SGB Media continues with its annual Look Ahead series, reaching out once again to key industry leaders to pull out their crystal ball and talk about the market’s direction, key trends and macroeconomic influences in 2024 that could impact the year.
In this latest installment, SGB talked with brand leaders and marketers about how their companies will address the challenges and opportunities in the market for 2024 and beyond.
In the first two parts of the SGB 2024 Look Ahead series, industry leaders working in the broader active lifestyle market and those focused on the outdoor active lifestyle space talked about the macro challenges and opportunities for 2024. Many outlined what 2023 meant to the market, beyond contracting guidance and reduced expectations for the year, and how they see it evolving in 2024 and the future.
As an industry, the expectation is that the inventory glut in 2023 will work itself in 2024, and the sharp decline in the online retail business for many will improve year-over-year as the market anniversaries the strong year-ago growth posted after weak trends in 2022 due to supply chain issues.
Some said that business in 2022 was just too good, and many retailers and brands continue to look to clear inventories amassed as companies created 2023 plans to continue good fortunes in the prior year. They hope 2024 will reverse that trend as comps will be easier to meet.
Challenging the positive outlook is that the 2024 fiscal year must compete with the extra 53rd week in fiscal 2023.
Some, like retailer Boot Barn, saw their meteoric jump in online sales flip to double-digit declines in the past few quarters after building an inventory position to meet the prior-year demands. The answer for Boot Barn was to add more brick-and-mortar stores, with a plan to grow to 900 stores, move through goods and expand nationally in a long-term strategy.
“On a consolidated basis, October same-store sales declined 9.2 percent with our retail store same-store sales declining 8.2 percent and our e-commerce business down 16.7 percent,” Boot Barn’s President and CEO Jim Conroy shared on a recent call. “Fortunately, we have other growth drivers that continue to perform.”
Conroy said that Boot Barn expects to build approximately 26 stores in the final two quarters of the year, which will drive top-line sales and build out market share. According to company CFO Jim Watkins, the strategy appears to be paying off as gross margins expanded as Boot Barn sold down its inventory overhang in the latest quarter.
Other realities that challenge retailers and brands are new laws in some states and the EU that limit or eliminate the use of PFAS in products. While most see the limitations as a good long-term move to deal with environmental concerns, the short notice of the changes has left many wondering how they will sell through the inventory they have for this year that does not meet the new regulations. Politicians and consumers rarely understand the product development timelines required to make these changes and shift design, development and sourcing to meet the new limitations put in place.
“The looming PFAS legislation in five states, which everyone I speak to agrees, is both the right thing and too short of a window for the supply chain to develop new components and products and bring them to market while allowing merchandise to sell through at normal sales rates and margins,” shared Lowa Boots GM Peter Sachs in a recent discussion on 2024 trends. “Thus, there will be significant markdowns and closeouts at both the wholesale and retail level, which may be good news for consumers.”
Nathan Dopp, CEO Americas, Fjällräven and VP, Fenix Outdoor AG, believes the pressure to adhere to upcoming PFAS regulations could force many brands (other than Fjallraven) and retailers to liquidate non-compliant product adding even more price pressure to the market. This would add to continued discounting pressures in the marketplace.
“Given the pervasive discounting and inventory glut we have seen in ‘23, we are concerned about the impact on maintaining price control and a full margin marketplace— all of this can impact brand integrity and the industry as a whole,” said Dopp. “Of course, these kinds of decisions are governed by individual brands, but collectively, it impacts the health of the community. These are challenging times that require thoughtful thinking for the future.”
Still, Dopp believes product durability will remain critical. He said, “As consumers face rising prices across the board, we anticipate people will shop with durability and longevity in mind, particularly when it comes to higher priced items. People will want to invest in clothing, footwear and equipment that are timeless and durable and will function for many years to come. That means ditching sort term trends and purchasing products that endure — even meaning buying less.”
Sachs also spoke abouth the elephant in the room for 2024 – it is an election year. On top of all the other challenges for active lifestyle market businesses, throw in politicians spewing their points of view, and it could create a new set of issues.
