SGMA International released their annual State of the Industry report at the recent Super Show in Orlando, and once again focused on the “positive developments” for the industry despite a year of negative growth.

The results, which are based on a survey of SGMA members each year, show that the U.S. sporting goods industry actually shrank 0.5% in 2003 from the previous year after growing 2.2% in the prior year comparisons with 2001. This is particularly concerning once you compare the industry to the total U.S. economy, which saw 3.8% GDP growth in 2003.

The report did point out that a number of “key segments” saw better growth in the third and fourth quarters, again pointing to 2003 as a year of two halves with very different results for some as the economy gained steam and consumers became more positive.

SGMA is forecasting just 1.3% growth for 2004, based on their survey of members. The U.S. GDP growth estimate for 2004 is 4.1%.

The five-year growth trend for the sporting goods industry for the period from 1998 to 2003 was 5.8%. The period is really a reflection of the anemic growth the total industry has seen since 1998, when the industry saw growth of 7.6% in a two-year period. The industry actually grew almost 41% in the previous six-year period as the industry saw new categories (the creation of Inline Skating actually created $600 million in sales over that period) and the growth of golf, exercise equipment and branded apparel fueled the growth in the early nineties.

What is clear from the numbers is that we, as an industry, have seen little new energy in the last five years, which will only diminish further as the industry consolidates and once iconic brands are swallowed up, retailers focus more on private label and we get ourselves trapped in a battle for market share as companies look for growth even as the industry as a whole flattens and declines.

The categories measured must also be challenged as the report fails to keep pace with a changing market landscape.

For instance, the Apparel category was shown to have declined 3.7% in 2003 from the previous year and is expected to be flat in 2004. But one could argue the growth of sports-inspired product has actually increased over that period as other brands that are not traditionally “sporting goods” take the volume that was once produced through branded product sales from the major footwear brands and licensed product sales from many companies that no longer exist. The Mall Specialty guys relied on apparel for growth in 2003.

It is important that we embrace and understand the trends that give rise to brands like Ounk, akademiks, Quiksilver, Hurley and others that are taking – and building on – that volume.

The other issue with methodology is how the report breaks out the Equipment category. Billiards/Bowling and Archery are still called out as specific categories, yet Snow Ski, Fishing, Team Sports and Paintball are all lumped under the “Other” category. No Snowboard either.

There is no analysis of the Skateboard, Snowboard or Bicycle business that has captured the imagination of much of our youth culture. It is easier to point to “video games” and lack of physical education as the culprit for why sporting goods sales are sluggish. The cold hard fact is that the industry now encompasses a much broader view of sport than the “powers that be” will acknowledge. The growth in the X-Games phenomenon is proof of that potential, yet few embrace it. We are dinosaurs.

When we first reviewed the report, we chuckled at the inclusion of Archery, but the exclusion of Hunting and Fishing. But we then realized that Archery is now larger than Inline Skates as a category after being dwarfed by Inline by more than a 2:1 ratio in 1996.

Perhaps it is not Archery we should focus on, but the decline of Inline Skates. Perhaps we should have used our lobbying muscle in Washington and elsewhere to fight the criminalization of Inline Skating in many municipalities. When cities started posting “No Rollerblading” signs on sidewalks, the battle lines were drawn and we as an industry did little, if anything, to support the kids that looked at the category as a new individualistic sport that could still be growing today if new participants were still fueling the business.

The same holds true for Skateboard. Are we helping fund Skateparks? Are we fighting ordinances that restrict the use of Skateboards on public property? To put it in perspective, what if we, as kids, had been chastised for nailing a milk crate to a telephone pole to play basketball? Would we fight today if towns started putting up signs prohibiting Street Hockey?

We have heard arguments from some that sporting goods stores can’t sell Skateboard product. Who’s fault is that? Not the kids who buy it.

Proffitt’s, Saks Inc.’s small market department store group based in Knoxville, TN, opened full-blown skate shops in their stores a few years ago. They have been a resounding success in footwear, apparel and equipment – yes, equipment. The secret? They hired kids that were into the sport and knew how to sell and service decks. Now that kids are in the stores, they are buying other product as well. Turns out the accessory business is very profitable indeed, and management has now given the green light for even more investment in experimental product categories.

So why can’t it work here? Why are big box guys all fighting over Golf shops, a category which hasn’t grown since 1996? Why don’t we take measures to include this new wing of our industry that is still fueling growth even as our more traditional sports lose momentum?

It is easy to live in a vacuum and see an industry disappearing around you and conclude that we are shrinking as a whole. But if you attend the OR Show, ASR Show, Surf Show, Interbike Show or MAGIC, you quickly realize that there is a lot more energy in the market than may be reflected in our last shrinking bastion of consolidated sporting goods — The Super Show.

We really do still have an exciting market.

Why not embrace those companies that are serving the youth market today better than most of the companies surveyed in this latest study. As an industry, we need to measure the sports and activities that reflect our current culture and consumer — not expect them to go back to “the way things used to be”.

If not, we will find out quickly that the Super Show really is a refection of the industry as a whole.