The company of “Under Armour” already sells its products not only via intermediaries but also by using direct to consumer (DTC) sales. We will argue that the company should use DTC sales more, despite some of their disadvantages, and that the most profitable way of DTC selling is Factory Houses. We will also show a way to apply DTC selling and overcome its drawbacks, and offer some reasons for including products for women into the range of goods to be sold by Factory Houses.
The company needs to focus on increasing the percentage of DTC sales because of the numerous advantages they bring. DTC sales enable to set lower prices for products, which leads to growth of sales that, in turn, means new distribution channels and increased brand exposure. These results attract more new consumers. The result is higher gross profits.
The most lucrative way to increase DTC sales for “Under Armour” is to open more new Factory Houses. Analysis of the data collected from the company’s annual reports show that there is a direct correlation between the increase of number of Factory Houses and the growth of DTC revenues (see Fig. 1) (“Under Armour, Inc. – Annual Report & Proxy” n. pag.). It means that opening new Factory Houses is the most lucrative option if the organization wants to increase its DTC sales.
The disadvantages of DTC sales include more competition in full-retail markets, and possible reduction of the brand value due to lower prices. But these drawbacks can be dealt with. The fact is that “Under Armour” started first Factory Outlets in 2007, and since that time, the pressure from retail markets did not cause many losses; vice versa, the company was able to sell its products that would otherwise amass in warehouses (“Under Armour, Inc. – Annual Report & Proxy” n. pag.).
A disadvantage of DTC sales is that they lead to lower prices of products, which might deflate the company’s brand value. A way to co counter this is to develop strategies to target elite customers who opt to shop at high-end stores. As Wheelen et al. state, it is possible to use a market development strategy to “capture a larger share of existing market for current products through market saturation and market penetration” (216).
Wheelen et al. also show that it is possible to divide products into two categories and sell them via different distributors (217). The company can easily apply this method. “Under Armour” already produces clothing of two kinds: clothes for casual use and professional sportswear. So, it is possible, for instance, to sell casual clothes in Factory Houses, and sportswear – in some professional sports clothes shops or via existing partners.
The company should also include women’s products in the list of items to be sold in DTC market. According to our strategy, Factory Houses are supposed to sell mainly casual clothes to the mass consumer. This market differs from professional sportswear market; there are more men in the latter market, but not in the former one.
So, it would be unreasonable to exclude women’s products from the list of products sold. It would at least halve the target group of consumers of products, possibly decreasing it even more, because women generally need more clothes than men.
As we have seen, DTC sales have many benefits, and are a promising way for “Under Armour” development; therefore, they should be applied. Data collected from the company’s annual reports shows that the most profitable way to realize DTC sales is Factory Houses. It is also argued that Factory houses should sell products for women. It is recommendable to differentiate the company’s products into two groups and sell a part of them via DTC, and the other part – via partners to implement DTC sales and counter their disadvantages.
Wheelen, Thomas L., J. David Hunger, Alan N. Hoffman and Charles E Bamford. Strategic Management and Business Policy: Globalization, Innovation and Sustainability. 14th ed. 2014. Upper Saddle River, NJ: Prentice Hall. Print.