By Eric Smith
Executives from leading sports, fitness and active lifestyle companies descended on Denver, CO, last week for the Sports & Fitness Industry Association’s sixth annual Industry Leaders Summit.
SGB Media attended the summit, which featured panel discussions and keynote speakers on all manner of industry topics, along with plenty of networking opportunities for the 200-plus attendees.
Here are five takeaways—plus a few bonus nuggets—from this reporter’s notebook that bubbled up at the largest C-suite gathering for the sports and fitness industries:
1) The industry is innovating, and there is funding for the right product and business plan.
The third annual SFIA Start-Up Challenge kicked off the Industry Leaders Summit, and it showcased the innovation happening across sports and fitness.
The Start-Up Challenge’s six finalists spent about 15 minutes each presenting their startup’s idea to a panel of judges that included industry veterans and venture capitalists who asked about everything from the startups’ go-to-market plan to their funding progress to their product sourcing (not surprisingly, most wanted to know if this was happening in China and what the tariff impact might be).
Nix Biosensors, the creator of high-tech sensors that are capable of measuring hydration status via sweat to optimize safety and physical and cognitive performance, won the grand prize—a $15,000 check (provided by Black Lab Sports) and an all-expense-paid trip to spend the day with the Under Armour Innovation Team.
The other finalists were:
- A-Champs, which combines video game play patterns with technology to encourage kids to actively play.
- BlinkTBI, whose EyeStat system helps measure brain injuries for athletics and other fields.
- Elevate Hockey, which created a hockey stick with a new curved shape that improves handling, passing and shooting.
- Flexit Inc., whose mobile app allows users to access gyms wherever and whenever they want and pay only for the time they use.
- Total Body Board, which created a portable fitness equipment product that uses resistance bands.
Not only did the Start-Up Challenge highlight some of the innovation taking place in the industry, but it’s further proof that venture capitalists are willing to invest in strong ideas that also boast solid business models. The 10 Start-Up finalists from the past two years since have gone on to raise $130 million in venture funding, said John Peters, SFIA’s vice president, business development.
Look for a bigger story on Nix, and coverage of the other finalists, in future editions of SGB Executive.
2) Sports & fitness companies can mitigate the impact of tariffs.
David Cohen, a Washington, DC-based international trade lawyer for Sandler, Travis & Rosenberg P.A., gave attendees an overview of the increasingly complex global trade landscape, including the most recent tariff developments handed down by the Trump administration.
In “The Taxing World Of Tariffs—How Trade Policy Is Affecting The Sporting Goods Industry,” Cohen discussed the impact of tariffs on Chinese-made sports and fitness products, which is vast because so many companies in this space are unfortunately “wedded to China” for sourcing, he said.
Cohen outlined the current tariff situation (read more in the recent SGB article, Trump Set to Move Forward On Next Round Of China Tariffs), but the most valuable information was his list of countermeasures to mitigate the impact of tariffs. Here they are:
- ABC—Anywhere But China: Source elsewhere, like Vietnam, if possible. Easier said than done, but some companies that manufacture in China are building plants elsewhere in Asia to evade tariffs.
- Product-specific exclusion requests: There are hundreds or even thousands of products that might be excluded from the additional tariffs.
- Classification: Inquire to see if some of the products you’re importing from China could be reclassified in the Harmonized Tariff Schedule and would therefore not be subject to tariffs.
- Tariff/Origin Engineering: Can you move some of the production process, if not all of it, to another country? If so, you might be able to avoid some or all of the tariffs your products are subject to.
- First Sale Valuation: Products that are sold numerous times in the supply chain—manufacturer to master distributor to distributor, etc.—could see a reduced tariff if the product’s price coming out of China is significantly lower than the final price. You’ll still pay the tariff, but it will be based on the lower cost of the initial sale.
- FTZ/Bonded Warehouse: Foreign trade zones or bonded warehouses allow your company to bring product in, store it in one of these facilities and ship it out without paying tariffs.
- Duty Drawback: This refers to the refund of duties if you paid a tariff on a product but then exported it.
- 321 De Minimis: This exemption rule allows for goods valued at $800 or less to enter duty-free into the U.S.
The takeaway from Cohen’s speech is that companies do have recourse for mitigating some of the added tariffs that have kicked in or will kick in soon, but this requires some consultation from a trade attorney and plenty of planning.
