What Does the Merger of DTLR and Sneaker Villa Mean?

An acquisition was authorized by private equity groups to merge DTLR and Sneaker Villa. “The combination of DTLR and Sneaker Villa will create one of the largest lifestyle retailers of street-inspired footwear, apparel and accessories in the industry, with over 230 stores in 18 states.”

Memphis doesn’t have either of these stores (DTLR or Sneaker Villa), but there was a similar acquisition by one of our local store chains. A few years ago City Gear acquired a number of Athlete’s Foot locations. That was in 2013. The number of City Gear stores rose to 111 at the time.

How are these acquisitions shaping the retail sector as Nike has built its DTC business? In a previous article I analyzed when Nike began to build e-commerce and DTC and how it affected Foot Locker’s e-commerce.

2 Reasons Nike Selling On Amazon Will Disrupt Foot Locker, Finish Line and Other Retail Outlets

Stores like DTLR and Sneaker Villa currently have affiliate programs with Rakuten and their e-commerce platforms aren’t as thoroughly integrated as Foot Locker’s, which really doesn’t have anything to do with the merger, but Nike’s continued push to minimize Futures and place an emphasis on DTC has to be behind the mergers that have been taking place.

Two years ago I was involved in a similar merger as a third party broker for a chain named Okuns. I had to liquidate inventory for the retailer which owned 7 stores, but eventually sold the remaining stores to Jimmy Jazz. I saw firsthand what happened as Nike began to force smaller account holders to meet stringent requirements such as building out the stores to retain their Jordan Brand accounts. I saw a small chain in the same area lose their accounts which led me to do a story on store closures and what was going to start happening. Two years ago Nike was a dominant force in footwear and could literally do what ever they wanted. The market has shifted and this is not the case anymore; but the damage is done to the market.

This combining of urban retail outlets signifies that it’s no longer a mom and pop store issue with accounts that relied heavily on Nike. The issue is beginning to shape larger stores.

I’ve said this once before, but I’m restating it here: There will be one more major acquisition involving urban stores. Jimmy Jazz will acquire City Gear.

I think DTLR and Sneaker Villa will result in the closure of 5% of the stores.

The Nike DTC push has re-shaped the landscape of the sportswear world. Like the Sports Authority bankruptcy reverberated throughout the market, Nike’s DTC push is probably the most overlooked aspect of what is happening in sportswear. adidas’ ascent over the last year has been about their ability to fill the holes Nike created in expanding their DTC, just as much as it’s been about making dope products. This is definitely something to keep an eye on.

Sources:

http://www.abladvisor.com/news/12454/golub-capital-supports-merger-of-downtown-locker-room-and-sneaker-villa

https://www.bizjournals.com/memphis/news/2013/10/14/city-gear-acquisitions-bring-store.html

 

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Chris Burns
Chris Burns
Founder, Writer and Webmaster at ARCH & CBP

Chris B. is the founder of ARCH.


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