Dick's takes advantage of Economies of Scale

As Dick's Sporting Goods has continued to grow their footprint throughout the United States, they've created their single largest cost advantage as compared to their competition. Their buying power with some of the largest athletic apparel manufacturers is second to none when it comes to the big box stores.

Typically when you are discussing cost advantages and economies of scale you are referring to large manufacturing companies. But when you consider these priniciples with retail organizations, it demonstrates the power of size and what that means for their contributions as it pertains to margin per unit. Dick's has an overwhelming advantage in the marketplace. Their greatest competitor on the national scene is Sports Authority and their footprint only equates to about 60% of Dick's. All the other competitors are regional in nature like Big 5 Sporting Goods. Unlike the manufacturing industry, these advantages can actually be seen in the stores. The next time you walk into one of these stores, take a moment and compare the levels of inventory or options that Dick's has in their offerings as compared to the others. Not only does Dick's use its cost advantages to improve margin, but they use these economies of scale to provide additional products and services that their competition simply can't do. They have used this important cost advantage to grow their product lines thus intriquing more diverse consumers to frequent their stores.

This not only allows them to continue to grow, it also serves as a life line when the economy goes through downturns or recession periods. They have a plethora of product offerings and the advantage to lower prices and create marketing promotions that help keep the stores busy when money is tight and consumers get nervous. Their margins do take a hit, but their buying power affords them the luxury to survive profitably.