Where Are Sporting Goods Sales Hiding?
By: Jenn McMillen
After the pandemic, sales of sporting goods have been powering down and industry leaders warn of further declines in 2023. But when looking into the areas where sales are dropping, retailers can spot opportunities. Here are one, two, three ways to lift sales that will matter more now, in February.
In 2021, nearly 60% of consumers bought new sports shoes. Are all of those pandemic joggers now running for the exits?
Sales in the sporting goods market indicate so much, having declined by 4% to 8% in the first nine months of 2022, according to a recent report by McKinsey & Co. Industry leaders expect that decline to persist, due to waning consumer optimism and cautionary spending.
In the post-New Year’s resolution month of February, those figures can get worse: Just 19% of people stick to their resolutions for at least one month, according to Forbes Health. That means 81% of those who kicked off exercise regimes on Jan. 1 are now on the brink of quitting.
For the $67.8 billion sporting goods stores industry, that means the one figure sure to lose weight in 2023 will be their revenue.
The Sporting Goods Industry Is Switching Gears
The financial performance of the sporting goods industry across various segments tells the story of post-pandemic lifestyle shifts. Some people got used to exercising outdoors or at home, not in gyms. Others who started workout routines to fill their long days have since replaced exercise with other interests.
Following are a handful of indicators of how behaviors are changing:
Shoppers are trimming their sporting goods budgets. More than half of all consumers said they will buy fewer sporting goods products in 2023, while 20% will trade down to less-expensive brands, according to the McKinsey & Co. report. As a result, 22% of sporting goods company leaders expect revenue to shrink by more than 5% in 2023.
Peloton’s sales are in a spin. Few equipment makers profited from the pandemic as did Peloton. Sales of its digitally connected bikes accelerated as consumer redirected their entertainment dollars to indoor workouts. Then people started leaving home again, and those bikes stayed behind. In its first fiscal quarter ended November 2022, Peloton’s revenue declined to $616.5 million, from $805.2 million in 2021. New fitness subscriptions declined by 95%.
Gym memberships are skipping reps. A survey by UpSwell Marketing, an agency that helps gyms attract and retain members, found that only half of the respondents who had gym memberships before the pandemic returned to their gyms within nine months of Covid restrictions being lifted. Nearly one-third still had not returned, and 25% do not plan to.
These figures don’t have to be discouraging. Look closely at where and how the spending movements are occurring, and retailers and brands can spot recovery options.
Working Out The Opportunities
If McKinsey’s research is accurate, and 20% of consumers plan to trade down to less-expensive brands, then sporting goods retailers should train their eyes on that group. One-fifth of any market can represent a path to profit, with a well-planned strategy.
Following are three performance opportunities being opened by these other shifts, with price-conscious consumers in mind.
Right-sized gyms memberships are doing well. If a good portion of former gym-goers stopped going in the past year, the price of admission might be why. Take low-priced Planet Fitness. It reported a 62% rise in revenue in the first nine months of 2022, the Motley Fool reported. At the close of 2022, it counted 17 million members. With a basic monthly membership at just $10, it’s a hard-to-resist value even for occasional gymsters. Strength exercise: When consumers trade down, retailers should show they’re willing to trade up. Planet Fitness does well for two reasons: Its membership volume offsets expenses (a la Walmart), and members are likely to go ahead and pay their low monthly fees, without guilt, even if they don’t pay regular visits.
Take control of your product recovery. While sales of new Peloton bikes are downshifting, resale is on a tear. By September 2022, Craigslist, Facebook and eBay were teeming with used Pelotons, according to The New York Times. Some were selling for half their purchase price. Core exercise: Take resale in-house. Peloton in August said it was testing a certified pre-owned bike program and making it a top priority. As explained in the Times, by buying back its equipment, Peloton seizes control from the peer-to-peer market and can decide where and when to resell its equipment. Doing so enables it to build direct customer relationships, so it can better understand who buys its equipment and plan accordingly. Other merchants, from REI to Amazon, also offer lower-priced refurbished sporting goods.
Make memberships flexible. Retailers that offer paid memberships, from reward programs to subscriptions, can generate revenue from retained enrollments even when product sales decline. Think about it: Every Peloton bike, Lululemon Studio Mirror and Amazon Prime package comes with a membership that represents a reliable revenue stream. Flexibility exercise: Sporting goods retailers can emphasize that the value of membership is maintained regardless of changes in activity, or whether the member buys a used or new piece of workout equipment. There are even ways to add value to membership fees that aren’t optimized. At some Spenga fitness studios, members who don’t cancel a class in time are still charged, but the money is donated to charity. Promoting these advantages – that your workout dollars are still put to good use – adds value.
Lunge For Those Sales, Sporting Goods Retailers
Retailers and brands watch closely: When consumer behaviors shift, they tend to open up areas that can be taken advantage of. Sporting goods retailers should not lose sight of those sinewy spending gaps, which are open for interpretation. Rather than commit to a 5% loss in 2023 sales, they can resolve to match their year-ago performances.
Faced with these record economic headwinds, that could be a personal best.
This article originally appeared in Forbes.
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Forbes.com retail contributor Jenn McMillen is nationally renowned as the architect of GameStop’s PowerUp Rewards, and is Founder and Chief Accelerant of Incendio, a firm that builds and fixes marketing, consumer engagement, loyalty and CRM programs. Incendio provides a nimble, flexible and technology-agnostic approach without the big-agency cost structure and is a trusted partner of some of the biggest brands in the U.S.