Tariffs will also be a talking point. Inflation, taxes, jobs, immigration, and two or more active wars are but a few of the other issues that will take center stage during the lead-up to the presidential election, not to mention threats of impeachment and divisive court cases, that will consume front page and “breaking news” headlines in the mainstream media—may be enough to talk the nation into a recession.
Other topics of conversation with leaders included a shift to experiential purchases and travel versus the pandemic-induced surge in purchasing for the home and nesting. It tends to be a positive conversation, particularly in the outdoor market, while the home fitness segment expects to see challenges in the continued shift that started growing faster in 2023. Others see the change in how and where people live and work as an opportunity to innovate within these trends.
“The trend of smaller living spaces is here to stay,” suggested David Jackman, president of sales, wellness division, SCS Supply Chain Sources, parent of KingSmith Fitness, WalkingPad, Ai Works, LifePro, and LifeTrend. “Housing shortages, high construction costs and high mortgage rates ensure smaller homes to buy or rent will remain the most popular. Despite space constraints, consumers still want the convenience of home fitness. KingSmith Fitness invented the WalkingPad to provide access to a walking treadmill in any room of the house. Currently, 18 of the Top 25 best sellers in the treadmill category on Amazon are walking cardio products.”
Jackman also noted that the trend in exercise snacking shows the outstanding benefits of brief exercise periods compared to long-duration sessions, per studies from the Journal of the American Heart Association. He also said the trend of wellness beyond fitness is surging, according to the recently released Global Wellness Institute report, providing innovators with more new avenues to address the needs of the active consumer.
“The GWI forecasts consumers will continue to increase spending, and the global wellness economy will grow at an annual rate of 8.6 percent,” Jackman shared. “By the end of 2023, it will reach $6.3 trillion, $7.4 trillion in 2025, and $8.5 trillion in 2027, nearly double its size in 2020. Accordingly, the New York Times is expanding Well, the largest of its subscriber-only newsletters.”
Jackman said to meet these trends and reach a broad audience, the SCS family of brands offers products across the main pillars of wellness.
Retailers and their brand suppliers are also focused on the customer experience to grow their business. After a crazy growth spurt in the outdoor and running specialty segments during the pandemic, many saw business come back down to Earth, with previous double-digit gains every month over the pandemic period giving way to comp store declines in the last year. The answer was to focus on the customer and own their needs and vision.
John Rogers, owner and president of Fleet Feet Maine Running in Portland, ME, provides a specialty store view on building customer relationships in the years ahead. “In 2024, we are focusing on three things to help continue growing our business,” shared Rogers with SGB Executive. “First, continuing to find new ways to engage and provide unique personal experiences with our customers. Second, becoming laser-focused on inventory management and a differentiated product mix in our stores to keep the “Specialty” in Specialty Running. Finally, continued investment in our employees and making them feel valued.
“Our continued focus on a personalized outfitting experience with each customer continues to resonate. Additionally, finding new ways to engage with them by expanding google search ads, search engine optimization, and consistent customer communication via digital media is connecting the brand with customers. A post-pandemic revitalization with community running clubs, pub running clubs, medical community members, and expanding our training groups is re-connecting the dots with our fitness, health, and well-being community.”
After the last couple of years with marketplace inventory volatility, Rogers said his stores are re-setting their focus on a strong OTB/Inventory management/product mix execution. “Looking at new brands that provide differentiation is also important. We are seeing continued success from On Running, Altra, Karhu and are bringing in Topo,” he said. “We need all our brands competing at a high level for a healthy, profitable specialty retail environment. Jogology in socks, Janji in apparel and broadening our injury prevention, nutrition and seasonal hydration, safety categories are helping to provide a fresh approach to our accessory/apparel mix. Staying true to our “Specialty Run” marketing position is a vital component to keeping our unique proposition to our customers.”
Rogers continued, saying that consumer engagement begins at the fit station and through checkout.
“The most important marketing tool we have is our employees, and we will continue to invest in them with education, benefits and a good life/work balance,” Rogers concluded.
Regarding fit solutions and technology, Aetrex told SGB Executive they are bullish on their business plans for 2024.
