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Smooth supply chains will redesign sporting goods segment

Amid ongoing market insecurity caused by COVID-19 related issues, future-proofing sporting goods supply chains needs daring strategies, with a elevated bar on quickness, sturdier supply chain partnerships, and near-shoring among topmost options being measured by industry directors.

The supply chains continue to be one of the main challenges for the sporting goods industry in 2021, according to a new in-depth study of the segment from the World Federation of the Sporting Goods Industry (WFSGI) and McKinsey & Company.

Figure 1: Future-proofing sporting goods supply chains needs daring strategies, with a elevated bar on quickness, sturdier supply chain partnerships.

The research, ‘Sporting Goods 2021 – The Next Normal for an Industry in Flux’ proposes that in 2020, the sporting goods industry slowed down for the first time since the financial crisis – decrease by around 7% to US$348 billion.

Most brands, retailers and manufacturers ended 2020 considerably in the red, despite a recovery in activity after the 1st and before the 2nd wave of COVID-19 related lockdowns. On the upside, they inclined to outdo the broader clothing market as the year advanced, with sportswear brands more robust than the rest of the clothing industry.

The report says, “The coming 12 months are set to be characterized by a more positive outlook, albeit amid uncertainty caused by an unfolding second wave and the relatively slow ramp up of vaccination capacity and delivery.”

Highest prospects are seen in the likely return of big sporting events like the Olympic and Paralympic Games and the UEFA European Football Championships, along with the current rise in acceptance of home, outdoor, and digital activities, sport and fitness.

To gain triumph in the new situation, the sporting industry needs to adjust both its customer proposition and its operational capabilities.

A survey done by the research witnessed that sporting goods industry leaders are vigilantly hopeful for the year ahead – with 64% of respondents guessing ‘better’ or ‘much better’ market situations than in 2020.

But amid insistent uncertainty around the course of COVID-19, it also makes sense equally to build sturdier supply chain partnerships and discover alternatives such as near-shoring – with 62% of participants saying they were considering local options.

Future-proofing supply chains

More responsive supply chains are another feature on company schedules. In a post-COVID world, categorized by smaller demand cycles, e-commerce, and closer direct-to-consumer (DTC) relationships, they are the least requirement in some markets.

Figure 2: More responsive supply chains are another feature on company schedules. 

While the report evaluate the DTC model curved forward by 2 years in the 1st months of the COVID-19 pandemic, with e-commerce progressing by as much as 4 years.

Adding that, “Higher online penetration calls for faster reaction times and more flexibility. Indeed, soaring online activity, and the resulting glut of data, has allowed companies to respond more swiftly to new demand trends such as mass personalization. By doing so, they have been able to create highly tailored items for specific audiences.”

The net consequence is that companies have had to be more agile, and produce reduced, more regular product runs more closely associated with demand. Asian suppliers lead times of big sporting goods companies have reduced to 30 days from 120 days.

The industry is also exploring the near-shoring and re-shoring options to try to cut lead times even further, as well as ease shipping insecurity due to trade rule worries.

With industry 4.0 fast tracking automation, making closer to home production, along with government incentives and tax breaks to appeal manufacturing to domestic markets.

Besides exploring near-shoring options, around 73% of sporting goods leaders expresses that they are engrossed on building closer relationships with a lesser number of current suppliers.

Around 60% expect consolidation in the supply chain over the approaching period. A connected developing trend is co-location with suppliers, maintained by tailored and customized machinery, which can be sourced on timelines as short as one day.

To utilize the most of the shifts in supply chain logistics and capabilities, decision makers need to make brave decisions.

If that prefers moving to near-shoring, it will need a different mindset and business model, and faster processes in relation to trend identification, production schedules, and supplier contracts.

Where current supplier relationships are set to last, companies should shift from transactional relationships in courtesy of deeper ties that bring more agility and liability.

Trends set to outline sporting goods industry in 2021

Figure 3: More than 75% of industry representatives believe the athleisure market size will keep growing, and 33% believe that growth was accelerated through Covid-19.

The report boons 8 important trends set to form the sporting goods industry in 2021 and beyond. Most were already developing ahead of COVID-19, but the dramatic events of the past year have accelerated their introduction and heightened their impact:

  1. Athleisure was a megatrend before Covid-19, but the pandemic has served to further blur the lines between work and free time, and there is a rising acceptance of comfortable wear in previously more formal contexts. More than 75% of industry representatives believe the athleisure market size will keep growing, and 33% believe that growth was accelerated through Covid-19.
  2. COVID-19 has triggered significant shifts in physical activity levels. Around 40% of people are less active, but around 30% are more so – with less affluent households exercising less. Physical inactivity is strongly linked to income: 46% of groups below US$25k were physically inactive in 2019 versus 19% of groups with incomes higher than US$100k. This is exacerbated by Covid-19, with between 8-28% of consumers expecting their income to decline for more than a year.
  3. Sustainability has become an increasingly urgent consumer priority, and companies have responded by introducing more sustainable products. Covid-19 has accelerated the trend. 67% of consumers consider the use of sustainable materials an important factor when it comes to purchase decisions. The number of net new “sustainable” SKUs introduced in the online market grew by 58% per annum between mid-2017 to mid-2020.
  4. The past year saw a leap towards digital fitness, driven by social distancing and stay-at-home requirements. These will not fully replace traditional sports and exercise but rather enhance them in a hybrid model including free and paid apps, livestream and (non-)connected equipment.
  5. The past year has seen a surge in online shopping, and many first-time users will stick with their new habits. The online share of major sporting goods players increased by ~3x between 2019 and H1 2020. Industry experts expect it to decline post lockdown but stabilize around 25% in 2021.
  6. With sporting events cancelled, postponed, or played in empty stadiums, and consumers spending even more time online, sports marketing has shifted from assets with broad visibility (club, league, or event sponsorships) to influencers on social media channels.
  7. 43% of respondents to the WFSGI and McKinsey & Company Sporting Goods Survey expect that sporting goods marketing will not be as closely linked with major sporting events in future, compared with just 29% that say the link will be maintained. Some 64% expect the industry will focus more on digital advertising.
  8. Brick and mortar stores were already under pressure pre-COVID. However, lockdown measures have accelerated the crisis. To attract consumers back to stores, retail needs to find new purpose, new experiences, and new levels of convenience that cannot be offered digitally. 45% of survey respondents predict fewer stores over the coming year, with just 7% anticipating an uptick.
  9. More agile supply chains have become a permanent feature on company agendas.
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