Sport Innovation/Skins Sportswear/Barriers to innovation
As it was already pointed out, SKINS has developed a strong international brand in the sports industry. There are, however, a few challenges that the company is facing and these may pose threat and limitations to further innovation. The barriers include the high price level of SKINS products, weaknesses in the distribution network, the issue of differentiation from competitors and lack of financial resources.
The first barrier to innovation is price. Price, being one of the components of the marketing mix, does not offer a sustainable competitive advantage for any company in general, and neither does it present many opportunities for innovation. The current retail price for a pair of SKINS compression shorts is relatively high ($ 100). This price, however, does not differ significantly from its main competitor 2XU ($ 85), so SKINS is not really forced to change its pricing strategy. Nevertheless, the expansion of the market with compression garment may pose a threat for SKINS. When the first compression garments for the sports purposes were launched, they represented a niche market within the sports apparel industry. Nowadays, the companies such as SKINS and 2XU have grown dramatically in size and popularity. Hence, this market attracts more entrants and it is possible that at some stage a new company will enter the market with low pricing strategy to entice customers to switch from rivals (something similar to a Starbury shoe phenomenon). Such strategy may not always be successful but in case the new product has a desired quality and this causes customers to switch brands, SKINS will have to do something to retain their customers. They can either keep focusing on further innovation to differentiate themselves or they can change the pricing policy. The latter option presents a few drawbacks. There possibly would be a room for SKINS to drop their prices but there is a problem how loyal customers would react because the higher prices of SKINS also brand the company as a highly innovative and quality-oriented sports apparel provider. Another pricing strategy could be to offer lower prices for loyal customers in order to reward them. This is, however, more prevalent in markets with repeated purchases. Moreover, lower prices would lead to lower margins which in turn may cause scarcity of resources, which are necessary for further research and development. Therefore, it is recommended that SKINS focuses more on enhancing their distribution network and the process of differentiation.
SKINS faces several challenges regarding the distribution process. As the competitor analysis revealed, other companies provide their products in their own stores whereas SKINS provides their compression garments through distributers and their online store. The company started to develop partnerships with sport-clothing companies in other countries in order to use their already existing distribution channels. As seen after the recent joint venture with the Chinese company, Li-Ning SKINS is trying to improve the awareness of compression garments in the Chinese market. The suggestion for the future is to develop more partnerships of this kind. SKINS should also consider setting up their own specialized stores as their portfolio of products is already wide enough. Another option is to develop an online community network for SKINS users to enhance communication with its customers and among customers themselves.
Apart from the pricing strategy and distribution network, the issue of differentiation from competitors is another major challenge for SKINS. The company has several advantages in terms of technology, such as the warp knit, dynamic gradient compression or microencapsulation technology. These benefits, coupled with a strong scientific background behind the products, generate a solid competitive advantage for the company. SKINS attempts to profile itself as a highly innovative company known for a scientific savvy. This is a good approach but on the other hand, the science behind SKINS product does not translate into much higher prices in comparison with the competitors. Therefore, the prices of SKINS, which are comparable with competitors, allow SKINS to tap more into wider markets. To achieve this, it is recommended for SKINS to communicate their scientific approach in a more understandable way. One way how to do it is to make the website more interactive and tone down the density of information. For example, in order to gain information on the technology behind the SKINS product, it is necessary to read around 2500 words. This may be slightly discouraging for a customer who had not heard about SKINS before. One of the suggestions is to shorten the technology section and move some of this information to the SKINS store section. Thus, upon clicking on a particular product, a flash application could pop up with a description of the product’s scientific features. The detailed explanation of the technology can still be present when someone is interested to find out more. Other recommendations include setting up a forum on the website to allow customers to not only comment on the products but also discuss different sport or training topics. Finally, SKINS could consider establishing more partnerships with community events, such as Blackmores running festival, thereby demonstrating its links to both recreational as well as elite sport.
Naturally, the last barrier to innovation is lack of financial resources to fund research and development or any other marketing and communication strategies. This, however, is a barrier that every innovative company faces. At this stage, it should be possible to gain funding from investors in case it is necessary, since the company is already well established and the market with compression garments is still in its growth stage.
Summary of issues and suggestions:
1. Threat of new entrants selling their compression garments for much lower prices
Dynamic pricing for loyal customers Focus on enhancing distribution and communication (explained further) 2. Weaknesses in distribution network
Establish more partnerships with local apparel companies Consider developing their own chain of specialized stores
enhance communication processes by increasing the user-friendliness of the website setting up a forum on the website partnerships with community sporting events to get the scientific background of the products to wider markets