SBJ/January 24 - 30, 2005/SBJ In Depth

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  • Retailer sponsorship in sports

    The following is a sampling of sports sponsorships involving some of the nation’s largest retailers.

    Wal-Mart Stores
    Headquarters: Bentonville, Ark.
    2003 revenue: $258.7 billion
    Partial list of sports sponsorships: Presenting sponsor of Champions Tour The First Tee Open at Pebble Beach in Pebble Beach, Calif.; FLW Outdoors (includes title sponsor of Wal-Mart FLW Tour, Wal-Mart Bass Fishing League, Wal-Mart Walleye Tour and Wal-Mart Walleye League); Southeastern Louisiana University athletics; Western Hockey League Prince Albert Raiders, Saskatoon Blades and Swift Current Broncos

    Home Depot
    Headquarters: Atlanta
    2003 revenue: $64.8 billion
    Partial list of sports sponsorships: Partner of U.S. Olympic Committee; ESPN College GameDay; NASCAR; NASCAR Nextel Cup driver Tony Stewart (No. 20 Chevrolet, Joe Gibbs Racing); naming rights of Home Depot Center in Carson, Calif. (10-year, $70 million deal through 2013)

    Kroger Co.
    Headquarters: Cincinnati
    2003 revenue: $53.8 billion
    Partial list of sports sponsorships: Presenting sponsor of LPGA Jamie Farr Owens Corning Classic in Sylvania, Ohio; founding partner of LPGA Wendy’s Championship for Children in Dublin, Ohio; presenting sponsor of ATP/WTA Regions Morgan Keegan Championships and Cellular South Cup in Memphis; Big South Conference; Southern Methodist University, Texas A&M University, University of Cincinnati, University of Memphis and Xavier University athletics; Central Hockey League Bossier-Shreveport Mudbugs

    Target Corp.
    Headquarters: Minneapolis
    2003 revenue: $48.2 billion
    Partial list of sports sponsorships: Naming rights of Target Center in Minneapolis ($18.75 million, 15-year deal through 2005); primary sponsor of IRL drivers Scott Dixon (No. 9 car, Chip Ganassi Racing), IRL driver Darren Manning (No. 10 car, Chip Ganassi Racing) and NASCAR Nextel Cup driver Casey Mears (No. 41 Dodge, Chip Ganassi Racing); title sponsor of PGA Tour Target World Challenge in Thousand Oaks, Calif.

    Sears, Roebuck and Co.*
    Headquarters: Hoffman Estates, Ill.
    2003 revenue: $41.1 billion
    Partial list of sports sponsorships: Official tools of the NHRA (Craftsman brand); title sponsor of the NASCAR Craftsman Truck Series (Craftsman brand); official tools of NASCAR (Craftsman brand); official retail partner of the Chicago Cubs; official tool/lawn care partner of the Chicago Cubs (Craftsman brand)

    Safeway
    Headquarters: Pleasanton, Calif.
    2003 revenue: $35.6 billion
    Partial list of sports sponsorships: Title sponsor of LPGA Safeway International in Superstition Mountain, Ariz.; title sponsor of LPGA Safeway Classic in Portland

    Albertsons
    Headquarters: Boise, Idaho
    2003 revenue: $35.4 billion
    Partial list of sports sponsorships: Title sponsor of Nationwide Tour Albertsons Boise Open

    Walgreen Co.
    Headquarters: Deerfield, Ill.
    2003 revenue: $32.5 billion
    Partial list of sports sponsorships: Chicago Cubs

    Lowe’s Cos.
    Headquarters: Mooresville, N.C.
    2003 revenue: $30.8 billion
    Partial list of sports sponsorships: Naming rights of Lowe’s Motor Speedway in Concord, N.C. (10-year, $35 million deal through 2009); NASCAR Nextel Cup driver Jimmie Johnson (No. 48 Chevrolet, Hendrick Motorsports); NASCAR Busch Series driver Kyle Busch (No. 5 Chevrolet, Hendrick Motorsports)

    Ahold U.S.A. Inc.**
    Headquarters: Quincy, Mass.
    2003 revenue: $27 billion
    Partial list of sports sponsorships: (Bi-Lo) Naming rights of Bi-Lo Center in Greenville, S.C. ($3 million, 10-year deal through 2011); (Bruno’s) title sponsor of Champions Tour Bruno’s Memorial Classic in Hoover, Ala.

