Sporting goods an industry in flux. The sporting goods industry contracted for the first time since the financial crisis of 2007–08 last year. Most brands, retailers, and manufacturers finished the year significantly in the red, despite a bounce back in activity after the lockdowns according to the latest research carried out by McKinsey. The exception was the Chinese market, which continued its role as the industry’s growth engine after expanding at an average of 16.5 percent a year (CAGR).
Sporting goods companies saw their market valuations fall in the early months of the pandemic. However, they tended to outperform the wider marker as the year progressed, with sports-equipment makers (particularly bicycle and digitally enabled fitness equipment) doing especially well. Sportswear companies were also more resilient than the rest of the apparel industry.
Trends set to shape the industry
Here are the critical key themes set to shape the sporting goods industry in the coming year and beyond. Most were already emerging ahead of COVID-19, but the dramatic events of the past couple of years has accelerated their introduction and heightened their impact. The research shows it will be critical for sporting goods players to align with these evolving dynamics in order to succeed in the next normal. The trends can be broadly described under three banners: consumer shifts, digital leap, and industry disruption.
1. Athleisure—the new default and a competitive battleground. Athleisure was a megatrend before COVID-19, but the pandemic has served to further blur the lines between work and free time, and there is a rising acceptance of comfortable wear in previously more formal contexts. With fashion brands increasingly entering this segment, sporting goods players need to leverage their innovation abilities and market knowledge in order to win in this increasingly contested battleground.
2. Physical-activity gap—an opportunity to put healthy lifestyles within reach of all. COVID-19 has triggered significant shifts in physical-activity levels. Around 40 percent of people are less active, while around 30 percent are more active. Unfortunately, a physical-activity gap linked to income levels already exists, with less-affluent households tending to exercising less. The crisis will drive more households into lower-income groups, and thus widen the physical-activity gap. The sporting goods industry should therefore embrace a multistakeholder approach to tackle physical inertia, particularly in the communities left behind. this is heightening the need for ever great personalisation of individual consumer treatment, especially is product offerings and communication. Software such as SwiftERM are reaping the benefit of this with immediate uptake, for any size of enterprise.
3. Sustainability—the accelerated next normal. Sustainability has become an increasingly urgent consumer priority, and companies have responded by introducing more sustainable products—a trend accelerated by the pandemic. The onus is now on companies to secure sustainable supply chains. Since recycling is likely to be a bottleneck, brands need to engage with innovative concepts, such as direct-to-consumer circularity.
4. Digital-enabled fitness and exercise communities take center stage. The past year saw a drastic shift toward digital fitness, driven by physical-distancing and stay-at-home requirements. Digital fitness won’t fully replace traditional sports and exercise but rather will enhance them in a “bionic” hybrid model. Digital workouts will continue to be a hot trend for the next couple of years, particularly when they offer an engaging and inspiring element and allow remote exercising in a simulated community setting.
5. Leap forward in online—an accelerating business-model shift to direct to consumer. store closures lifted the online growth curve to a new level, enabling multiple brands to grow e-tailing and even direct-to-consumer sales. As a result, the past year has seen a leap forward in online shopping, and many first-time shoppers will stick with their new habits. With online penetration expected to stabilise at around 25 percent in 2021, six times higher than before the pandemic, brands and retailers need to adjust their business models fast. Brands need to put digital commerce at the centre and accelerate direct to consumer, and retailers need to deliver seamless and integrated omnichannel experiences.
6. Marketing shift from assets to influencers—an opportunity to make digital pay. Digital marketing traditionally focused on assets with broad visibility (for example, club, league, or event sponsorships). With sporting events cancelled, postponed, or played in empty stadiums, and consumers spending even more time online, sporting goods industry players need to shift to digital. Furthermore, to build awareness, credibility, and engagement, brands need to increasingly work directly with individual athletes as influencers, who have a much longer reach than events or associations. However, as athletes are role models, and consumers expect them to take a stance on topics important to them, brands needs to ensure alignment with these messages.
7. Retail under pressure—but a critical part of the future channel mix. Brick-and-mortar stores were already under pressure, and lockdown measures have accelerated the retail crisis amid widespread closures and increasing financial pressure. To attract consumers back to stores, retail needs to find new purpose, new experiences, and new levels of convenience that cannot be offered digitally.
8. Supply chains—the flexibility imperative and a raised bar on agility. More agile supply chains have become a permanent feature on company agendas. In a post-COVID-19 world characterised by shorter demand cycles, e-commerce, and closer direct-to-consumer relationships, they will be table stakes in some markets. Amid persistent uncertainty, it will make sense to both build stronger supply-chain partnerships and explore alternatives such as near-shoring.
Winning in the next normal
Pre-COVID-19, many companies were riding a wave of increased sports participation. COVID-19 has also raised the bar for winning, amid tougher market conditions, pressure on physical retail, and the need for investment to align with an increasingly dynamic industry landscape. In the next normal, winners will be characterised by:
- a strong presence in growing segments and sports categories, including women, China, and athleisure (which is predicted together will account for around two-thirds of growth in the next couple of years), as well as running and biking
- an excellent direct-to-consumer business model, including a proprietary e-commerce and seamless omnichannel offering, powered by a cutting-edge back end (expertise, fast development cycles, and omnichannel capabilities)
- direct personalised connection to consumers, through digital communities, loyalty programs, and the like
- a purpose-driven retail footprint, with specific formats for different store types
- credibility on sustainability, either as a differentiator or on par with industry, at a minimum
- revisited supply-chain relationships, with built-in agility (for example, local-for-local sourcing and closer partnerships)
- sports marketing optimized for digital channels, with a focus on influencers (for example, individual athletes) who are aligned with brand values
- agility in planning and budgeting, to respond quickly to changes in the market environment