Although the COVID-19 pandemic continues to affect business around the world, the sporting-goods industry has managed to return to pre-COVID-19 levels of growth amid tough economic circumstances. During 2020, executives in the sporting-goods industry focused on three key trends: consumer shifts, the digital leap, and industry disruptions. In 2021, these trends continued, in some cases accelerated, or took interesting new turns. With many people still working from home, athleisure has gained further ground, reflecting new attitudes toward traditional workwear. Increased health awareness has given many people a new perspective on sports and general fitness. E-commerce has thrived, as consumers continue to shop online, even as lockdown measures have eased. Digital forms of individual or community-based 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.
I personally am more excited than I have ever been 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.
Status of the industry
At the beginning of the pandemic, sporting-goods companies, with a few exceptions, saw a significant dip in sales, as well as narrower margins. These shifts led to a bifurcation in performance (Exhibit 1).
Prior to the pandemic, the majority of listed players 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, a few specialized players were able to pull clear, with margins and sales growth soaring to higher than 15 percent. Still, most sporting-goods companies continued to deliver above-average economic profits.1 In 2021, the sporting-goods industry experienced a broad recovery. On a global level, the sportswear market in 2021 almost entirely recovered to pre-COVID-19 sales, fueled by consumers in China (23 percent growth compared with 2020) and the United States (15 percent). Overall, 14 percent year-on-year growth in 2021 will be more than double the average annual growth rate (CAGR) between 2015 and 2019 (5 percent).2
The last two years have indeed felt like performance sports for many of us—this is the new reality. We experienced a major shift comparable to the 1920s when Coco Chanel liberated women from corsets.
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 retightened restrictions. Indeed, the medium-term outlook is positive, with the global sportswear market expected to grow 8 to 10 percent a year up to 2025, from €295 billion in 2021 to €395 billion in 2025 (Exhibit 2).3 As more people commit to leading healthier and more active lives, sporting-goods companies have an opportunity to explore new areas of growth.
During the pandemic, digital was the only way to connect—now it is completely normal.
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 industry’s fortunes through 2022 (Exhibit 3).
We are convinced that an appreciation for sports and for an active life is intrinsically linked to preserving this planet.
Our research suggests five key themes that reflect the current state of play: the continuing 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 industry players, with economic profits becoming increasingly concentrated among a small group of players. The implication is that some industry players must speedily adapt their business models. In each topic, we present strategies that may support them in doing so.
- Evolving attitudes and behaviors: Consumers will continue to be active in new and different ways in 2022, amid rising health awareness and a greater commitment to digital and community-led exercise—often away from traditional sporting venues but also as part of traditional gym-based exercise at home. Looking at future spending, our report finds, 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 in which they plan to splurge, a positive indication that the 2021 tailwinds will continue in 2022—at least for industry players that keep up with increasing 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 leading players are tapping into this growing trend. Companies in 2021 that were able to streamline this connection between engagement and sales were able to boost profits significantly and even build digital consumer-engagement ecosystems—spanning from the company’s website to its own app and retail stores—using the generated data to inform areas such as product development and demand planning. And the social-media space keeps evolving: the use of livestreaming as both a promotional tool and 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 get a foothold in this “metaverse” arena, and others are expected to follow suit.
- The sustainability imperative: The pandemic and COP26 have helped to accelerate people’s awareness around sustainability, including a demand for more sustainable products. As consumers’ expectations in this area increase, the bar for companies to differentiate themselves is rising fast. 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: Last year reinforced the importance of digital channels, even as physical stores started reopening (Exhibit 4). We observed players shift toward offering direct-to-consumer (DTC) models, creating 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 will continue to focus on partnering with select retail partners. Meanwhile, retail stores will seek to establish a clear edge for brand names in order to keep them from leaving. Brands that do leave, however, will open up space for smaller brands to move in. Many players will repurpose 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 transport costs, and logistics chaos are causing turmoil in global supply chains (Exhibit 5). At the same time, consumers continue to expect fast and convenient delivery. Players will want to review their supply chains strategically so that they are better prepared for an uncertain future.
The push toward online sales has given us much more information about our consumers than before, when most of our business was done through retailers.
The shifting 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 that can adapt flexibly and align boldly with the new trends as they emerge.
With COVID-19, we will continue to see disruptions on both the demand and supply side for the next three to five years. We need to have an extra layer of cushion.