Look for much more on the tariff situation in SGB, including a more detailed analysis of Cohen’s comments
3) “Making customers better will make better customers.”
It’s simply not enough to be customer centric; that is now table stakes in today’s marketplace. Instead, your company must “transform” your customers’ lives through the products and services you offer. This was the message from Michael Schrage, research fellow, MIT Center for Digital Business, who delivered the event’s opening keynote, “Vital Transformations: The Future Of Sports, Fitness & ‘Participation Innovation’ In A Netflixed World.”
An innovative culture is essential for a company to thrive in today’s competitive economy, Schrage said, especially in a category like sports and fitness. What you make or sell shouldn’t focus on the features and functions of the product or service but instead on “transforming your customer’s life.”
“Make your customers and your users more valuable to you and to themselves,” said Schrage, adding that the virtuous cycle of innovating to create new capabilities to create more innovation is the key to success. “If your innovative roadmap doesn’t work like that, I think that you’re cheating yourself and your investors.”
4) “Culture eats strategy for breakfast.”
This phrase was coined by Peter Drucker and referenced during Schrage’s keynote earlier in the day (see above), but it truly hit home for ILS attendees during the panel discussion, “Sports & Fitness Retail—Are We There Yet?”
The panel featured Jared Drinkwater, CMO, BSN Sports; Joey Pointer, CEO, Fleet Feet; and Rick Mina, president, WSS. Mark Sullivan, editor, Running Insight, moderated the discussion, which kept returning to what drives success for the companies represented. They each came back with the same answer—a strong culture.
WSS, for example, is a retailer with a strong presence in Latino communities primarily in California but now expanding to other states. Mina said an emphasis on community involvement and staying true to the company’s roots has been critical not only for driving sales but also for increasing employee retention.
Pointer said Fleet Feet takes a similar approach by encouraging company-owned and franchised stores to take an active role in everything from local fun runs to helping neighbors during natural disasters. And on the business side, Fleet Feet’s focus on innovating the fitting process, for example, has given the retailer more stickiness with customers.
And BSN Sports works hard at selling itself to the company’s 920-plus sales professionals. This is the first step that must occur before the company can win the commitment of a customer. “If your employees don’t love your brand, your customers won’t,” Drinkwater said.
5) Consolidation across the industry will continue.
Acquiring growth is the easiest way to grow, which means M&A will continue in the sports and fitness industries, according to the participants in the panel discussion “Accelerating M&A Activity Driven by Strategic Consolidators and Private Equity.”
The panel featured Alison Minter, managing director, North Castle Partners; Mike Dowse, president, Wilson Sporting Goods; and Seth Richards, CEO, Implus. It was moderated by Matthew Tingler, managing director, Baird.
Sports and fitness is “attractive for private equity investment,” said Minter, which should be a positive indicator of the health of the category. As for what PE firms seek in a target, “businesses with differentiated products or services are our most successful investments,” she said.
Look for much more on M&A across sports and fitness in future editions of SGB Executive.
- Diversity remains an industry focus, but are companies doing enough? A panel discussion, “Challenge The Status Quo Within Your Organization,” featured some of the industry’s best-known leaders: Gwen Manto, former EVP & chief merchandising officer for Sports Authority and Dick’s Sporting Goods; Jennifer Harned, president and general manager, Bell & Giro, Vista Outdoor; and Jim Weber, CEO, Brooks Running. Moderated by Kalinda Bogue, principal, Artichoke & Owl Strategic Development Consulting, the panel touched on ways that their companies are working to become more diverse.
- The U.S. Supreme Court legalized sports betting nationwide, which presents an opportunity for industry stakeholders (starting with those attending the ILS) to push for funding from that betting to benefit sports and fitness programs, especially at the youth level, said Tom Farrey, executive director, Aspen Institute.
- Former NFL player and ESPN analyst Merrill Hoge gave an inspirational keynote about making it to the pros, and then he spoke with Dr. Peter Cummings of Boston University about Hoge’s forthcoming book, “Brainwashed,” whose conclusion is that misinformation and misleading headlines about concussions in football mean it’s time to reframe the discussion about sports in America. (Hoge, Cummings and SFIA CEO Tom Cove are pictured above.)
Photo courtesy SFIA