“Aetrex’s technology division has record bookings for new distribution shipping next year, including scanner placements at nearly 500 locations in the winter sports space and R&D departments at major global brands that have signed on to use our scanners and the Foot.com data portal to drive product innovation,” said Matt Schwartz, chief revenue officer at Aetrex. “We’re working on numerous e-commerce implementations of our SizeRight and Fit Genius plugins, helping consumers find the right styles of shoes for their feet and reducing online returns. Aetrex now has tech development offices on three continents with talented data scientists, software and hardware engineers, and several exciting product launches geared up for 2024..
Schwartz said the company’s footwear and orthotics lines grew double digits in 2023, and the company is forecasting even greater growth in the year ahead.
“Aetrex uses technology to deliver enhanced fit and function in footwear, and consumers continue to respond enthusiastically to the unique benefits we deliver. We believe that macroeconomic conditions indicate the U.S. is headed for a ‘soft landing.’ While we expect the presidential election to create minor headwinds, we also expect GDP growth to continue along with solid consumer spending. We believe that, overall, the footwear industry is headed for a solid year,” noted Schwartz.
Dan Sheridan, president and COO at Brooks Running, shared that point of view with SGB Executive as he provided insight into the future at Brooks Running. “We believe performance running footwear and apparel is the best category in sporting goods,” Sheridan said. “The market is strong and growing, and Brooks continues to move in the lead pack. Rising participation in running, fitness, walking, hiking, and trail running presents us great opportunity to introduce new customers to the Brooks brand. Despite the headwinds and economic uncertainty we’ve seen over the last year, running and retail are healthy across channels.”
Sheridan forecasted that in the U.S., Brooks expects to see double-digit growth in 2024 in each region, primarily driven by product innovation and execution excellence against the focus and strategy in place for 20-plus years. “In January 2024, Brooks will introduce the next generation of the fan-favorite Glycerin franchise with the Glycerin 21, featuring additional DNA Loft v3 cushioning underfoot, followed by the launch of the athlete-tested Hyperion Elite 4 distance racing shoe ahead of the 2024 U.S. Olympic Marathon Team Trials in February,” Sheridan shared. “The new year will also see us deepen our investments in the global running community, driven by our long-term commitment to build the best performance gear in the world for runners and active people.”
Gillian Meek, CEO at Kamik, the Canadian boot brand, said in comments to SGB Executive that macroeconomic pressures and uncertainties, including unseasonably warm weather and a build of inventory, have created headwinds in the industry. Despite that reality, she said the company’s resilience as a 125-year-old brand is proven, and it remains optimistic about business and the opportunities that lie ahead.
“Success in the short term will come from innovative product and marketing and will be measured by market share or shelf gains,” Meek noted. She said ensuring the quality and dependability of products remained at the core of the company’s mission.
“We understand that consumers rely on us to provide products that meet their expectations by being dependable every day. Our commitment revolves around enabling families to enjoy the everyday outdoors together, and we will continue to fulfill that promise and maintain that trust. Just like our products, we strive for the relationships we have with our partners to be reliable and dependable. Recognizing the importance of our partners and distributors in the success of our business is key. We will focus on prioritizing [and] strengthening these relationships in the coming year, continued Meek.
Meek said the digital landscape plays a pivotal role in consumer behavior, and Kamik is committed to expanding its presence in the e-commerce space. “In 2024, we will focus on growing our online platform to provide consumers with a better shopping experience,” she said.
Sustainability continues to be a buzzword as the market moves into 2024 as the requirements for consumers, particularly Gen-Z, expect more from the brands they purchase and the retailers they frequent, based on surveys conducted over the last few years.
Mother Earth is a clear priority for the next generation of consumers (and voters) and their viewpoints and positions on issues will be felt for years to come as they become the decision-makers in governments worldwide and in C-suites across the market. Climate change is also a hot-button issue within this conversation and how companies deal with increasing temperatures (long-or short-term), increasing or decreasing rainfall and other environmental influences will be addressed differently based on how a company views today’s realities—long-term climate change or short-term unseasonably warm weather patterns. The view will determine whether a brand shifts direction and innovates or stays the course.
