After a year that saw the sporting goods industry contract for the first time since the Great Recession, executives in the segment are cautiously optimistic.
The sporting goods market as a whole shrank by around 7 percent in 2020 to around 286 billion euros ($347.1 billion), according to the “Sporting Goods 2021 – The Next Normal for an Industry in Flux” report by World Federation of the Sporting Goods Industry (WFSGI) and McKinsey & Co. Despite this decline, they said, sportswear companies proved more resilient than the rest of the apparel industry, and sports equipment makers in particular performed “especially well.”
In a survey the pair conducted of 130 industry executives, 64 percent of respondents said they expect “better” or “much better” market conditions in 2021 against those experienced in 2020.
The biggest challenges will be in supply chains and Covid-related issues, the report concluded. The greatest opportunities, meanwhile, lie in the potential return of large sporting events such as the Olympics and the UEFA European Football Championships, as well as the ongoing rise in popularity of outdoor, home and digital activities, sport and fitness.
“The sporting goods industry has shown its resilience in light of an incredible crisis,” Robbert de Kock, president and CEO of WFSGI, said in a statement. “Sporting goods industry players have found ways to win in the next normal by reaching consumers through digital channels and achieving both sales and consumer engagement through new or enhanced digital exercise communities.”
McKinsey and the WFSGI’s report outlined eight trends that are set to shape the sporting goods industry in 2021 and beyond. Most, it noted, were already emerging before the pandemic and the events of the past year have simply accelerated their introduction and heightened their impact.
A major trend before Covid-19, athleisure has flourished throughout the pandemic and will likely continue to thrive into the future. More than 75 percent of industry representatives in the survey said they believe the athleisure segment will continue growing. One-third said they believe that growth was accelerated through Covid-19.
Physical activity levels
The report also predicted significant shifts in physical activity levels. Though much has been said about how consumers are becoming more active—and, indeed, McKinsey and the WFSGI said 30 percent are—40 percent of people are less active. The two groups said these developments are widening the physical activity gap as households with lower incomes are exercising less.
Physical activity, they noted, is strongly linked to income: 46 percent of groups making below $25,000 were physically inactive in 2019 compared to 19 percent of groups making above $100,000. Covid-19 has exacerbated this divide with between 8 percent and 28 percent of consumers expecting their income to decline for more than a year because of the virus.
The pandemic has also accelerated the move toward sustainable products. Two-thirds of consumers now consider the use of sustainable materials an important factor when making purchase decisions, McKinsey and the WFSGI said. The number of new sustainable SKUs introduced in the online market grew 58 percent annually between mid-2017 and mid-2020, they added.
Due to social distancing and stay-at-home requirements, 2020 saw a dramatic shift toward digital fitness. Moving forward, the duo said this won’t replace traditional sports but rather enhance them. More than half, 53.6 percent, of members at a “leading U.S. gym chain,” they observed, plan to complement their routine with free apps, livestream, connected equipment or paid apps.
As has been widely noted, last year saw a boom in e-commerce and direct-to-consumer sales. From 2019 to the first half of 2020, the online share of major sporting goods players grew threefold, McKinsey and the WFSGI said. After a post-lockdown shift away from e-commerce, they predicted the online share will stabilize around 25 percent in 2021.
The report also found a likely shift in sports marketing from assets with broad visibility, such as club, league or event sponsorships. With sporting events cancelled, postponed or played in empty stadiums, industry players shifted to influencers with greater reach on social media. Looking ahead, 43 percent of respondents said they expect sporting goods marketing to be less closely linked with major sporting events in the future, compared with 29 percent who said the link will be maintained. Sixty-four percent said they expect a larger focus on digital advertising.
With the lockdown accelerating the pressure on brick-and-mortar retail, McKinsey and the WFSGI said retail will need to find new purpose, new experiences and new levels of convenience that can’t be offered digitally in order to attract consumers back. Forty-five percent of respondents predicted fewer store openings in the coming year while 7 percent said they anticipated an uptick.
Finally, McKinsey and the WFSGI said more agile supply chains have become a permanent feature on company agendas. In a post-Covid world marked by shorter demand cycles, e-commerce and closer DTC relationships, they will become “table stakes” in some markets, the pair said. According to their survey, executives agree, with 62 percent saying they were considering local options.