The gap between the winners and the losers in the sports apparel and footwear sector has increased and will continue to increase, according to McKinsey & Company, based on a survey conducted for the World Federation of the Sporting Goods Industry (WFSGI) which highlighted some key trends. The findings will be shared with the industry at two webinars next Tuesday.
According to McKinsey, the sector is expected to have grown by about 14 percent in 2021, recovering to 98 percent of the level reached in 2019, with increases of 23 percent in China and 15 percent in the U.S. That’s more than double the average growth of 5 percent reached between 2015 and 2019.
The outlook remains positive for 2022 and the next few years. McKinsey is projecting an annual growth of 8 to 10 percent for the sports apparel and footwear market through 2025, rising to €395 million from €295 million in 2021.
McKinsey’s research shows that sales of sports apparel and shoes in general have performed better than many other consumer goods as athleisure has benefitted from remote working and because of a growing desire to keep fit for health reasons, even more than the looks. This has translated into a preference for cardio sports including running and cycling. The trend is bound to continue on a global basis, in tune with the development of the middle class in emerging markets like China and India as well as in more mature markets such as the U.S.
Prior to the Covid-19 pandemic, the majority of the listed companies in the sector were posting operating margins of between 8 and 15 percent and annual sales growth of 5 to 10 percent. Many companies in the sector returned to pre-Covid levels last year in terms of sales and operating profits, resulting in higher market shares, but others didn’t. Above-average performances were achieved by some small and agile high-margin companies and other much bigger ones that have developed more than others their own DTC operations and omni-channel retailing, while offering more sustainable and durable products.
In an online press conference yesterday, Alexander Thiel, who leads the European research operations in the sporting goods sector for the consultancy, indicated that these trends, which have been accelerated by the Covid pandemic, may lead some companies to acquire small start-ups that have developed some of these capabilities.
He insisted that sustainability has become “an imperative, rather than an option,” as 65 percent of consumers intend to buy more durable products in the future. He admitted, however, that it may be difficult for them to judge whether the products are sustainable enough, in contrast with the labelling requirements being introduced in grocery stores.
He also said that the use of social media and social commerce has become “an absolute megatrend” in the sector, especially in China. There has also been a shift from teams to individuals as influencers. McKinsey’s research indicates that 60 percent of social media users are welcoming recommendations for new purchases.
On the other hand, 70 percent of industry executives said they expect the current supply chain to remain out of balance with the demand for a while. This and the increased costs of raw materials, including cotton and recycled materials, will make price increases inevitable.
WFSGI will make the full 64-page report available next Tuesday. In addition to many other figures and predictions, it will feature interviews with Kasper Rorsted, CEO of Adidas; David Alleman, co-founder of On Running; Philipp Rossner, chief strategy officer of Signa Sports United; Jorge Casimiro, president of the Nike Foundation and Caitlin Morris, vice president of social & community impact at Nike; Steve Evers, CEO of Intersport International Corp. (IIC), and Mateja Jesenek, IIC’s chief retail officer; and Duncan Scott, vice president of strategic sourcing & quality for New Balance.
