2011 Outlook: Trade Association Executives Offer Their View

 

The industry is poised to recover well in 2011 as the economy recovers but nobody thinks it's going to be a blockbuster year.  It's probably small gains.  My sense is that the lean management put into place over the last two years will continue to pay dividends from the point of view of profitability.  Some concerns would definitely be the increasing supply chain costs. 

 

At the team sports level, the reduction of school sports budgets remains a concern.  They didn't take such a hit in '08 and '09 because budgets had already been approved so there's going to be more impact in 2011.  We are also concerned that the traditional sources that picked up some of the funding gaps, like booster clubs, might get to the point of being tapped out.  Casual play also continues to trend down, and that’s not good. We're also keeping an eye on retail bricks & mortar degradation with the growth of e-commerce and new mobile technologies. 

We need a strong retail base in this country, particularly to showcase new product.  Finally, we'll have to figure out this 'new frugality.'  On the one hand, people are just not purchasing as much as they used to.  On the positive side, though, pent-up demand is starting to bubble up and the minute people can afford it, they'll probably make some pretty significant sporting goods purchases both for themselves or their family. SGMA research suggests that the avid enthusiast for most sports continues to participate at a very high rate, and those are the ones who will buy and make repeat purchases. 

 

That core group for us remains very, very strong.  We also hope they're going to go back to buying big-ticket items.  Related to that, we're continuing to see new product that can be linked to a trend, such a toning, that can provide a huge upside when we find them.  Among activities, running is a juggernaut.  Several niche sports -lacrosse, rugby, field hockey for girls – are all growing nicely, partly supported by clubs.  Other niche activities such as triathlon and yoga represent a strong opportunity since they reach an older, more affluent customer.  Overall we're thinking fairly positively, but we definitely have some major concerns.

We have concern for our members trying to compete on a level playing field, particularly with online sellers like Amazon, eBay and others that don’t collect state sales tax from customers in many states.  We believe that the streamlined state sales tax initiative can help level that playing field.  Perhaps a larger issue is the concept of selling direct to consumers, as well as the growing number of invitation-only sites that offer new product at near-wholesale prices. 

 

We look forward to creating a dialogue with industry partners to clearly continue the importance of retailers and dealers in the  product distribution and service chains.  What gives us optimism is the passion that our members bring to their stores and their team businesses. Their relationships with customers combined with expertise in their chosen specialties bring great value that’s hard to beat.  We are optimistic about the American people and their ability to overcome the great challenge of a slowly recovering economy.

Frank Hugelmeyer, president and CEO Outdoor Industry Association (OIA)

The over used phrase “cautiously optimistic” seems appropriate.   Maybe 'very cautiously optimistic' is more accurate.  Retail sales in many specialty channels are growing, consumer confidence is on the rise and affordable outdoor activities seem to be gaining market share. Overall we are holding up well; however, we remain in a fragile recovery and there are some disturbing indicators still out there. 

I am most concerned about the rapidly expanding supplier disruptions out of Asia and the dramatic deficits being reported by many states and municipalities. The outdoor industry is heavily dependent on China and manufacturers are scrambling to find consistent suppliers in that region.  State agencies provide untold jobs and severe budget cut backs could have a material negative impact on both unemployment and consumer confidence.  I am also concerned about the rapid transition of retail sales to online channels and the small specialty retailers who need to survive in this new market paradigm. 

 

I am very optimistic about the active outdoor lifestyle which seems to have made the cut as many Americans revised their spending and leisure priorities.  We even have the President and First Lady promoting the active outdoor lifestyle.  In addition, multiple outdoor brands are in a strong cash position which has fueled strategic investments.  Overall, the outdoor companies who have made focused strategic investments are realizing strong returns.

David Ingemie, President, SnowSports Industries America (SIA)

My outlook is positive but cautious.  We are off to a very good start but I believe in averages and I hope suppliers and retailers take that into consideration going forward.  Economy-wise, the recession has bottomed out and we are seeing people beginning to spend (purchase on discretionary items). 

My concerns are several.  One is over-ordering or under-ordering at both the supplier and retailer level.  Another concern is how specialty retailers and suppliers can improve efforts for reaching their target customer or potential customers.  There are plenty of opportunities with social media, the internet, etc.; but the challenge is that there is not one easy solution for reaching everyone.  In the past we were able to do outreach with local newspapers and industry publications, which just isn’t the case any longer.  My optimism is in the economy and that we are pulling up from the bottom.  Also, there is a lot of discussion and promotion to get kids and the rest of  the population active and that is a good thing for our very active snow sports industry.  We also have some cool new technological developments in hardgoods and accessories.

Sales of hunting and shooting sports products were fairly robust given the state of the economy in 2010 and while we don’t anticipate overall sales to keep pace with last year, I would anticipate activity on par with 2008 levels.  The market for modern sporting rifles has peaked although accessory sales remain strong as do handgun sales.  Our biggest concerns remain the slow pace of the nation’s general economic recovery and potential legislative and regulatory threats involving traditional ammunition and the crippling potential of microstamping.  I think our biggest opportunity for 2011 is to equip the thousands of new target shooters who are being introduced through family, friends and initiatives such as our First Shots program and the Scholastic Clay Target Program and the Scholastic Steel Challenge.

Although the economic downturn has created a slight upturn in fishing license sales, like many industries the American Sportfishing Association (ASA) reports mixed results for the sportfishing industry over the past two years.  Fishing license sales, tracked by Southwick Associates, continue to show better numbers compared to sales in the years prior to 2009.  However, while more people have turned to fishing, they are not necessarily purchasing new equipment. 

 

Sales of consumable items, such as fishing line and terminal tackle, have done well, but expenditures for higher priced items such as medium- and higher-priced rods and reels have been soft.  Fishing-related travel expenditures reflect the general state of the economy as it relates to travel in general. If predictions of continued high unemployment rates and a slow economic recovery bear witness, ASA expects business in 2011 to be much the same as 2010.

The number of fitness specialty dealers has decreased and in turn, so has sales volume. Because sales in the fitness specialty market may shift to channels which we do not track, we hesitate to make predictions about the consumer market.  However, based on consumer spending through the fitness specialty channel alone, which does report to us, projections for consumer sales improvement are more modest than commercial. We anticipate an increase from the reported 40 percent plus in sales reductions over the past 24 months.  Not all manufacturers experienced the same sales reductions equally.