The World Federation of the Sporting Goods Industry (WFSGI) has noted a slight improvement in the supply/demand balance for sporting goods products as the number of sporting goods manufacturers facing a decrease in demand because of the coronavirus pandemic has dropped in all the regions of the world except in Latin America.
This and other interesting data have emerged from the June 2020 edition of the WFSGI Covid-19 Impact Survey, conducted among manufacturers as well as retailers and brands and issued a few days ago. The June results were compared to the previously covered April and May editions of the survey.
Ongoing disruption in the supply chain
Disruption along the supply chain has remained generally unchanged. The number of respondents facing disruption continued to diminish in Europe and the Far East, but in all other regions, the respondents have reported a slight increase in the degree of the disruption.
On the other hand, the number of manufacturers that are facing material shortages has doubled from one month to the next, due especially to capacity problems encountered by shipping companies.
Labor shortages are still a challenge, although the situation shows some signs of improvement. Nearly 40 percent of the manufacturers see a shortage of workers, but the rate is around 10 percent below the level of the previous month. Furthermore, the number of respondents confronted with absence of staff due to a coronavirus-related reluctance to return to work dropped by half as compared to the May. Travel and transportation restrictions are still a problem.
Regulations specifically related to Covid-19 still impact more than 75 percent of respondents. The percentage is unchanged as compared to last month. Meanwhile, cash flow issues have slightly improved. Nearly 77 percent are challenged by low cash flow, roughly 7 percentage points less than in May.
Covid-19 will have a lasting effect
For the months to come, 84 percent of respondents consider that the Covid-19 will continue to impact their business, although this represents a 6 percent improvement from last month. Most respondents expect a major drop in business in the upcoming months, with 27 percent forecasting a decline of 50 percent, followed by 25 percent predicting a 20 percent drop and 15 percent anticipating a drop of 10 percent.
Europe and North America are still the most affected regions. A little more than 60 percent of the respondents still expected a drop in their business in June, but their share was ten percentage points lower than in the previous month.
Full recovery seems unlikely in the short term for a large number of respondents. More than 45 percent see a recovery within 91 to 180 days, while 30 percent consider that it will take more than a year. There are still 7 percent of respondents who do not expect any recovery at all, even though this is slightly better than the 10 percent rate registered in the prior month.
To improve their situation, the option that is gaining the highest consensus is to consolidate production capacities, with close to 60 percent opting for this solution. Meanwhile, the number of respondents who have no plans continues to decrease and now accounts for 7 percent of the total as compared to 10 percent in May and 14 percent in April.
Sports brands and retailers look at new strategies
Among brands and retailers, the favorite strategies to mitigate the effects of the crisis still consist in raising online sales (77%) and cleaning out existing inventories (40%). Only 12 percent of the brands consider deferring payments, down from 47 percent in May and 60 percent in April. Meanwhile, 15 percent more respondents than in April are considering a consolidation of their supply chains.
Cancelling orders and focusing on the recovering Asian market were seen less of an option in June than in May. Focusing on liquidities and marketing have become less important for around 12 percent of the sample.
Flexibility remains a key in the relations with suppliers. The number of respondents who intend to change their sourcing priorities has significantly increased. Only 35 percent of them plan to leave their sourcing priorities unchanged, and that represents a drop of 15 percentage points as compared to the previous month.
Global market-centric sourcing is getting less attractive, with only 20 percent of respondents choosing that option, while local-for-local and regional-centric sourcing are becoming a more attractive option.
The prevailing sports after the pandemic, according to the industry, remain the same. Outdoor sports are at the top, closely followed by cycling and running. The authors of the report have highlighted the fact that neither basketball nor baseball have been selected by any of the respondents.
The July edition of the WFSGI Pulse Survey is already online at https://www.surveymonkey.com/r/PL3JPKC. The WFSGI invites all interested sporting goods companies to participate. The survey is open to all sporting goods company, regardless of whether or not they are WFSGI members. The survey is completely anonymous, as no individual or company data are requested.