Europe’s economic trends, forecasts from Germany’s OutDoor show -- outdoor strong, price hikes coming

Information about the economic trends in Europe that will influence the outdoor and sports markets globally were gathered only by SNEWS at the OutDoor show in Friedrichshafen, Germany. We talk to and listen in on European buying groups, sports surveys and manufacturers to glean the insight and bring it to you.
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Although a threat of rising prices hovers on the horizon, sport buying groups enthusiastically reported at the OutDoor show in Germany that overall sports sales for the first half of 2010 were up and the outdoor industry not only led the charge but also showed no signs of slowing.

“The real hit was the entire segment of outdoor,” reported Olaf Wittayer, managing director of the outdoor segment for the buying group Sport 2000, at a press conference at the annual show in Friedrichshafen, held July 15-19. “The outdoor market isn’t even close to seeing the end of its gains.”

Sport 2000 for the first half of the year showed an overall increase in sales of all sports gear and products of 6 percent compared to the first six months of 2009, while the larger Intersport group reported a year-over-year gain of 7.7 percent. But that’s only part of the picture: Outdoor pushed overall gains with 17-percent growth among Sport 2000 member retailers and 16-percent growth among Intersport member retailers. While Sport 2000 noted its outdoor segment hit EUR 43 million (USD $55 million) for the year of July 2009 through June 2010, Intersport went on to estimate it would hit EUR 630 million (USD $815 million) for the year compared to EUR 580 million in 2009 (USD $750 million).

“Outdoor is the largest segment for us,” said Klaus Jost, managing director of the Intersport group, at its press conference for German journalists.

Across Europe, the late winter was cold, snowy and helped push outdoor product sales strongly into February and March, but a wet and chilly spring plummeted sales year-over-year in April and somewhat in May. June again performed strongly when the summer season kicked in, both groups reported.

Suppliers and trends

For both groups, Jack Wolfskin not only maintained its No. 1 position, but also made additional strides upward. Others that showed good growth in sales were Mammut and Salomon. Also among outdoor-only suppliers, both shoe specialists Lowa and Meindl were strong. The real hit, according to Sport 2000, was Icebreaker, which leapt to No. 8 overall among outdoor suppliers. Spokesman Ullrich Lueke noted that its revenues in the first two quarters of 2010 among Sport 2000 retailers already reached revenue totals for the entire year of 2009.

“That’s just crazy,” Lueke said, noting as the leader others too were showing interest and increased sales in the merino wool arena. Intersport’s Jost described growth in the merino area as “enormous” despite high prices. He pointed out EUR 69-79 (USD $89-$102) as an example for a T-shirt and said simply, “Wow.”

“There’s lots of potential in this brand,” Jost added.

Other product and sales trends:

>> So called “active wellness shoes” with some kind of biomechanical innovation or differentiation were growing by leaps and bounds. He noted minimalist shoe styles (for example, the adidas Chill and Nike Free), as well as shoes promoted as “toning,” such as Skechers’ ShapeUps and Reebok’s Easy Tone. “We see a trend that will be valuable to get into,” Lueke said.

>> Nordic walking sank deeply -- a 17 percent decrease per Intersport -- and running grew 3 percent. A partnership of four companies, formerly strong in Nordic walking, introduced something called “Speed Hiking.” (Click here to see our first story about general OutDoor show trends for our take on that.)

>> Fitness and workout product sales, per Intersport, were up 6 percent for the first part of the year.

>> Other continuing trends included fashion and lifestyle crossover, growth in satisfying the different needs of the 50+ demographic, and increased Internet sales.

“Nobody is against this channel,” Lueke said about the Internet, but he said there are lots of questions that still need clarifying about how, by whom, what and where things are being sold.

Price increases coming?

The larger topic that surfaced not only at the conferences by the buying groups but throughout the show was the likely threatened necessity of price increases. Reasons include: Pressure to raise wages in China and other Far East manufacturing centers, more labor shortages, rising prices of materials, increased transportation costs, and fluctuating currency rates.

The biggest question was whether manufacturers would eat some of the costs, whether retailers would swallow lower margins, or whether retail prices would just simply go up. One large manufacturer SNEWS spoke to noted it had bought enough supplies in advance to make it through at least this season while keeping prices stabile, but that’s not the case for most.

Managing director of Sport 2000, Andreas Rudolf, said in a statement that with the current situation, “price increases can’t be avoided.”

In a survey of European Outdoor Group manufacturer members completed in June and released by the EOG at the OutDoor show, nearly 90 percent reported they believed price increases are a must. Those increases could reach up to 20 percent, said respondents. Nearly 71 percent said they were facing rising factory prices of 5 percent to 15 percent, nearly 46 percent said they saw increases coming of 8 percent to 10 percent, and a quarter said increases of 10 percent to 15 percent were in the future.

Of the respondents -- about half of the 54 EOG (www.europeanoutdoorgroup.com) members -- more than three-quarters (78.6 percent) said the industry could not absorb any increased costs. Just less than two-thirds (65.4 percent) said their companies would try to absorb “some” of the cost increases. When asked if any would reduce overhead to maintain margin, the responses were evenly mixed: 38.5 percent said no, 30.8 percent said yes, while 30.8 percent said they were unsure.

--Therese Iknoian

To read a SNEWS overview of the OutDoor show, including a rundown of emerging trends reported directly from the show floor in Germany, click here. In the next few weeks look for stories on a brouhaha over corporate sustainability, the debut of an index for companies to rate how environmentally sound their products are, a look at some European products, and many other topics.

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