Although the COVID-19 pandemic continues to affect business around the world, the sporting goods industry has managed to return to pre-COVID-19 growth levels amid difficult economic circumstances. During 2020, sporting goods industry executives focused on three key trends: consumer shifts, the digital leap, and industry disruptions. In 2021, these trends continued, in some cases accelerating or taking interesting new turns. With many people still working from home, leisure has gained more ground, reflecting new attitudes towards traditional workwear. The rise in health awareness has given many people a new perspective on sports and fitness in general. E-commerce has thrived as consumers continue to shop online, even as lockdown measures have been relaxed. Digital forms of individual or community exercise and physical activity have become more popular and have created new possibilities for sporting goods companies. Meanwhile, sustainability is more important than ever, with the COP26 Climate Change Conference emphasizing the need for companies to increase their efforts to decarbonize as they seek to differentiate their offerings.
Personally, I am more excited than ever working for a sports company. We all know that sports are a major driver of health and as an industry we have the power to change lives for the better.
Kasper Rørsted, CEO of Adidas
state of the industry
At the start of the pandemic, sporting goods companies, with a few exceptions, saw a significant drop in sales as well as thinner margins. These changes led to a performance fork (Annex 1).
Before the pandemic, most of the players on the list posted growth in earnings before interest and taxes of 8 to 15 percent, as well as 5 to 10 percent growth in annual sales. In 2020, some niche players were able to get ahead, with margins and sales growth soaring to more than 15 percent. Even so, most sporting goods companies continued to generate above-average financial profits.
In 2021, the sporting goods industry saw a broad recovery. Globally, the sportswear market in 2021 almost fully recovered to pre-COVID-19 sales, driven by consumers in China (23 percent growth compared to 2020) and the United States (15 percent). hundred). Overall, the 14 percent year-over-year growth in 2021 will be more than double the average annual growth rate (CAGR) between 2015 and 2019 (5 percent).
Exhibition 1
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The last two years have felt like high-performance sports to many of us – this is the new reality. We experienced a major change comparable to the 1920s when Coco Chanel freed women from corsets.
David Allemann, co-founder of On
Over the next 12 months, we expect the tailwinds seen in 2021 to continue, despite some uncertainty caused by new viral variants, such as Omicron, and tighter restrictions. In fact, the medium-term outlook is positive, as the global sportswear market is expected to grow by 8-10% per year until 2025, from €295 billion in 2021 to €395 billion in 2025. (Graph 2).
As more people commit to healthier, more active lives, sporting goods companies have an opportunity to explore new areas of growth.
Appendix 2
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During the pandemic, digital was the only way to connect; now it’s completely normal.
Caio Amato, Brand Leader, Oakley
Trends set to shape the industry in 2022
This second edition of our report confirms the trends we presented last year and explores an exciting new selection of trends that are poised to shape the fortunes of the industry through 2022 (Exhibit 3).
Annex 3
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We are convinced that the appreciation for sport and for an active life is intrinsically linked to the preservation of this planet.
David Allemann, co-founder of On
Our research suggests five key themes that reflect the current state of the game: the continued growth of digital, an acceleration in sustainability, a closer connection between social media and commerce, the reshaping of distribution channels, and an imperative for new supply chain strategies. None of these trends is new, but over the past year they have become even more important, widening the gap between various players in the industry, with economic gains increasingly concentrated among a small group of players. The implication is that some industry players must quickly adapt their business models. In each topic, we present strategies that can help you do just that.
Evolving attitudes and behaviors: Consumers will continue to be active in new and different ways in 2022, amid heightened health awareness and greater commitment to digital and community-led exercise, often far from traditional sporting venues , but also as part of traditional gyms. exercise at home. Looking at future spending, our report finds that younger generations and consumers in China, India, and the United States are generally more optimistic than older generations and consumers in other geographies in terms of spending. Sporting goods is one of the categories where they plan to splurge, a positive indication that the tailwinds of 2021 will continue into 2022, at least for industry players keeping up with rising consumer expectations. From social media to social commerce and digital ecosystems: Social media continues to serve as an effective platform for influencers and digital communities to foster a closer connection between consumers and commerce, and major players are leveraging this growing trend. In 2021, companies that were able to optimize this connection between engagement and sales were able to significantly increase profits and even create digital ecosystems of consumer engagement, ranging from the company website to their own app and retail stores, using the data generated to inform areas such as product development and demand planning. And the social media space continues to evolve: the use of live streaming as a promotional tool and as a shopping channel is now well established in Asia and is expected to expand around the world. Early adopters among sporting goods players are trying to gain a foothold in this “metaverse” field, and others are expected to follow suit. The sustainability imperative: The pandemic and COP26 have helped accelerate people’s awareness of sustainability, including the demand for more sustainable products. As consumer expectations rise in this area, the bar for companies to differentiate themselves is rising rapidly. Leading companies will focus even more on sustainable materials, circular business models and helping consumers make choices that reflect their values. The future of channels: The importance of digital channels was reinforced in the past year, even as physical stores began to reopen (Exhibit 4). We saw players move towards offering direct-to-consumer (DTC) models, building a stronger online presence and consolidating their retail partner model. In 2022, companies will need to make the most of their strengths. New players will prioritize DTC and continue to focus on partnering with select retail partners. Meanwhile, retailers will be looking to establish a clear advantage for brands to keep them from leaving. Leaving brands, however, will make room for smaller brands to move on. Many players will reuse physical locations as experience- and service-driven elements of an omnichannel offering. Solving the supply chain puzzle: Demand volatility, production bottlenecks, rising raw material and transportation costs, and logistics chaos are causing turmoil in global supply chains ( Graph 5). At the same time, consumers continue to expect fast and convenient delivery. Players will want to review their supply chains strategically to be better prepared for an uncertain future.
Annex 4
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The drive towards online sales has given us much more information about our consumers than ever before, when most of our business was done through retailers.
Duncan Scott, Senior Vice President of Strategic Sourcing and Quality, New Balance
Annex 5
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The changing trends that the sporting goods industry experienced in 2021 are likely to become even more established in 2022, with uncertainty becoming the new reality. In this challenging environment, risks and opportunities abound. The most successful players will likely be those who can adapt flexibly and boldly align themselves with new trends as they emerge.
With COVID-19, we will continue to see disruptions on both the demand and supply sides for the next three to five years. We need to have an extra layer of mattress.
Duncan Scott, Senior Vice President of Strategic Sourcing and Quality, New Balance
Source: www.mckinsey.com