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

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+

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)

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+

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-

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