    CVS Corp.
    Headquarters: Woonsocket, R.I.
    2003 revenue: $26.6 billion
    Partial list of sports sponsorships: CVS Charity Classic; Tampa Bay Buccaneers; New England Patriots

    Publix Super Markets
    Headquarters: Lakeland, Fla.
    2003 revenue: $16.9 billion
    Partial list of sports sponsorships: Atlanta Braves, Miami Dolphins

    Delhaize America***
    Headquarters: Salisbury, N.C.
    2003 revenue: $15.5 billion
    Partial list of sports sponsorships: (Food Lion) Associate sponsor of NASCAR Nextel Cup driver Bobby Labonte (No. 18 Chevrolet, Joe Gibbs Racing); (Food Lion) Atlantic Coast Conference; (Food Lion) Central Intercollegiate Athletic Association; (Food Lion) University of North Carolina-Charlotte; (Kash n’ Karry) Tampa Bay Lightning; (Kash n’ Karry) New York Yankees

    Federated Department Stores
    Headquarters: Cincinnati
    2003 revenue: $15.3 billion
    Partial list of sports sponsorships: (Macy’s) Seattle Mariners, San Francisco Giants, Oakland Athletics, Los Angeles Dodgers, San Diego Padres, Pacific Coast League Sacramento River Cats, Pacific Coast League Albuquerque Isotopes, Texas League San Antonio Missions, Emerald Nut Bowl; (Macy’s) title sponsor of Macy’s E-Series (surf competition in Hawaii)

    The TJX Cos.
    Headquarters: Framingham, Mass.
    2003 revenue: $13.3 billion
    Partial list of sports sponsorships: (TJ Maxx) USA Gymnastics; (Marshall’s) U.S. Figure Skating

    Staples Inc.
    Headquarters: Framingham, Mass.
    2003 revenue: $13.2 billion
    Partial list of sports sponsorships: New England Patriots, Dallas Cowboys, Philadelphia Eagles, New York Jets, Seattle Sea-hawks, Washington Redskins, Atlanta Falcons, San Francisco 49ers; Los Angeles Lakers, Los Angeles Clippers; naming rights of Staples Center in Los Angeles ($116 million, 20-year deal through 2019)

    * In November 2004, Sears agreed to merge with Kmart. The merger is waiting for FTC approval.
    ** Ahold U.S.A. is a subsidiary of Netherlands-based Royal Ahold N.V. Revenue listed is for Ahold U.S.A. only. The parent company reported $76.5 billion in net sales for 2003.
    *** Delhaize America is a subsidiary of Belgium-based Delhaize Group. Revenue listed is for Delhaize America only. The parent company reported $26.2 billion in operating income in 2003.
    Sources: SportsBusiness Journal research, the companies

    Print | Tags: Kroger, Lowe's Companies Inc., In-Depth, Sears, Roebuck & Co., Staples, Target, Wal-Mart Stores Inc., Walgreen
  • Retailers take aim

    The sports marketing strategies of retail companies used to be driven by their vendors — manufacturers. The manufacturers — whether a Gillette or a ConAgra or a Black & Decker — would buy a sponsorship and involve the retailer in a promotion via pass-through rights.

    About 10 years ago, more retailers began to take the manufacturers’ role, turning the tables on manufacturers by buying their own sponsorships and involving manufacturers in ways — and on schedules — that better suited the retailer.

    Today, retail companies are more involved than ever as sports sponsors, not just co-op partners, and they’re calling the shots with vendors to an unprecedented degree. Even when they’re not the lead dog in the promotional relationship, they may still demand a fuller range of assets from the vendor, not merely the same promotion the vendor did with another chain the week before.

    In some cases, the retailer is even playing the vendor role, such as the Wisconsin-based department store chain that had its own brand of sportswear built around Green Bay Packers players.

    In all, retailers have taken stock of their established brands, geographical reach and key position in the product pipeline to solidify their position in the sponsorship world.

    Gaining leverage

    In some cases — Wal-Mart being the most prominent — the most desirable retailers are selling co-op positions and turning the sponsorship itself into a revenue source.

