How Nike and Amazon Are Crushing the Local Soccer Store
The Athletic details the decline of an industry amidst the growth of a sport.
In an economy of increasing industry consolidation, the American tradition of entrepreneurship is at an inflection point. According to a 2012 report from the New America Foundation, new business formation declined by 50 percent between 1977 and 2009, when adjusted for changes in the working age population. Data since haven’t been much better. And the decline in entrepreneurship may be even steeper, as emerging work arrangements like contract workers are often conflated with traditional entrepreneurs in employment data.
Over at The Athletic (well worth the subscription), Matt Pentz outlines one such casualty of the dominance of big firms: the decline of the mom-and-pop soccer shop. As soccer has become an increasingly prominent pastime for American youth over the past few decades, niche specialty shops to provide the gear necessary for the sport have also become staples in communities across the country. For a while, these shops were a free market, entrepreneurship success story. The department stores and sporting goods giants where Americans purchased their football, baseball, and basketball gear largely ignored once-obscure soccer, so enterprising fans of the game set out on their own to serve a market need for the growing sport.
Of course, with the advent of online merchandising, brick-and-mortar retail has had a tough go of it in recent years, and the local soccer shop is no exception. But as Pentz outlines, it’s not only e-commerce that threatens the survival of these mom-and-pop shops:
Profit margins began to fade along with the buzz of the 2010 World Cup. The toll that online retailers like Amazon took on local businesses across the spectrum has been well documented. Between January 2017 and the past this spring, retail lost more than 140,00 jobs, according to Labor Department data, and retailers announced 4,810 store closures in the first three months of 2019 alone.
What was different about soccer stores is that some of their biggest suppliers and former advocates eventually came to position themselves as competitors.
Walt Jr. described the decline of his business as happening in three waves. The first was the emergence of soccer.com and other places like it, which were also soccer-specific but whose online model gave them greater reach. The second was Amazon’s exponential growth. The third was Nike and Adidas fighting each other — and eventually soccer stores themselves — for ever larger shares of the marketplace.
Sports giants like Nike and Adidas exist in the American soccer market in no small part because of these local shops that specialized in soccer when no one else would. The established, big brands were able to compete with—and eventually surpass—traditional soccer brands like Diadora, Lotto, Umbro, and others because local shops were willing to introduce the big players’ products to market. Initially, the arrangement worked; even with the rise of specialized online retailers like soccer.com, the benefits of trying on the gear (even if you’d first seen it online) and avoiding shipping delays and fees were enough to keep local stores in business.
But bigness will always present challenges to local business. Amazon’s vertical integration was able to eliminate the shipping advantage. Then once the viability of the soccer market was established (again, thanks to the risks taken by start-up specialty shops), the sporting behemoths moved to maximize profit by directly competing with retail. And when you control the supply chain to both your own stores and those of your competitors, it’s not much of a competition. More from The Athletic:
Places like the Sporthaus were beholden to their wholesale agreements with Nike and Adidas and found themselves carrying more product than they could reasonably sell.
“They always just told us, ‘You just have to find ways to sell more product,’” Walt Jr. said. “The only people they kept were the people who were buying enough product to make it worth it to them.”
This also meant that stores had less room to stock smaller niche brands, chipping away at their reputation as specialty one-stop shops.
On top of that, Nike and Adidas placed greater priority on selling directly to customers themselves, whether online or via their own stores. Schmetzer recalled requesting certain types of gear and being told they were out of stock for suppliers, only to find them available for purchase in multiple colors and sizes on the companies’ websites.
The line between healthy competition and unfair monopolistic practice is a fine one. There’s no question that soccer players and fans now have access to a wider array of goods at lower prices than in the era of local stores. But of course, there are costs: these shops served as a nexus for community, for sponsorship of local youth teams, for connections to pick-up games among recent arrivals to the area.
The bigger question, though, is the long-term health of an economy in which entrepreneurship is no longer viable in the long-term. The growing profits that Nike, Adidas, and Amazon gain off of soccer gear is directly due to the risks taken decades ago by the entrepreneurs they are now putting out of business. How many future would-be entrepreneurs will be deterred from pursuing their business because of the emergent “sell-out-or-get-crushed” phenomenon? How many opportunities to support a family and add value to a community are unrealized because of increased economic concentration among established firms?
Pentz ends his piece on a positive note, highlighting how a few soccer shops have adopted their strictly retail model to now include a more interactive, playing-and-watching aspect. They’ve added turf fields, food, and more to bring soccer fans in to both play and watch the game—and hopefully buy some gear while they’re there. This sort of ingenuity is certainly reason to hope for the enduring nature of entrepreneurship. But it must be noted that this model entails a far greater barrier to entry than the traditional soccer shop—space for soccer fields and adequate staff to service the concept don’t come cheap. It’s easier to evolve an already-established player in the soccer market into that kind of “soccer destination” concept than to build one anew.
New businesses created by entrepreneurs are the primary source of almost all net new jobs—and new business creation is declining. Perhaps that’s why, despite continued macroeconomic growth, middle and working class Americans are increasingly anxious over their economic prospects. In a time of ever-greater economic stratification, our policies should seek to make new business creation as easy as possible—even if that means paying marginally more for your Nike cleats at the local soccer store.