What Under Armour Will Focus On Going Forward: Direct-To-Consumer Channel (Part 3)

by Trefis Team
Under Armour
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In the last part to this series, we examined how international markets are set to play a major role in Under Armour‘s (NYSE:UA) resurgence. In the following analysis, we will discuss how the company is pushing its direct-to-consumer channel, and more specifically e-commerce, in an effort to reduce its reliance on the wholesale channel, which in the recent past has suffered heavily.

Since the beginning, Under Armour’s business model had relied heavily on its wholesale channels to help propagate and market themselves. However, over the last few quarters, this model has come to hurt the company significantly. With a rise in online shopping, big retailers are finding it hard to maintain traffic in their brick-and-mortar stores. Consequently, many big major retailers like Dick’s Sporting Goods filed for bankruptcy, while cutting the number of stores it operates by more than half.

Online retail sales in the U.S. have grown at a rapid pace over the past several years, thanks to growing internet usage in the country. Internet penetration in the U.S. has gone up from 44% in 2000 to about 88.5% currently. The ease and convenience of buying goods from the comfort of your home, and having them delivered to your doorstep, is a luxury that many can now afford. Hence, it comes as no surprise that online apparel sales in the U.S. are expected to cross over $100 billion by as early as 2019.

Like its competitors, Under Armour has come to realize the importance of opening and maintaining an easy-to-use and accessible online marketplace. Additionally, the company is working heavily on improving its mobile shopping experience. In this respect, last year, it introduced a new UA Shop App which allows the customers to navigate through its full range of products from their mobile phones. Apart from being a marketplace, the app will collect data on the customer’s activity on the app to effectively refine results and recommend products. The company hopes to see better results from its online sales going forward.

Furthermore, the company hopes to gather more traction on its website and app through targeted digital advertising. Only recently, the company launched a full scale digital ad campaign to promote their women’s line of clothing. We can expect more such campaigns to flood the digital space in the near future.

All in all, Under Armour has a long way to go to win back investor’s confidence. However, the aforementioned strategies mentioned in this series could help the company see better results going forward. Only time will tell if these are enough, but for now, any positive change, is a welcome change. The next earnings call will give us better understanding of what is to come.

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