    Retail company league sponsorships

    NBA
    RadioShack

    NASCAR
    AutoZone
    Sears, Roebuck and Co. (Craftsman brand)
    Home Depot

    ATP
    Tennis Warehouse

    WTA
    Tennis Warehouse

    LPGA
    DSW Inc. (shoe store chain)
    Women’s Golf Unlimited (Square Two Golf)

    NHL*
    Home Depot
    Best Buy

    * 2003-04 season
    Sources: The leagues

    “Retailers are saying, ‘My margins are getting squeezed, we’re only making a 1 or 2 percent margin, and I’ve got to find revenue elsewhere. If I go buy my own sponsorship, I can turn around and sell positions in these sponsorships. It’s a complete opposite model,’” said Reid Stewart, a vice president at Momentum Worldwide, whose clients include Gillette, ConAgra and Home Depot.

    The practice was already part of the grocery industry 10 years ago, but the past few years have seen mass merchants and home-improvement retailers get involved.

    Why the shift?

    “They’ve seen the value of those relationships increase as they’ve been exposed to them, but also, I think they are looking for control of consistency at retail with one promotion going on in the shelves as opposed to having two or three or five different ones,” said Greg Busch, director of sports marketing at GMR Marketing, who was formerly a marketer at power tool manufacturer Porter-Cable.

    Retailers also are leveraging their unique position in the data-compilation equation. “Obviously they have a lot of capabilities to track traffic and transactions, and in a lot of cases can build systems to [measure the results of promotions],” Busch said. “And in the case of packaged goods, you’re a little more at the discretion of the retailer and scanning data and whether you can actually build the infrastructure to tie sales directly to a sponsorship.”

    At Wal-Mart, the sponsorship power of the retailer is in full force. Company marketers did not return requests for comment, but other marketers describe with awe Wal-Mart’s leverage

    Wal-Mart commands hefty fees from vendors that participate in its FLW pro fishing tour.
    in commanding low-six-figure participation fees in its NASCAR and FLW bass-fishing programs. Wal-Mart is famous for being rugged with vendors; sponsorship is just one facet of this.

    Even where retailers aren’t demanding money for co-op positions, they’re demanding programs catered to their needs. Especially in the grocery category, chains aren’t settling for the same promotion done at their competitor the week before.

    “At most you used to give them a different week of media,” said Stewart. “One week Albertsons, one Kroger. Now it’s either ‘Give me my own customized promotion’ or even ‘Customize my own sponsorship.’”

    Stewart said a recent Gillette program with Stop & Shop involved an honorary team captain program and game ticket giveaways that were exclusive to Stop & Shop.

    The home-improvement and home-electronics segments have been slower than the groceries and mass merchants to assert this strength, marketers say. There are at least two reasons. One is a greater aversion to promotional clutter, the other is that the marketing and the “retail environment” departments are distinct at many retailers and have different aims.

    “The retail guy has done a lot of research to see that the consumer only looks in five places, and so he wants to avoid clutter, but the sponsorship guy wants to activate in as many places as he can,” Stewart said. “We’re doing NASCAR-themed planning at Circuit City, and it’s very limited as to how we can promote in-store.”

    Wal-Mart has focused some of its muscle on its “retailtainment” strategy, which includes “Fan Days,” such as the NASCAR-themed days going on simultaneously around the country and involving interactive events and displays that go well beyond cardboard point-of-purchase displays. The company leverages these to liquidate its sponsorship fees, and makes it clear to vendors that these are the way to get superior results.

    “Wal-Mart winked at Gillette and said, ‘You’ll get better performance if you do our special days,’” Stewart said.

    Stewart is surprised more chains haven’t got into the “retailtainment” idea.

    “Wal-Mart is saying, we don’t just want a one-way communication with the customer, we want an in-store experience that’s a little more dynamic,” he said.

    Brand building

    Not every retail chain has the market strength or management skill to draw co-op payments from vendors. But retailers now find sponsorship more valuable for a less tangible reason: branding. As they’ve seen manufacturers benefit from long associations with sports properties, they’ve begun to follow suit.

    “Establishing what the brand represents is a bigger part of the overall message that already includes price competition,” said David Paro, president of Deep Alliance Marketing, a former McDonald’s sports marketer who also serviced retailers at agencies SFX and Frankel.

    Chains such as Wal-Mart, Target and Kmart are working extremely hard to develop distinct marketplace images, “so matching up with sports and event properties is more of a natural thing,” Paro said.

