Daily thoughts, observations, and speculations
The performance apparel industry is very competitive because of industry giants like Nike and Adidas. These two companies have traditionally set the standard for performance gear, but Under Armour was able to enter the market using an innovative design that nobody had ever seen. They were the first company to create a dry-fit style shirt that used “moisture wicking” technology to prevent athletes sweat from being absorbed. It also helps to improve their performance by keeping their muscles warm. The creation was a huge success among athletes of all sports and Under Armour experienced rapid growth in the marketplace. Competitors took notice of this growth and quickly created their own dry-fit style shirt, but Under Armour had already captured the majority of the market by being the first-mover. So in Under Armour’s major business line, they seem to have the market cornered with their technology and refuse to form a strategic alliance with another major company.
UA does, however, choose to strategically ally with smaller corporations to gain a competitive edge in its accessories department. They reached a licensing agreement with JR286 to manufacture and distribute Under Armour accessories. Under Armour provides JR286 with exclusive rights to the Under Armour trademarks and all of Under Armour’s accessories. Under Armour provides final approval on all business decisions related to accessory design, marketing, and distribution.
As Bill Kraus, Vice President of Licensing stated in a recent press release “This strategic alliance allows for the sustained expansion of Under Armour accessories to all of our sales channels, while continuing to positively affect our bottom line by concentrating our internal efforts on performance apparel – our core competency.” He also states of the alliance that it is “Motivated by consumer demand for our products, (wherein) this agreement allows us to deliver some of our most desired items to our customer while simultaneously building Under Armour’s relationships with key retailers.”
UA’s accessories include hats, bags, wristbands, headbands and water bottles. With JR286 responsible for all aspects of the accessory business – including sales and distribution – its efforts provide a powerful layer to Under Armour’s existing sales structure. JR286 mirrors Under Armour’s current sales and distribution model by channeling to key retail accounts, independent dealers, team dealers, international, and online outlets. As part of the agreement, Under Armour promotes the licensed accessories with its existing and current accounts through various advertising and promotional activities, including a presence at the sporting goods industry’s premier trade show, the Super Show.
UA is a niche company, with most of their core technologies protected by intellectual property. They enjoyed first mover advantage and marketed to a professional athlete client base, which built for them a sustainable loyal consumer base. So in order to focus on their core competencies of the sports performance apparel, they formed strategic alliances with JR286 to manufacture their accessories line. This gives them rare benefits to outcompete the likes of Nike and Adidas.