French sporting goods retailer Decathlon is undergoing a major restructuring of its operations. Its ambitious transformation plan aims to ensure a “more profitable, more digital and more environmentally friendly” approach.
The group has fundamentally changed its positioning by streamlining its product portfolio. It is planned to eliminate about thirty of the forty-nine existing brands. Among the brands that will disappear are Artengo (racquet sports) and Elops (cycling), which will be integrated into brands such as Quechua (outdoor sports), Domyos (fitness and martial arts) and Decathlon (multisport). The aim is to master the digitization of the remaining brands, simplify the customer experience while maintaining an affordable range of under 20 euros in the face of price inflation. In addition, the storage-related costs should be reduced.
As for digitization, the share of e-commerce sales fell from 20.8 percent in 2021 to 16.8 percent in 2022. This result falls short of the expectations of new CEO Barbara Martin Coppola, who wants to revamp the site to expand online sales. To do this, she has set up a Green IT team that is 100 percent dedicated to finding a more sustainable model for the IT department. Looking at a longer period, i.e. from 2019 to 2022, there is a 135 percent increase in digital activity, thanks largely to investments in logistics.
Indeed, Decathlon continues its logistical efforts to strengthen its local production and therefore its resilience to supply difficulties related to geopolitical, macroeconomic and environmental risks. For example, the proportion of “Made in Europe” in retail sales in Europe has increased from 25.6 percent in 2021 to 27.2 percent in 2022. Decathlon therefore tends to be more responsive to demand and promote its circular economy. The group has also revised its supply chain strategy, opting for rail transport to move its products from its Wuhan warehouse to northern European warehouses. While this option optimizes delivery times and, according to the group, would save 36 percent of CO2 emissions compared to road or sea transport, it could ultimately prevent Decathlon from pushing its Made in Europe production.
Circular economy: rental, return and repair
As part of its transformation plan, Decathlon is embracing circular economy solutions such as Product rental, return and repair. These circular economy initiatives account for 1.75 percent of the group’s sales, up 22 percent on the previous year’s result.
Decathlon is seeing strong growth in its rental system, with 187,888 product rentals in 2022 compared to 97,474 in 2021. The company offers three types of rentals, including short-term rentals, which allow customers to rent products such as mountain bikes, paddles or snowshoes for a couple hours, several days or a season. With short-term rentals, the Group intends to generate sales of EUR 9 million in 2022, compared to EUR 5 million in 2021. The main focus of the Group’s rental strategy remains monthly subscription rentals for at least one and three months respectively. The number of contracts concluded in France has increased significantly, from 872 in 2021 to more than 20,000 in 2022. The long-term subscription, with a commitment period of 12 to 36 months, is currently being used as a tool to analyze customer needs and desires.
Decathlon is also developing the sale of second-hand products, allowing customers to resell their items either in-store or online. Customers can choose to receive a voucher or pay directly into their bank account for taking back their products in-store, or they can return their items online, describe the condition and receive a buyback offer price. More than 3,000 products have been resold through Decathlon’s online marketplace. All told, 159,790 items were sold as trade-ins in 2022, representing 0.25 percent of the group’s total sales, compared to 87,000 in 2021.
30 percent of the products sold by Decathlon are classified as recyclable and 23 percent of sales are made with ecodesign products. This qualification, which Decathlon developed in collaboration with Adidas, includes criteria such as a product’s ease of repair and durability. The group is aiming for 100 percent Ecodesign products by 2026. The implementation of the transition plan will result in the layoff of nearly 600 employees, but will also result in the hiring of 500 technicians by 2026 to develop the repair system.
Integration of ESG criteria into the financial balance sheet
Since 2020, Decathlon has integrated ESG (environmental, social and governance) criteria into its balance sheet and bank credit lines.
The indicators “sales of ecodesign products” and “sales of circular products” have been included in the shareholding since October 2022. They are now part of the variable remuneration of the company’s executives. The quarterly bonuses of certain executives include a bonus-penalty arrangement, which is linked to sales of Ecodesign products for managers in the areas of services, sports & processes and IT and to sales of circular products in the case of managers in stores and logistics.
In addition, Decathlon has partnered with EthiFinance, an extra-financial analytics agency, to develop an impact credit project that links financial value to long-term investments that meet ESG criteria. Nine business partners, including Crédit Agricole CIB and Natixis, have included these ESG criteria in their loan agreements with Decathlon. This means that more than 70 percent of the bank loans taken out by Decathlon 2022 were analyzed according to ESG criteria. By 2025 it should be 100 percent. This initiative allows Decathlon to benefit from cheaper interest rates and to fund more responsible activities for the banks involved.
Linking the company’s environmental performance to the remuneration of its managers is a concrete and effective lever to ensure value creation and efficient management of extra-financial projects. While these circular projects represent a small percentage of Decathlon’s corporate balance sheet today, it should be interesting to see how the group will use them in the future.
This translated post previously appeared on FashionUnited.uk