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Aug 25, 2020

Sneakernomics: Second Half Predictions for U.S. Sports Retail

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We are beginning to get a clearer picture of what to expect for sports retail in the second half of 2020. Here’s a look at my expectations for the upcoming months.     

Based on the recent U.S. unemployment figures, I believe it’s accurate to say that this recession is not going away any time soon. The economic climate will impact overall sports retail and we can expect a soft business environment into 2021. Some industries will be challenged to survive in their pre-pandemic forms.

I anticipate that unemployment will remain at severely high levels for some time, and many of those lost jobs will not return. Younger consumers and people of color are represented in the unemployment rolls at a higher rate. Seeing as they are also key demographics for the sports industry, this situation will further hurt the industry.

From research conducted by our partners at CivicScience, we know that many U.S. consumers remain reluctant to quickly venture back into shopping malls. This will dampen the recovery, but it will help online sales.

There will continue to be bankruptcies, store closures, and further consolidation. Brands will continue to whittle away at their customer lists. Bankruptcies will be disruptive to existing retailers. All of this also drives more business to the internet.

Online purchases will reset to a new and higher level of penetration. The timelines I forecasted pre-pandemic I have moved up by three-to-five years. Online penetration for athletic footwear will shift from about 30% of sales pre-pandemic to about 40% going forward. Much of this will be driven by brands’ direct-to-consumer (DTC) businesses, which have surged during the pandemic.

Looking at key holiday moments in time, the first that we are in the middle of right now is Back-to-School, and the season-to-date results continue to disappoint. Looking at weekly data via NPD’s Retail Tracking Service, athletic footwear sales are down more than 20% in the last week of July and first two weeks of August combined. The likely causes? The end of the Pandemic Unemployment Assistance program, delayed and virtual school openings, and the recession.

The Amazon Prime Event currently slated for October will be the unofficial start to the 2020 Holiday shopping season. I expect brands and retailers will be aggressive to try and stave off the Prime Event, and will implement early, aggressive price promotions. Black Friday is poised to be a challenge this year given most states’ rules on social distancing, kicking off what I expect to be a messy holiday season.

Delving into specific categories, I remain pessimistic about athletic footwear’s second half performance. It is now clear that the sensational June results were an outlier. The sales increase was driven by an easy comparison, paychecks through the Pandemic Unemployment Assistance program, therapeutic shopping, and a spike in limited edition shoes hitting the market. While I still believe that performance running and sport lifestyle products will be bright spots and outperform the market, I believe the overall trend will be negative.

Activewear will also be challenged in the second half. Basics should continue to do well, but purchases will be focused on practical and useful everyday wear.

The sports equipment categories that have been doing well throughout the pandemic should continue to do so. We can expect solid increases from cycling, home fitness, golf, and select team sports equipment; however, inventory shortages will likely temper these results.

Fall scholastic sports including football and basketball will be hurt, as we saw this spring with baseball and soccer. Outdoor products will be a mixed bag, with the primary focus being on activities that are backyard-friendly. Consumers are also reluctant to travel by air, and if this persists I see this lack of air travel as hurting the snow sports business in the second half.

The pandemic’s effects on sports retail are far from over. But, with thoughtful and careful planning, many brands and retailers can identify uncharted opportunities and endure in our new society.

Upcoming Event

SFIA Virtual Conference

Presenter: Matt Powell, Senior Industry Advisor – U.S. Sports
Presentation Title: Best Practices for Brands & Retail in the Current Environment
Date and Time: Thursday, September 24 at 1:45 - 2:30 PM (EST) 
Location: Virtual
Description: Matt Powell hosts an interactive discussion on marketplace trends and what brands and retailers can do to win post-pandemic. Matt, a well-known and often quoted expert in the sports industry, will be presenting the trends and forces shaping our industry, its response to COVID-19, and its future. Matt will assess the industry across various categories, discuss the forces impacting manufacturers, retailers and consumers, and provide his predictions for the coming year. Drawing upon NPD's sales tracking data, his 40+ years in the industry, and insights from what has been successful in other industries NPD tracks, Matt will focus on best practices and what manufacturers and retailers can do to thrive in today’s rapidly changing marketplace.

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