K mart's Sports Giant steps to plate - sporting goods warehouse stores

Discount Store News, April 24, 1989 by Richard C. Halverson

K marth's Sports Giant Steps to Plate

MADISON HEIGHTS, Mich. -- After a delay of several months, K mart opened earlier this month the first test unit of Sports Giant, its new sporting goods membership warehouse club.

The second of two test stores will open in mid-May in nearby Livonia, Mich.

K mart built both 50,000-square-foot stores just a few miles from its Troy, Mich., headquarters. But like Office Square, K mart's entry in the office supplies warehouse derby, Sports Giant will report to san Antonio, Texas, headquarters for Builders Square.

In a bid to keep overhead low, Sports Giant and Office Square both share computer systems and support services, such as personnel and construction, with Builders Square, K mart's home center subsidiary.

Frank Denny Jr., son of Builders Square founder Frank Denny, is the general merchandise manager for Sports Giant. Chief executive officer is Charles White, who began his K mart career in 1976 as manager of a sporting goods department. In 1986, he was promoted to sales manager for Division VI.

Initially, K mart announced it planned to open four test stores by last fall but blamed problems in locating real estate for the delay. K mart will await the first fiscal year results from the two test stores before approving more stores, White said at a pre-opening press preview April 3.

"We haven't even begun to talk about the potential number of units," said Larry Parkin, K mart executive vice president for grocery and warehouse operations, who also spoke at the preview.

Sports Giant will "lack little" in the way of merchandise, Parkin said, and will back its merchandise with the customary service of specialty shops, such as repairing bikes and stringing tennis rackets.

Now that a bankruptcy trustee is liquidating All American SportsClub. Los Angeles, Sports Giant is the only true membership warehouse club in the sporting goods field.

Although other chains, such as Sports Town, Atlanta, and Sports Authority, Fort Lauderdale, Fla., operate warehouse type stores, only Sports Giant is charging a membership fee.

For an annual fee of $10 per family, members pay about 5 percent to 10 percent less than non-members under Sports Giant's pricing structure.

Denny predicted that members will account for 80 percent of Sports Giant sales within three years. But he said he can only guess at how many members his chain expects to recruit within three years. It could be anywhere from 40,000 to 80,000, he said.

In contrast to warehouse shelf pricing, with just the member price displayed, Sports Giant posts both the member and non-member price on almost all items. That way, members can see how easily they can recover the "nominal" $10 fee, White said.

"Anyone will be eligible for membership," White said.

To build its membership base, Sports Giant is hiring a membership marketing director who will approach major employers in the Detroit market and offer them rebates based on the purchases their employers make, White said.

As with American Fare, and Builders Square, Sports Giant won't advertise its ties to K mart, White said.

In another marketing approach, sports Giant is hiring someone whose sole job will be to solicit team sports business. White projected that team sports will account for about 7 percent of total volume within three years and perhaps as much as 10 percent. "It's a business you have to build," White said.

White predicted the first unit will break even in its first year but declined to disclose either a break-even sales figure or what margins Sports Giant expects.

Everyday prices at Sports Giant will be lower than K mart's, White said. But he acknowledged that K mart price promotions could beat Sport Giants on the merchandise both carry. However, Sports Giant, with 50,000 square feet, won't overlap much with the merchandise carried in the typical 3,500-square-foot K mart sporting goods department, he said.

Sports Giant stocks about 47,000 sku's of 630 sporting goods brands in 12 different departments, including: athletic and sport apparel, footwear, exercise equipment, bicycles, team sports, ski, hunting, fishing and camping gear, photo, water sports, and golf equipment. All merchandise will be branded, White said, with the exception of Sports giant private label athletic socks.

Fishing accounts for the lion's share of sku's, with about 10,000, followed by camping, 3,000 and golf, 2,500.

In guns, Sports Giant will carry only hunting rifles and shotguns, no handguns or assault rifles, Denny said.

A "few vendors" were reluctant to supply goods to a discounter, White said, but the only product Sports Giant wanted but was unable to obtain was Nike athletic shoes. Sports Giant still is negotiating with Nike, Denny said.

"They want to look us over first for a couple of weeks," Denny said. He predicted that Sports Giant will carry Nikes within a month or so.

Reebok, another vendor that is loath to sell to discounters, cooperated, however, and Sports Giant stocks about 10 styles of Reeboks among its more than 12,000 pairs of footwear in about 330 styles.