Expansion and Retailers and Greenwood Park and Specialty stores and Retail and Real Estate & Retail

Running Co. takes aim at sporting-goods giants

January 7, 2008

Retired Olympic distance runner Bob Kennedy is still moving as fast as ever.

Riding the wave of the post-1990s running boom, Kennedy--along with his business partner Ashley Johnson--have grown The Running Co. from a single boutique store tucked along the Monon Trail in Broad Ripple into the dominant player in Indiana's specialty running market.

Kennedy and Johnson--himself a former collegiate All-American runner--now have four stores, and the most recent expansion is their boldest yet, pitting them against mall giants Dick's Sporting Goods, The Finish Line and Foot Locker for supremacy among south-side runners and walkers. The pair opened a store at Greenwood Park Mall in December.

"There's a huge potential market currently being served by store's like Dick's, Kohl's and DSW. We think our Greenwood Park Mall store allows us to speak to that market," Kennedy said.

Specialty running stores rarely locate at malls, which charge about 20-percent more in rent than smaller strip malls.

But Johnson said Greenwood Park Mall's new outdoor lifestyle center allows the new store to have the best of both worlds.

"We have exposure from the street and the store is easy for regulars to get in and out of, and it also gives us access to thousands of mall shoppers every day," he said. "Those are people we might not be exposed to otherwise that can experience our service."

During the first week, Kennedy said, the Greenwood store's sales are double the projections.

As in any specialty business, customer service is a critical ingredient if the stores are to continue to succeed, the partners and others in the industry said.

"In the specialty running business, if you don't have a high level of service, you can kiss it goodbye," said Ken Long, who founded the state's first specialty running store, The Runner's Forum, on the north side in 1979. "Bob and Ashley have stuck to their business plan. The service they offer is excellent, and as a result they've grown."

The Running Co. is the only central Indiana specialty running operation with more than one store. The Runner's Forum has one location; Athletic Annex Running Centre has one northwest-side store, and Gray Goat Sports has a single south-side store.

After opening the Broad Ripple shop in November 2000, The Running Co. expanded into Fishers in May 2004 and Carmel in early 2006.

The Running Co. co-founders aren't ruling out further expansion, possibly even outside central Indiana.

The three established stores are profitable, Kennedy said, with year-over-year sales up 19 percent in 2007. In 2006, sales were up 25 percent, and each year before that sales increased more than 30 percent. Kennedy and Johnson wouldn't reveal sales figures. About 68 percent of the company's sales are shoes, with the remainder coming from apparel and accessories.

Though The Running Co. has expanded quickly, sporting-goods experts said growth in this specialty market isn't easy.

"With service being so critical, finding the right personnel to man these stores is key," said Long, who sold his retail business in the mid-1980s, and now runs a company that trains runners and walkers. "To work in a store like this, you have to be a lot more than just a shoe clerk."

The Running Co. has 26 employees, and Kennedy said the screening process is intensive. One tactic Kennedy and Johnson use is hiring knowledgeable longtime customers.

"We don't hire teen-agers," Kennedy said. "That's not the perception we want to have. We demand a certain experience level."

The Running Co. plans to add another 10 or so employees this year, including a person to handle marketing full-time. Another employee may be added soon to handle purchasing.

Unique services

Staffing stores with knowledgeable employees isn't the only ingredient in good customer service. Another key to the company's success, Kennedy said, is offering services not available elsewhere. The Running Co., for example, partners with St. Vincent Sports Medicine and uses a treadmill and videocamera to offer analysis of a person's running mechanics.

Kennedy and Johnson don't see themselves growing at the expense of other specialty running stores.

"We think there's a large potential customer base that goes beyond what is traditionally thought of as serious runners or walkers," Kennedy said. "Lots of people never race, so they don't consider themselves serious runners or walkers, but they are."

Industry trends indicate now might be the time to bet on The Running Co.'s success.

According to Washington, D.C.-based Sporting Goods Manufacturers Association, U.S. participation in running and walking is growing nearly 10 percent a year.

There are now 37.9 million U.S. runners and joggers. That's up about 10 million from the original running boom of the early 1980s, according to the SGMA. There are another 42.2 million fitness walkers.

There are more Americans running and walking for fitness than there are playing basketball, baseball and football combined, the SGMA reports.

"If you don't believe the power of this running boom, just look at the numbers of people participating in races, especially marathons and half-marathons," said Mark Price, co-owner of Athletic Marketing Group, a firm that sells running shoes and goods to retail stores in Indiana, Michigan, Ohio, West Virginia, Pennsylvania and upstate New York.

In 1980, for instance, the Indianapolis 500 Festival Mini-Marathon had about 2,000 participants. Today, that race is capped at 35,000 entrants.

There were 400,000 Americans who finished a 26.2-mile marathon in 2006, up from 100,000 in 2000, according to Marathonguide.com. There would likely have been more if the nation's biggest marathons weren't capped. More than 93,000 applied to run the 2007 New York Marathon. Registration was capped at 36,000. The Indy mini, the nation's largest half-marathon, sells out more than five months in advance.

Early rejection

Though Kennedy and Johnson have pedigrees that bode well for the operation's success, it was a marathon effort to win over some industry insiders. Running shoe and apparel makers such as New Balance and Asics were notable holdouts, refusing to allow The Running Co. to carry their products when the Broad Ripple store opened.

The Running Co. now carries every major running brand and stocks 60 models of shoes.

"When we opened seven years ago, we were begging to open [accounts] with some of the vendors," said Johnson, who formerly managed the Portland Running Co. in Oregon and Marathon Sports in Boston. "Now we're many of those vendors' biggest account."

Despite Johnson's experience, many questioned if the duo had what it takes to survive a retail market dominated by big-box stores. At the time, Kennedy, who ran in the 1992 and 1996 Olympics, was sponsored by Nike.

"There was a fear that this would be a Nike concept shop, with just a few other brands in there," said Price, who primarily deals Saucony.

Kennedy is no longer sponsored by Nike.

"When Bob and Ashley drew up their business plan, they looked long term, and that approach has paid off," Price said.

Kennedy's company is now getting a boost from his old sponsor.

Last month, Oregon-based Nike launched a multimillion-dollar ad campaign targeting avid runners.

"When Nike is selling a lot of running shoes, they're so huge, it's good for everybody in the business," Price said. "All the specialty brands and shops draft off that."

The Running Co. principals certainly pay attention to the running market, they simply don't take their cues from it.

"We don't compare ourselves with other athletic stores," Johnson said. "We compare ourselves to operations like Starbucks and Nordstrom. Those are companies that have a business plan based on strong service--that is replicable."

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