Technology_FinalRepo..

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Technology_FinalRepo..

  1. 1. Technological Environment While there has been much technological advancement since the first pair of hockey skates was made, or the first track suit was produced. The sporting goods industry has seen a sweeping change in the materials that are used in production, and particularly in the way goods are marketed and sold to the consumer. Sporting goods retailers are much more customer oriented now and have leveraged the capabilities of modern computing software and IT infrastructures. Radio Frequency Identification (RFID) Technology is continually advancing at a rapid rate than ever before, and at the forefront of this development, with respect to the retail environment, is the Radio Frequency Identification (RFID) technology. This computer chip technology is slowly replacing the barcode system and incorporates multiple tasks within its programming.1 The system tracks products through a radio signal being emitted through an embedded computer chip in the merchandise and acts as a theft deterrent by being a security device.2 Simply put, RFID is an electronic tagging technology that allows an object, place, or person to be automatically identified at a distance without a direct line-of-sight, using an electromagnetic challenge/response exchange.3 The retail giant Wal-Mart has invested US$3 billion in implementing RFID. The retail giant forces the majority of its suppliers to adapt this technology (essentially 1 http://www.mergentonline.com.proxy.library.carleton.ca/IndReports.asp? Page=70&type=IndReports&ReportNumber=224 2 http://retailindustry.about.com/gi/dynamic/offsite.htm? site=http://www.smartbrief.com/alchemy/servlet/encodeServlet%3Fissueid=50ABBADA %2D5696%2D4730%2DA676%2D6AEA35FF09E6 3 http://xml.coverpages.org/rfid.html#overview
  2. 2. forcing the industry to advance) to enhance the supply chain operation. 4 Major companies, including Gillette, Kraft Foods and Procter & Gamble have collectively invested US$250 million in RFID at Wal-Marts' request. Estimates have placed that the costs RFID implementation for a single manufacturer at $6.9 million each in 2004.5 It is expected that there an increase of will 20 – 40% in (tagging) costs to add on the extra RFID tags to goods. However, overall advantages are expected to outweigh the additional costs. Financial losses through theft will decline due to the more efficient security benefits within the product. Also, retailers will see savings of 5% of inventory cost and 7.5% of warehouse labour costs.6 Threats of RFID involve consumer complaints that such out- of-store tracking is an invasion of their privacy. Nevertheless, this is definitely an opportunity for the retail industry because the advantages of this technology are likely to ensure its widespread acceptance by the retail and other industries. Internet & E-commerce The North American environment is becoming highly comfortable with online shopping. Internet shopping has become a normal method of purchasing. "Despite all the negative press online shopping has received lately, we're seeing that consumers continue to purchase over the Internet," said Geoff Ramsey, e-Marketer CEO.7 Stats U.S.A also shows that adoption of the Internet and confidence in online purchasing has grown, so too 4 http://retailindustry.about.com/gi/dynamic/offsite.htm? site=http://www.smartbrief.com/alchemy/servlet/encodeServlet%3Fissueid=264A68AD %2DB397%2D44D6%2D88A1%2D2E3D98966BF5%26lmid=archive 5 http://www.mergentonline.com.proxy.library.carleton.ca/IndReports.asp? Page=70&type=IndReports&ReportNumber=224 6 http://retailindustry.about.com/cs/it_rfid/index.htm 7 http://retailindustry.about.com/library/bl/bl_em0320.htm
  3. 3. have the online sales figures of worldwide e-tailers.8 e-Marketer, a business magazine, provides a chart showing an increasing trend of online revenue from 2000 to 2004. With advanced ICT infrastructures and RFID technology retailers are more willing to invest money to showcase their merchandise on the net and set up systems to handle online credit card transactions and the logistics systems for shipping and tracking of products to customers.9 Baby boomers and digitally literate young adults, coupled with the spread of broadband access, are changing the way people shop online—and how Web merchants market to them. The data obtained from the US Commerce Department illustrates that “e- tail” sales totalled US$68.8 billion in 2004, an increase of twenty four percent over 2003. Not only did “e-tail” sales increase dramatically in 2004, but thirty seven percent of retailers are also selling their products through a combination of the internet, stores and catalogues, compared with only 26% in 2003.10 8 http://retailindustry.about.com/library/bl/bl_em0320.htm 9 http://www.mergentonline.com.proxy.library.carleton.ca/compsearch.asp? type=indreports&sortby=undefined&Industry=05020&Region=10&startmonth=01&startyear=2003&endm onth=12&endyear=2006 10 http://www.mergentonline.com.proxy.library.carleton.ca/IndReports.asp? Page=100&type=IndReports&ReportNumber=224
  4. 4. The proliferation of the internet, as the chart above shows continuous % increase in internet usage over the years, has also spread to businesses with over 86%11 of American businesses now using the World Wide Web, and total U.S. e-commerce exceeding $100 billion in 2003.12 In terms of sporting goods industry, two-thirds of all internet users are between the ages of eighteen and thirty nine. Hence, the main target market of most sporting goods retailers are customers, usually, within that age group. It is estimated that in the year 2007, 77% of the internet population over the age of thirteen (roughly 131 million people), will shop online, up 7% from the year 2001. As people become more comfortable with the internet, and the internet-generation grows up into income-earning shoppers, internet retail and e-commerce are likely to 11 http://www.learnframe.com/aboutelearning/page17.asp 12 SGB’s Top 100 Retailers Report www.sportinggoodsbusiness.com, p. 26, Release Date: June, 2004
