Global Sports Market Estimate 2009.

The NPD Group, Inc. announced the results of its fourth annual study on the global sports market, Global Sports Estimate 2009. According to the report, worldwide sales of sports equipment, apparel, and footwear sales remained flat at $ 284 billion USD (€ 219 billion*) in 2008, down from a 4 percent increase the previous year.

Regional highlights

There was an overall decline of 1 percent in all of the Americas (North, Central, and South) that was driven primarily by the 2 percent decline in the United States during 2008. Sales in Europe lagged as well, with a 1 percent decline. However, the overall picture was stabilized somewhat, due to the contributions made by Asia, up 4 percent and the Middle-East/Africa, up 7 percent in 2008.

In the emerging countries, the ‘wealth effect’ may have contributed to the growth. “In some cases, it was a combination of things that triggered double digit growth,” said Renaud Vaschalde, global sports industry analyst, The NPD Group, Inc. “For instance, China’s growth skyrocketed 15 percent in 2008 and for the second consecutive year. This was due to the combination of things like a growing middle class and one that has more disposable income, as well as the fact that the Olympic Games were hosted in China that year.”
On the contrary, most of the developed countries posted negative results. “Clearly in Japan, the U.S., and Western Europe, the sports market underperformed relative to the economy, as measured by the gross domestic product per capita evolution,**” said Vaschalde.

‘Sport Use’ Rise Explains Market Evolution

Overall sales of ‘sport use’ apparel and footwear products are on the rise which by itself is good news for the industry.

There were positive results seen in the market size for running, walking/hiking, swimming, cycling, training/fitness/work-out, and soccer/football. “In the case of these sports, they are convenient and easy to pursue or they are family friendly, or they are just fun. Then add to that the benefits of helping you look and feel good, and we can begin to understand more about why we have seen positive results,” observed Vaschalde.

Additionally, the reappearance of snow is something that helped the snow sport industry during both the 20007-2008 and 2008-2009 seasons. Overall, the snow sports industry posted growth worldwide in 2008.

However, there were mixed results in some sports. Golf, basketball, and tennis lost some ground in 2008. Hunting and fishing were also negatively impacted by diminishing wildlife resources and a decreasing number of places in which to fish and hunt.

In Europe manufacturers have been trying to grow the women’s sports market. However, there are some real life constraints that hinder this strategy. “More and more women indicating they work or are willing to work outside the home,” noted Vaschalde, “When that is combined with the responsibilities of caring for children and a home, there is very little time left for women to work out, let alone pursue a sport.”

Another example of obstacles impeding growth in the sports industry are cultural in nature. These can be seen in just how deeply ingrained a particular sport is in the culture of a country.

In the U.S., for example, despite efforts to grow soccer, it has not yet taken hold as it has in European countries. Basketball, baseball, and American football are very popular in the U.S., but there are no signs that they have gained wide acceptance globally. “Like food, sports are deeply entrenched in a population’s history and identity. Nothing can replace the passion for the Super Bowl in the U.S. or the passion for a soccer world cup semi-final elsewhere,” said Vaschalde, “Just try to export success of a U.S. Rodeo someplace or export Rugby from the U.K. to Germany or Cricket from India to Japan. Chances are it won’t be terribly successful.”

Other Factors Explaining Market Evolution

With the exception of bikes, which posted a 4 percent rate growth in 2008, the stagnation of the sports industry, worldwide, is evenly distributed between footwear, 0 percent; apparel, -1 percent; and equipment, 0 percent.

When examining the footwear market, there seems to be saturation in that market within the Americas. Footwear declined 3 percent in 2008. That trend is not evident in other regions, where footwear is flat or growing.

In sports apparel the trend shows a decline in Europe, down 4 percent. While the rest of the world showed growth or leveled off.

Outlook for 2009

China

There are signs that the party is over for China in 2009. The global recession seems to be having a severe impact on the Chinese economy. Declines there are thought to be driven primarily by the economy, with huge declines in exports that are not being compensated for by the domestic sales. Additionally, some retailers continue to point to their stock of unsold Olympic merchandise as part of their challenge.

The European Market Shifts – Private Label

In Southern Europe, manufacturers are clearly responding to Decathlon’s private label expansion by taking control of their own distribution. Other key retailers are also getting into the private label business. In many cases, these are recent moves, and both sides are still fine tuning the components of the ‘right mix.’ Regardless of those efforts, there are critical factors that businesses must possess in order to enter this arena. “The size of a business is the key component to a successful game plan,” says Vaschalde. “And many medium sized brands and retailers cannot afford to play it.”

The European Market Shifts – Consolidation

On the manufacturer side, NPD says there are segments in which there will be further consolidation in the coming year. Examples can be seen in both the outdoor and swimwear segments. Here, the brand landscape is not as concentrated and that might indicate there will be mergers and acquisitions activity in 2009 and 2010. That might mean that some brands will disappear or be acquired in a brand portfolio strategy by bigger companies.

On the retail side, in Europe, 2008 was a year in which non-specialized distribution suffered and this will call for someone to make a move much like the Kaufhof/ Karstadt discussions in Germany. We also see some opportunities for the bigger buying groups like Intersport and Sport 2000 that will come as a result of the difficulties being suffered by some of the smaller groups and independent shops.

The European Market Shifts – Growth in Direct to Consumer Channel

The direct to consumer channel has posted significant growth, but can it sustain those levels in the sports business? The latest trend shows that online shoppers are primarily looking for price. This means there will be reduced margins posted by this channel in the future. Additionally, there is the certain emotion evoked in consumers when they can interact with products and thus the in-store shopping experience becomes important to purchasing. Finally, and most especially for sports product, consumers are more inclined to want to try on their sports apparel or footwear before they make a purchase. Here again the in-store experience gains even more importance.

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For more information at http://www.npd.com

*Exchange rate calculation: 1€=$1.3
** GDP per capita measured in purchasing power parity.