic reference for those terms of search. SEO / SEM is an evolutionary strategy that requires constant attention to respond to market changes. An example of this strategy is to put the emphasis on rare products that are not available in stores so when players look for these items on the Web, they end up on the Hockey Supremacy site.
Likewise, Hockey Supremacy integrates a social media strategy. Their Facebook page has 10,705 followers and their brand new Twitter account already has 162 subscribers. These two platforms are used to post flagship products, give voice to satisfied customers, answer the questions of the population, share some interesting news about hockey, and gather suggestions from the fans.
The Website attracts more than 1000 visitors daily: all from different venues, but all in search of information on novelties, prices and the availability of the equipment. Advertising opportunities are available for manufacturers. Three examples are banners, homepage visibility and the diffusion of newsletters. The development of co-branding may be cost-effective.
Banners The Website banners were not an integral part of the strategy of Hockey Supremacy. They are being studied, but these last years, the majority of the Web advertising investments were made in Google Adwords and in Facebook.
The Best Price Guarantee Program The company has set up a best price guarantee program. It allows the customer to beneficiate from a better deal by presenting a competitor’s advertisement of the same product, but sold at a lower price.
Thus, Hockey Supremacy must adjust its price for the client.
The Loyalty Plan (Loyalty Crown VIP Program) To ensure the long-term viability of Hockey Supremacy, it is essential to set up a customer retention plan. The Loyalty Crown VIP Program was created for it. For every dollar spent, the customer receives a crown. A hundred crowns can be redeemed for a five-dollar discount on the next order. This plan has been a success since it was created, increasing the customer’s quantity of orders per year.
The regulations imposed by the equipment’s suppliers determine the minimum price to post on the Web. However, when a client checks out, a discount may be offered which, in a way, bypasses the manufacturer’s requirements. Since a large part of the clientele is in search of the best prices, this strategy is essential for the company. These coupons are available via online promotions, social networks and newsletters.
The Customer’s Profile The clientele of Hockey Supremacy is constantly growing across the country.
Its clients fall into three different categories:
1. The Bargain Hunters (by price) These buyers are constantly searching for the best price available on new models, the liquidation of inventories and the exclusive discounts. A majority of these clients are well aware of their needs and the characteristics they look for when it comes to their hockey equipment. Hockey Supremacy meets these customers’ expectations by offering the best price guarantee program, the loyalty program and the coupons.
2. The Excluded (for geographic reasons) The big franchises such as Expert Hockey, Rousseau Sports / Pro Hockey Life cannot settle in all markets. Due to the high cost of investing in a physical store, certain smaller markets, such as Nunavut, do not have a sufficient population density to justify the establishment of a store.
Other geographical factors, such as high real estate value and the lack of space in big city centers such as Montreal or Toronto, reduce the ability of Hockey Supremacy to establish a store. The consequence is that several customers must cover considerable distances to visit a specialized shop that offers a wide range of products.
3. The Hockey Nerds (searching for rare or exclusive products) The hockey stick comprises several personalized adjustments: flexibility, flexion point, lie, curve, handle and grip. Thus, it is impossible for a store to offer all the possible sticks available. When a customer wants a specific product, he uses the Web to locate it. Hockey Supremacy targets this clientele by advertising on Google Adwords, an excellent way to redirect potential clients with precise needs towards their portal.
Competition Hockeymonkey.com and Hockeygiant.com are the biggest competitors of Hockey Supremacy in cyberspace. For several years, customers from Quebec who wanted to buy products online to benefit from low prices or to get an exclusive product had to turn to these two American competitors. These companies cannot legally send some of their products from their warehouses, located in the United States, directly to Canadian buyers. Thus, they use a sceptical marketing strategy named Mail Forwarding. Otherwise, the products are subject to custom fees and local taxes which usually cancel out the discount.
Competitors often blame online retailers such as Hockey Supremacy for sending their customers in traditional stores to try the products and then purchase them on the Web. “The Internet is accessible since 1995. Competitors and large chains should have taken advantage of this platform way before. I was only meeting the customer’s demand”, said Éric after we pointed out this fact.
The traditional retailers are on the Web, but the majority of them do not offer online purchasing. They have to respect their franchises’ sale territory and thus only use this platform to inform their clientele about the products available in store.
Here is the competitors’ profile:
Hockeymonkey.com Hockeymonkey.com has been in the e-business since 1999. They offer a large choice of ice hockey and roller hockey equipment. The company diversified and extended its model of e-business to include Lacrossemonkey.com, Goaliemonkey.com, Monkeyteamsports.com, Hockeymonkey.eu and Homerunmonkey.com. They also opened physical stores in California, New Jersey, Maine and Sweden.
- Average of visits per day: 13,808
- Annual online sales: $28,000,000 (80% of all sales)
Top 10 cities searching for Hockey Monkey on Google:
Hockeygiant.com is the flagship branch of SportsGiant LLC, an enterprise specialised in the distribution of niche products, which operates under many distribution channels. They run a site, as well as three big box stores in the US. They are recognized for offering a fast and efficient service. Their owner has attributed this success to a significant investment in the management of the inventory and in the carrying-out of orders. Notably, Hockey Giant has once before attempted to operate stores in Canada, but packed up their bags and left a year later.
Canadian Tire (Canadian Tire Society Ltd) Canadian Tire operates 1700 stores and gas stations across Canada. Its sports section has always been an integral part of its heritage. In May 2011, the Canadian Tire Society Ltd acquired the Forzani Group Ltd. The enterprise subsequently bought out Pro Hockey Life Inc., better known as Sports Rousseau and Entrepôt du Hockey (Hockey Warehouse), to position itself as the biggest alliance of specialized sports retailers in Canada.