  5. 5. expand significantly. Although “e-tail” contributed only 2.2% of total retail sales in the US in 2004, it is growing steadily and shows great potential of being a significant manner by which people will purchase products in the forth coming years. According to the NRF (National Retail Federation), the e-tail market is forecasted as US$117 billion of sales in 2008.13 Within the sporting goods industry, alone, U.S. consumers bought $1.5 billion worth of sporting goods online in 2003, up from $1.36 billion in 2002. This figure is expected to rise to $2.2 billion in 2004 and $4.8 billion in 2007 and to account for roughly 10% of total sporting goods sales by that time.14 This growth in internet usage and concentration of younger users presents a huge opportunity for those in the sporting goods industry and other retailers. Not only does this allow for a 24 hour-a-day, 7 day-a-week place of purchase for the customer, but it also allows retailers to showcase a much wider range of products than traditionally allowed by brick-and-mortar operations. 13 http://www.mergentonline.com.proxy.library.carleton.ca/PDF/Data/IR/NA_05020_062005.pdf 14 www.sportinggoodsbusiness.com
  6. 6. Performance Textiles & Equipment Textile technology encompasses realms of products that were not even dreamed of decades ago And has revolutionized the sporting goods industry by making clothing and equipment lighter, faster, dryer. Performance textiles are one of the biggest innovations concerning the sporting goods industry. For the year 2005, the SGMA named Plantronics’ Textile Revolution one of the top five15 new sports products of 2005. As an example, Plantronics, a sports apparel company, introduced a new line of patented athletic performance apparel focusing on blood flow to muscles, sweat control and temperature regulation. Of course, Plantronics is only one of many new upstart sports companies capitalizing on such technological innovations. In the coming years, Plantronics and Smith Optics, another sports apparel company, will collaborate to develop new Smith-branded action sports gear incorporating wireless audio communication and entertainment technology.16 (The new manufacturing line includes helmets, goggles, eyewear and other products that incorporate wireless technology. The helmets will include audio systems compatible with MP3 players, such as Apple iPods, and MP3-enabled cell phones, advanced ventilation systems, a crash replacement program and an unprecedented lifetime warranty17). Also added to the sporting goods is Nano technology which involves manipulation of materials at a microscopic level. Products possess noticeable improvements, like wider sweet spots (racquet sports), more controlled flex patterns, and better weight management. Marc Ellen CEO of Nano-Proprietary Inc. explains that "in 15 http://www.sgma.com/press/2005/press1106595734-30073.html 16 http://www.sportinggoodsbusiness.com/sportinggoodsbusiness/headlines/article_display.jsp? vnu_content_id=1001882342 17 http://www.sportinggoodsbusiness.com/sportinggoodsbusiness/headlines/article_display.jsp? vnu_content_id=1001882342
  7. 7. the sporting goods area, the use of Nano-composites can make the products stronger, lighter, more durable, stiffer, and increase the [product's] lifetime."18 Early Nano apparel applications have included stain-resistant pants and no-iron oxford shirts. Today, the technology is providing permanent odor reduction in garments, regenerative repellency in shells, better bonding and adhesive qualities, and new integrated engineered knits.19 More comfort, greater strength and broader choices. The technology is being incorporated in to golf clubs, running shoes, various types of racquets, baseball bats etc. The technology is definitely an opportunity for retailers, particularly for sporting goods industry to develop new products. On the other hand, cost of employing this technology is absolutely a threat. Not only is it expensive, it is also complex to incorporate into broad-consumption applications. Electronic Gift Card Electronic Gift Cards (plastic credit-card sized with a pre-loaded value that are issued in place of traditional paper gift vouchers) are one of today's hottest point-of-sale applications. They are rapidly replacing paper-based gift vouchers in retail outlets throughout the world. The technology eliminates the time, labor, and fraud associated with paper certificates. Also, gift cards keep customers coming back and generate new revenue streams. In fact, the average gift card value is $50 and consumers typically spend 20% more than the original value of the card.20 According to the NRF (National Retail Federation), US consumers spent an average of US$80.45 on gift cards in 2004, bringing 18 http://weblinks2.epnet.com.proxy.library.carleton.ca/citation.asp?tb=0&_ug=sid+DD63FDBC %2DB4E8%2D4B25%2DAC7C%2D81A9AE57FD9A %40sessionmgr2+cp+1+0F3C&_us=sm+ES+or+Date+6F1A&_uso=st%5B0+%2DAN++19143436+tg %5B0+%2D+db%5B0+%2Dbuh+op%5B0+%2D+hd+False+D2F3&cf=1&fn=1&rn=1& 19 http://www.azonano.com/details.asp?ArticleID=377 20 http://www.trintech.com/ElectronicGiftCardsFAQs.html#q2
  8. 8. total sales for the year to US$48 billion. Gift card sales in the holiday season (2004) set an impressive record of US$17.3 billion, up US$100 million from the previous holiday season (2003).21 Electronic gift cards are also 33% cheaper to manage than paper-based gift certificates, due to more efficient handling and shorter transaction time.22 Over-all, the above listed figures attest that gift cards are attracting retailers' attention as marketing tools due to the low cost of implementation and management, and their ability to attract new customers and retain existing ones.23 For these reasons, the existence and increasing popularity of gift-cards is undeniably an opportunity for retailers. 21 http://www.mergentonline.com.proxy.library.carleton.ca/compsearch.asp? type=indreports&sortby=undefined&Industry=05020&Region=10&startmonth=01&startyear=2003&endm onth=12&endyear=2006 22 http://retailindustry.about.com/b/a/139011.htm 23 http://global.factiva.com.proxy.library.carleton.ca/ha/default.aspx

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