2021 has been a great year for the sporting goods industry! This is the conclusion of the new report “Sporting Goods 2022 – The New Normal is here”, which the world association of the sporting goods industry and the management consultancy McKinsey & Company have just published.
The sporting goods industry has survived the pandemic well, that is the tenor of the second edition of the annual report on the development of the sporting goods industry. Produced jointly by the World Federation of Sporting Goods Industry (WFSGI) and McKinsey & Company, it is based on proprietary and public research and interviews with industry leaders, the report’s authors said.
Similar level of growth as before the pandemic
The sporting goods industry has “performed the rare feat of returning to pre-COVID-19 growth levels in a difficult economic environment,” according to the report. Despite store closures, demand for sports products has increased around the world, accelerating the recovery of the economy. In 2021, the industry reached almost the same level of growth as before the pandemic. Annual growth was 14 percent in 2021, more than double the average annual growth rate between 2015 and 2019 (five percent). Annual growth of eight to ten percent to around 400 billion US dollars is expected by 2025.
Nonetheless, post-pandemic, the industry finds itself in a new context in which several key trends have both been confirmed and accelerated. While these trends are not new, they have widened the divide between the various players in the industry, with economic gains becoming increasingly concentrated. The consequence is that some companies have to adapt their business models quickly.
These five trends will have a major impact on the industry in 2022:
1. New sports habits
People will adapt their sports habits to the new situation. According to the study, around 70 to 85 percent of consumers want to continue using their online courses. This means that they will be active differently than before the pandemic. With a growing health awareness and greater commitment to digital, community-driven exercise, many will look to opportunities to exercise outside of traditional sports venues.
The younger generations and the people of India, China and the US are more optimistic and sporting goods are among the categories where they are willing to spend more money. Another finding: The gap between those who exercise a lot and those who do not exercise at all has widened further during the pandemic.
In terms of categories, athleisure remains the fastest growing apparel category, with a growth rate of 8-9% between 2020 and 2025.
2. Social commerce is increasing
Social media hype continues to grow, with influencers and digital communities forging a closer connection to commerce. The live streaming trend, which first took hold in Asia, will continue to gain momentum around the world. Already today, more than 80 percent of consumers worldwide are looking for products online, more and more companies will use social media to develop new strategies to bring consumers and brands, social interaction and e-commerce together. The Metaversum and its digital product worlds are also finding their way into the sporting goods industry.
3. Sustainability is a must
COVID-19 and the climate crisis have raised awareness of sustainability around the world. More than ever before, more and more people are understanding the connection between their own consumption and the situation of our planet. As expectations rise, the bar for companies to differentiate themselves continues to rise. Companies will focus even more on sustainable materials and circular business models, helping people make choices that align with their values.
4. Shifts in distribution channels
In 2021, companies have accelerated their evolution towards direct selling models, e-commerce and strategic partnerships with retailers. Looking ahead, further rebalancing is likely, the study says, with companies looking to make the most of their strengths. Some will focus on DTC (primarily new players and brands), while retailers will seek to create a clear advantage for brands. Many larger brands will repurpose physical locations as experience- and service-centric elements of an omnichannel offering.
5. Cost increases and uncertainties in the supply chain
Fluctuations in demand, production bottlenecks, rising raw material and transport costs and logistical chaos are causing unrest in global supply chains. The transport costs alone have increased by a factor of seven to ten. At the same time, the rise of online commerce has raised expectations for faster and more convenient delivery. Brands and retailers should therefore strategically review their supply chains to better prepare for an uncertain future.
Uncertainty is the new normal
The new normal in the sporting goods industry is likely to become even more entrenched in 2022, with uncertainty becoming the new reality, the report says. In this challenging environment, there will be both risks and opportunities. When looking for ways to improve performance, those who are likely to be most successful will be those who are flexible enough to adapt and boldly respond to new trends as they emerge.
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