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Jan 9, 2018

Sneakernomics: Sports Retail Predictions for 2018

Matt Powell, Vice President, Senior Industry Advisor ;

Sports

@NPDMattPowell

On the surface, the 2017 results for the U.S. sports industry appear to be below average, but not a disaster. When we understand that it was an extraordinarily promotional environment that drove these results, we realize that things still weren’t as great as they have been in prior years. 

The issues that plagued the industry in 2017 still exist as we enter 2018. Some of the necessary steps that brands and retailers must take to correct these issues will further harm topline results. However, these steps must be taken if we are to recover the aspirational and inspirational foundation that built this great industry.

I have low expectations for athletic footwear in 2018. Brands have stated that they will tighten advertising policies to try and rein in the rampant promoting we saw in 2017. While these are the right steps to recovery, it means that in the short term retailers and brands will do less business. Acceptance of this fact is the first step to improvement.

Brands have also stated that they will cut back on the distribution of formerly coveted products to try and drive demand back up to lost levels. Again, this is the correct strategy, but in the short term it will mean fewer sales for brands and retailers. It remains to be seen if the cache can be restored.

While reported inventories are improving in terms of quantity, the quality of inventory remains poor. There still is far too much performance basketball and running products in the market, which is creating markdowns at retail. Brands and retailers must work to shift inventories away from performance. The consumer is quite clear in telling us they have no appetite for “performance-as-fashion.”

On the other hand, the sport lifestyle sneaker category will be the primary growth vehicle in 2018, though increases will moderate. The “modern runner” look has become too pervasive, and the industry needs a new hot look to lift sales.

Those brands that thrived in 2017 will continue to do so; those that did not, will not. New, smaller brands will flourish in 2018 as the consumer seeks differentiation and retailers seek relief from the unprecedented promoting that drove the meager increases from the mega brands.

Athletic apparel will not see much improvement over 2017. The category was on promotion for nearly the entire year, and difficult comparisons will make growth challenging. A lack of a new items or looks for apparel will also dampen results. This remains a major opportunity.

In terms of other key opportunities, private brands, which were a bright spot for apparel in 2017, can flourish in the 2018 environment as retailers seek relief from the downward promotional spiral. Women’s athletic apparel remains the greatest opportunity for the industry, and one that the industry continues to squander. The sports industry needs to look to the white-hot beauty industry for cues on how to reverse fortune.

Beyond footwear and apparel, the sports equipment market will face the ongoing challenges of declining participation. Fewer kids playing sports means less equipment sales.

The baseball business will have a decent year as new bat regulations will drive sales; however, this is a one-off benefit, and retailers and manufacturers will have to seek new ways to keep consumers engaged.

One bright spot in team sports remains protective gear. Parents whose kids are still playing sports are very concerned about injury, and justifiably so. There is a major retail opportunity to leverage this concern.

The golf business will remain challenged as Millennials are not picking up the game and Boomers age out. Golf is a share game now, where winners will win by taking from losers.

The outdoor industry woes will continue as it remains too focused on pinnacle product and less aimed at the everyday user. Likewise, the cycling and run specialty businesses are also too focused on pinnacle users.

Overall, we will continue to see retail rationalization in the sports industry, as there is far too much mediocre retail in the space. I expect that 2018 will be a challenging year for the industry, and one of transition. In the coming weeks I’ll share some thoughts on what I see as solutions for improving the industry in the months ahead.


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