Direct to Consumer Impact on Dick’s (DKS)

The middleman’s days were numbered when the first ever purchase was completed on the Internet. As competitive pressures in retail continue to erode vendor margins, the direct to consumer channel is more and more appealing.

Companies that act as distributors, such as Dick’s (DKS), have been under pressure from Amazon (AMZN) and now face the prospect of some it’s bigger suppliers building their own direct to consumer (DTC) business. Nike (NKE) and Under Armour (UA) have both been improving their dtc sales through their own bricks and mortar stores as well as their own online presence. The two companies combined for over $9 billion in direct sales and that number should only grow.

Nike and Under Armour are Dick’s two largest vendors, accounting for over thirty percent of revenues. When your top two suppliers start to circumvent you, that’s a problem.

Dick’s has a competitive rewards program. They have also been involved with local youth sports administration through their Dick’s Team Sports HQ initiative. They need to motivate people to visit their stores as opposed to the convenience and possible price advantage of the direct to consumer channels. It’s a mighty challenge.

DISCLOSURE: This article is for informational purposes only and is based on my own personal experiences. It is not intended as investment advice and should not be relied upon as such. It is not a recommendation to buy or sell any securities listed. Please consult a qualified advisor to determine the best investment plan for you.