How should brands and retailers position themselves to be ready for the next few years? Following a meta-analysis of the Sporting Goods market, McKinsey has compiled for our publication key strategies that will give companies a competitive edge and the possibility to realize their growth potential.
McKinsey surveys of Sporting Goods Industry members show that companies tend to view the future market environment as unpredictable and challenging. For example, about one-fifth of companies expect margins and sales to decline by 5 percent in 2023.
However, the data shows that, especially after crises (e.g., the financial crisis of 2008/2009 and covid) the Sports Industry recovered well.
Looking ahead to 2025, together with McKinsey, we bring you six key strategies that will give companies a competitive edge.
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1. Level up your branding
Modern, successful brands revolve around the customer. They forge customer connections on multiple levels. Key elements of successful branding often include an emotional and purpose-driven brand message and incorporate a measurement of brand building. Sporting Goods brands can also profit from collaborations with Fashion brands, building strong communities, and having strategic partnerships with carefully chosen retailers.
There are compelling reasons to do so:
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According to a McKinsey study, 96 percent of the top 40 brand portfolios have been outperforming the MSCI World Index by 96 percent over the course of the last 20 years (1999-2019).
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85 percent of purpose-prioritizing firms show at least a 10 percent growth rate in the past three years (vs 42 percent for the non-prioritizing firms).
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85 percent of customers are more likely to recommend a purpose-driven company.
2. Modernize your assortment and pricing approach
A brand’s assortment and pricing structure drives growth and profitability. The future of product assortment and pricing needs to be based on a rigorous data and analytics approach. It’s the same as having a performance car properly tuned regularly, to maximize performance.
According to McKinsey, a data and analytics approach to assortment and pricing can result in a:
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5 percent revenue increase potential across all categories,
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2 to 3 percentage point margin increase potential,
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5 to 20 percent fewer SKUs in the range.
3. Use a full-funnel marketing strategy
In order to ride out market challenges, companies need to optimize marketing activities across the funnel. Currently, most brands are focused on the bottom, which includes distribution, point of sale and performance marketing. To maximize growth in the future, the most successful brands will significantly step up their focus on middle and upper-funnel activities.
Key elements of successful full-funnel marketing include personalization and community building, which will result in high satisfaction and engagement.
Acting this way can result in:
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10 to 20 percent increased customer acquisition,
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5 to 15 percent overall revenue growth,
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20 to 30 percent higher satisfaction and engagement.
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4. Don’t overlook sustainability
Research shows that consumers expect the Sporting Goods Industry to do more for the environment. Sustainability is becoming an important buying factor. To be a competitive business, companies will need to integrate ESG as a core pillar into their product and marketing strategy.
This will require integrating sustainability into the product architecture, having a compelling narrative with clear and supportable sustainability claims, and strong collaboration between the Chief Sustainability Officer and the rest of the executive team.
Research shows that there is starting to be real business potential in this approach:
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15 to 30 percent price premium for climate-friendly, net-zero products and services across B2C and B2B sectors is possible.
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Sustainability-marketed products grew 2.7 times faster than conventionally-marketed ones.
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Sustainability-marketed products delivered 32 percent of CPG market growth despite representing only 17 percent of the market.
5. Embrace emerging tech / Gen AI
Organizations are starting to experiment with Gen AI across all parts of the value chain and first movers have the potential to accrue a competitive advantage. For marketers, for instance, there are four key applications of Gen AI that can grow a business: Opportunity identification, consumer insights, content creation, and process automation. Start using them, now.
A few numbers that should convince you of Gen AI’s importance:
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Click-through rate through automated A/B testing powered by Gen AI rises by 25 to 30 percent,
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Customer acquisition cost through automated marketing workflows powered by Gen AI decline by 10 percent,
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30 percent revenue uplift through improved personalization powered by Gen AI.
In our webinar we’ll give you concrete examples of which AI to use and how.
6. Optimize your multi-brand operating model
Are you part of a multi-brand company? Does your company have completely independent brands, or are you debating how certain aspects could be mutualized across brands? McKinsey has analyzed a number of multi-brand companies and their research indicates winners have found the “sweet spot” between what to mutualize and what to keep separate among brands.
It is a difficult question, and the answer depends both on the company and the industry. For example, the value at stake for companies that can mutualize key aspects of digital marketing could result in:
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10 percent growth in revenue a year (2x average rate of S&P 500) when marketing leaders partnered with IT and implement a common solution across brands,
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60 percent of brands moved content marketing in-house over the last three years.
What next?
Perhaps you are thinking, these are all nice ideas, but how do I bring them to life in my company? Perhaps you want more concrete examples and success stories or the background of these numbers. In that case, join our EDM Expert Talk with McKinsey, where you will have the chance to ask your questions.
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