“The effects of climate change will continue to influence the winter footwear market in 2024, with warming temperatures and unprecedented weather patterns changing what consumers are looking for in a product,” said Mark Hubner, SVP of Commercial at Baffin. “With volatile freeze-thaw cycles becoming so prevalent, the primary need in cold-climate footwear has shifted from staying warm in the snow to staying dry through varied elements.
“As these changes continue to impact consumer needs and purchasing patterns, Baffin persists in our mission to create innovative and enduring boots that protect from the elements—no matter what they may be. By not straying from our expertise, but rather using it as a catalyst to produce styles suitable to these changing environments, we can create something new while staying true to who we are.”
Hubner said Baffin has an increased focus on transitional footwear and continues to expand its offerings made with lighter insulation levels but still features comprehensive technologies to protect against wet, cold and icy conditions. “These models are also conducive to a more on-trend aesthetic and styling, producing a collection that highlights the fusion of functionality and fashion and allows for more diverse wear, from trail adventures to downtown commutes and everywhere in between,” Hubner reported to SGB Executive.
“At Swiftwick, we’re seeing a continued interest from consumers in sustainability initiatives and willingness to pay more for products that align with their values, whether that’s eco-friendly materials or local U.S. manufacturing,” shared Mark Chou, CEO, Swftwick. “Consumer demand for American-made goods has been relatively unhindered by rampant inflation in the past couple of years, so we expect that demand to remain strong and even grow as disinflation occurs.”
Chou said Swiftwick is working to meet growing consumer demand for sustainable and responsible fibers, committing to sourcing 80 percent of its Merino wool from Responsible Wool Standard (RWS) certified sources by the end of 2024 and 100 percent within the next three years.
“We’re also committed to continuing our manufacturing exclusively in the U.S., reducing the carbon footprint of our supply chain while also supporting domestic job creation. We look forward to seeing both brands and consumers increasingly focused on sustainability in 2024 and beyond, he said.”
Ibex General Manager Jordan Todoroff suggested that 2024 will be known as the “Year of Greenwashing” in his comments to SGB Executive.
“There will be an overwhelming number of callouts from brands using recycled polyester and acting like it’s a commitment to sustainability,” Todoroff explained. “In reality, it will be due to the incredible surplus of recycled polyester as a raw material that resulted from the pandemic. The recycling scam will continue in a few other ways as well. One of those will be found in the fine print of ‘pre-consumer recycled content.’
“The big change in the coming year will be companies shifting away from the use of PFAS. As government policies like California’s take effect, companies have to shed PFA coatings that they have used in textiles for years. This means replacing fabrics customers know well and either hoping no one notices or spinning some marketing around the updates. There will be a race to find a replacement for Gore-Tex and likely a number of companies moving away from that branding to experiment with their own waterproof technologies.”
Todoroff said Ibex is fortunate to be insulated from the woes in 2024 and will continue to innovate “as usual.”
“For natural performance fibers like Merino, we’re preparing to release a number of firsts throughout every product category and expect to see significant growth in the demand for natural fibers,” Todoroff shared.
Johnny Sheu, president & CEO of WellPower, Inc., creator of Geocell, said the demand for sustainable components, including the brand, is on the rise especially in the U.S. “According to the Harvard Business Review’s recent report, released on September 18, on consumer sustainability trends, Americans are on the brink of a major shift in consumption patterns. Truly sustainable brands will seize the advantage from brands that are greenwashing,” he shared.
“Geocall, a high-performance, 100 percent plant-based, natural rubber ideally used in water sports, fitness accessories and footwear, is proud to be a part of this shift,” Sheu offered. “Geocell’s manufacturing process minimizes waste by repurposing leftover scraps to create new products. This not only benefits conscientious consumers, but also empowers brands and retailers to offer planet-friendly options.”
Photo courtesy Rab
***
To read Parts I and II of the SGB Media 2024 Look Ahead series, click on the links below.
EXEC: Outdoor Active Lifestyle Market Leaders Share 2024 Outlook