    This search for “personality” is driving another trend, some say: Retailers are increasingly involved in cause-related marketing. It’s one reason why Gallery Furniture shifted some of its marketing dollars last season to the Houston Texans, with whom it is doing several cause-related programs. And on Jan. 31, Gallery Furniture is sponsoring a tennis exhibition at the Toyota Center with John McEnroe, Jim Courier, Anna Kournikova and other luminaries to aid victims of the Southeast Asian tsunami.

    “The Rockets let us have the Toyota Center for next to nothing, and I like to market with teams that are proactive like that. It’s a broad change in attitude, from Me Generation to We Generation,” said Gallery Furniture President Jim McIngvale. “Any property that’s involved in the community and wants sponsors involved, too, is something I can latch on to. It helps the community and it helps the cash register ring.”

    Sears, Roebuck and Co. feels similarly. It instituted a $100 million American Dream program a little over two years ago to help promote home ownership and maintenance in needier communities, and it now has a program to support families of enlisted people involved in the Iraq war who are also Sears employees. “We’ve returned our attention to cause marketing,” said Touré Claiborne, director of brand and partnership marketing for Sears.

    The billboard shows some of the ways Carson Pirie Scott markets its store brands through its sponsorship with the Packers.
    Examples of retailers asserting the strength of their positioning in the marketplace are everywhere. Three of Carson Pirie Scott’s store brands — Boston Store, Herberger’s and Younkers — created their own line of activewear around two Green Bay Packers players this past season, right alongside the Reebok duds they carried in 24 stores. The Packers are the company’s only major sponsorship.

    The stores also developed proprietary activewear brands and logos for Javon Walker (J-Walk) and Nick Barnett (Defiant 56), and marketed them along with an in-school program involving a raffle that students entered in store. Barnett and Walker will make 24 visits this year to winning schools around the state.

    Although the clothing line didn’t do as well as the store’s Reebok offerings, which did “enormously well,” according to Christine Knippel, vice president of special promotions and publicity, they did well enough for another run next season, especially after wide receiver Walker’s break-out year.

    If there’s one area where retailers haven’t followed manufacturers, it’s in venue naming rights. Currently only four of the roughly 70 major league sports venues with title sponsors have retailers as those sponsors — Target, Office Depot, Staples and Petco — probably because while retailers are focusing more on brand-building, they usually don’t need the high-cost blitz of a naming deal. They have more immediate dollars-and-cents concerns.

    But if this area starts to follow other areas of sports marketing, we’ll see naming-rights deals for retailers during this decade. Chances are it will depend on whether the deal involves enough latitude to market vendor partners and to do it the sponsor’s way. Because retailers are starting to expect the upper hand.

    Print | Tags: Football, Gillette, Green Bay Packers, Houston Texans, Kmart, McDonald's Corp., Momentum IMC, Motorsports, NASCAR, Reebok, In-Depth, Sears, Roebuck & Co., SFX, Target, Tennis, Wal-Mart Stores Inc.
  • Sponsorship report cards: Experts grade the retail category

    Jeff Shifrin
    Executive vice president, Octagon

    For years, retailers have received the benefit of sponsorship without actually having to invest in properties. As the brands on their shelves deliver sponsorship promotions, imagery and hospitality assets at the store level, the retailer is able to tap into consumer passions to drive traffic and increase sales. More recently, retailers have become more creative and varied in their alignment with properties to market themselves as a brand, a service and a unique shopping experience.

    Wal-Mart links to the consumer passion for fishing through its ownership of the FLW Tour, but also benefits from non-Wal-Mart-sponsored content such as an activation site for branded programs funded by key vendors. Other retailers flip that model, serving as content owner, delivering valuable assets to vendors as part of a larger merchandising program that impacts pricing, drives traffic and ultimately increases same-store sales.

    Examples include Best Buy and Target, which have sponsored properties that bring them exclusive assets, from which they’ve created exclusive product offerings for their consumers.

    Retailers, like other sponsors, seek exclusive space unless a property is dynamic enough to accommodate multiple players. The one property that seems to cut across all retail lines is NASCAR. Mass merchandisers, department stores, grocery stores and specialty stores leverage NASCAR to drive their brands, drive sales and motivate their employees.

    As an activation site or as content owners, sponsorship will continue to play an important role in this category.

