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Visionary Thinking

THE PROPHETS OF LOW MARGIN – Decathlon’s visionary approach to sports retailing

Decathlon deliberately keeps profit margins low. And then passes that value back to the customer.

If you want business success you have to aim high. Everybody knows that. But French sports retailer Decathlon have, it seems, achieved their seamless growth by doing exactly the opposite.

Established by billionaire Michel Leclercqin in 1976, Decathlon now has 2,080 stores worldwide, in fifty-six countries, across five continents.

This constant expansion has been fuelled, in part, by a forensic focus on price. Somewhat counterintuitively, Decathlon deliberately keeps profit margins low. And then passes that value back to the customer.

As Olivier Robinet, CEO of Decathlon Australia, says “What I have in mind is to sell at the lowest price we can. A lot of companies think exactly the contrary, they want to sell at the highest price they can at the highest margin. We want to … sell at the lowest margin we can. Our margin decreases every year and that’s a big topic for us.”

So, for Decathlon, less really is more – low margins drive higher sales volumes which deliver a healthy profit. Last year’s turnover of 11.4 billion euros delivered, according to Retail Detail, a net profit of “550 million euros, just 4 million euros lower than a year earlier.” And this despite the commercial challenges of the pandemic.

But their strategy is not just about the bottom line. It also helps Decathlon do something else. As the brand says, “In a world where sport has the potential to give so much, providing innovative, enticing and high-performance products at prices that are accessible to everyone isn’t a job, it’s our mission.” Those low margins help them fulfil it.

As retail A.I. specialist Vue.ai’s always informative blog points out, Decathlon has a “unique business model.” As well as retailing major names like Adidas and Asics, “they design, test, manufacture, and retail their own brands. Their research and development team employs 700 people that work meticulously on new products and new designs of existing products.”

And those products are developed by athletes for athletes. A recent example is an easybreath mask for divers developed when a Decathlon project manager, himself a scuba diver, watched swimmers having problems breathing.

Aim low, then. As a slogan, it is, admittedly, a little lacklustre. But as a business strategy? Inspiring.

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