Spot The Difference
The definition of undercut is to ‘undersell: sell cheaper than one’s competition’. This is not a new concept, it happens daily in supermarkets, retail stores, bars and restaurants. Selling for the cheapest price generates interest, interest transcends into sales and ultimately results in stolen sales from competitors.
The customer more often than not is attracted to the cheaper option and the opportunity to save money, after all who would want to pay more for exactly the same product when they can get it cheaper elsewhere?
The notion of one company undercutting another is all well and good in theory, but what about when both companies have the same owner?
Well this is the case currently with Newcastle United Football Club and sportswear retailer Sports Direct, two separate companies, both owned by Mike Ashley. Yet Sports Direct undercuts Newcastle United club shops on the same product by up to £15.
The table below highlights the cost of the same items sold in Sports Direct and the Newcastle United club shops, and the difference in price between items. Prices are for the current Puma 2010-2011 home kit in adult size medium. It’s worth pointing out the same price differences apply to the second and third kits.
|Item||Sports Direct||Club Shop||Difference|
|Short Sleeved Shirt||£35||£45||£10|
|Short Sleeved Shirt with Premier League Badges||£35||£50||£15|
|Long Sleeved Shirt||£40||£50||£10|
Ten items, all cheaper in Sports Direct than in Newcastle United club shops. Going off what is seen the most at St James’ Park, we can presume that the most popular item is the short sleeved shirt, which when bought from the club shop will cost £10 more than at Sports Direct. Celebrate the return to the Premier League by adding Premier League badges to the arms of the shirt and it is an additional £5 in the club shop, compared to no extra cost in Sports Direct. That is £15 more expensive to buy exactly the same product in Newcastle United club shops than in Sports Direct.
This is not the difference between buying from a shop versus buying offer internet, buying from abroad versus buying locally or even buying real versus buying fake. It is the difference between going up a set of escalators to the floor above as is the case in the Monument Mall.
Just to keep in trend with the variation of cost between the shops for the same product. Shirt printing in the Club Shop is £10 for any player, any number, whereas in Sports Direct it is £1 per letter, £4 per number. Looking at a few players in the squad:
|Name & Number||Sports Direct||Club Shop||Difference|
Of course, Newcastle United will receive a percentage of all sales through their contract with Puma as the supplier regardless of where the products are sold. However the difference between buying from Sports Direct and Newcastle United club stores is that profit made from club shops goes straight to Newcastle United, whereas profit made at Sports Direct goes to Mike Ashley – it is then up to him how much he wants to put back into Newcastle United.
Shirts are more likely to sell at £35 than at £50, Mike Ashley knows this and by charging £35 at Sports Direct rather than the £50 in club stores, he is driving custom away from Newcastle United to Sports Direct, driving money away from the club’s bank account to his own.
It is too simplistic to say that Sports Direct have more capacity to buy in bulk at a lower cost and can sell for cheaper than the club shop. This is a man who has built up his fortune through the sportswear industry, who has the industry contacts and relationships to buy cheap and sell cheap, suitable for Sports Direct but not for Newcastle United.
Fans who are loyal to the Newcastle United brand and who buy from club shops, or who refuse to buy from Sports Direct are being unfairly asked to pay more. £15 more in some cases for exactly the same product. Why has there not been more of an effort to price the items the same and the fans given the choice where they spend their money?
Well, because this would be fair and not in Mike Ashley’s business interests. Mike Ashley seems quite content to undercut Newcastle United in a key area of merchandising for his business/personal gains, ultimately this lack of income for the club will result in a lack of money generated by the club which could be spent on improving the team, in Newcastle United press office speak – ‘no capital outlay’.
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