    Grade: B+


    Becher
    Scott Becher
    President, Sports & Sponsorships

    Gone are the days of retailers acting purely as a distribution channel for vendor promotions. Thankfully. Retailers are demanding more — and doing a pretty good job — building their own brands with impactful sponsorship efforts.

    Look at Home Depot and its U.S. Olympic team sponsorship. Its ownership of the Olympic job opportunity program is thoroughly integrated through all marketing elements during Olympic years, including national television. Home Depot’s partnership with ESPN and College Football GameDay also delivers effective weekend/Saturday visibility.

    In the battle of the Depots, recently Office Depot announced a new sponsorship with NASCAR as its first official office products partner. Expect strong local activation efforts in key race markets along with a meaningful association with a race team.

    These are retailers reaching out to drive traffic and encourage customer loyalty, yet still relying on the financial and marketing muscle of their vendors to make it happen. Smart.

    Leave it to Wal-Mart to make the leap and buy its own outdoors property. Not all retailers are in a position to do that, but in any category, it’s great to be the king.

    Grade: A- (for leveraging vendor dollars and integrating with media)

    B (for ties to purchase via customer loyalty programs)


    Grabowski
    Joe Grabowski
    Portfolio manager, Wells Capital Management

    As an investor in retail stocks, I take notice of new sports sponsorships and try to determine if the revenue and gross margin lifts generated by the agreements will offset the expense and have a positive impact on the company’s stock. Retailers continue to pour money into sponsorships, hoping to improve name recognition among shoppers — but are they effective?

    A ranking of companies by sponsorship spending in 2003 included no retailers in the top 20. The reason is the majority of shoppers are females, while the majority of sports spectators are men. Companies like Office Depot have recently entered into multiyear agreements with niche sports such as NASCAR, a sport that caters immensely to its small-business owner customer base. However, where do you turn to reach an impressive number of women? The LPGA and the WNBA are two entities that cater to the audience, but are the viewership numbers worth the investment?

    Many large companies, such as Sears, have sponsored recent sporting events, but have not renewed because they didn’t get enough exposure to their target customer.

    Grade: B-


    John Griffin
    Senior vice president, IEG Consulting

    Most of the major players on the national retail scene have done a good job at leveraging their relationships with vendors to get those manufacturers to support significant sports sponsorship deals that the retailer then has used to help drive store traffic and product sell-through. Examples include Wal-Mart’s FLW Outdoors fishing sponsorships, Target’s auto racing involvement and The Home Depot’s USOC tie.

    Although those types of deals have worked well on a tactical level, the category has fallen short in terms of using sponsorship for strategic brand building and creating a meaningful point of differentiation. With the notable exceptions of Home Depot’s use of the Olympic platform for powerful corporate image advertising, and T.J. Maxx and Marshalls’ use of gymnastics and figure skating to bond with women, most national retailer sports sponsorships are of the “me-too” variety that doesn’t build long-term relationships with consumers.

    We expect to see more involvement in sports from both the office supply and consumer electronics subcategories in the near future.

    Grade: C+


    Bingham
    Mark Bingham
    Partner, ThinkingSports

    We believe that the most powerful asset in a sports sponsorship is communication. The best message finds the intersection of something authentic about the brand and the sponsored property. Since retailers enjoy more points of contact with consumers than most marketers, in many ways they can derive more value out of their sponsorship than other categories.

    Given that today’s big box stores and malls are the Main Street of yesteryear minus the charm of Main Street, there is great need to create real relationships with teams and sports important to their consumers. That’s why we’re seeing more and more retailers jump into sports sponsorships — Lowe’s, Office Depot, RadioShack.

    Clearly some do it very well. Home Depot’s Olympic job opportunity program allows them to differentiate themselves from other USOC sponsors and communicate their brand positioning of empowerment by actually employing Olympic athletes and allowing them the flextime to pursue their dream. It’s real, it’s simple. Just like most good answers tend to be.

    In a category as wide as retail, we think there is an opportunity for more shining lights.

    Grade: B-

    Print | Tags: Basketball, Best Buy, Colleges, ESPN, Golf, IEG Inc., Lowe's Companies Inc., LPGA, Motorsports, NASCAR, Octagon Group, Olympics, RadioShack, In-Depth, Target, USOC, Wal-Mart Stores Inc., WNBA
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