It used to be said that when the economy got ugly, more people went fishing.
Fast-forward to today’s culture and you might be able to say, instead, when the economy gets sluggish, more people try to get active.
By almost all measures, the U.S. economy is now in a recession. Real estate, banking, and insurance sectors have been badly weakened and are dragging down overall economic activity. Most of the nation’s top retailers reported double-digit declines in October sales in early November, following a weak September and forecasting what could be a grim holiday shopping season.
But consumers, who have sharply cut spending, are still investing some of their discretionary dollars in physical activity of some sort.
“People are spending money,” said John Wilson, general manager of CW-X, which produces active wear such as tights for running, from the bustling New York City Marathon expo the first weekend of November. “When it comes to your sport, you invest. People still want to get out and do their thing.”
While the weakened economy finds consumers hunkering down, delaying big purchases and tightening their belts, the outlook may not be quite as bleak for outdoor sports, fitness retail or health club industries. Citing historical data, economists say the categories may weather the economic downturn.
SNEWS knows the current economic state is important for your business. This is one look at different ways it's affecting our industries and your business in a periodic and ongoing series of stories in SNEWS. This time around we take a look at statistics and historic sales data from Leisure Trends, NSGA, and IHRSA to offer up some bright spots of hope amongst all the gloom and doom. Stay tuned for more in-depth reporting on the current situation as it develops and changes, from interviews with experts, closer looks at small businesses and how they are coping, to economic statistics, breaking news and how it affects consumers.
Get active, stay active
Despite the gloom and doom, sports enthusiasts will continue to support their activities. Cash-strapped consumers may fork over cash for accessories, but forgo big ticket items – or chose ones that cost slightly less. Skiers will still ski, though they may ride chairlifts locally instead of heading off to a destination resort. Health clubs owners may also still people coming in the door.
Of course, retail economists and trend analysts don’t agree on everything: Some simply say retail sports categories will lose less this time around than other sectors. Others are doing their best to forecast, knowing this is a different situation than in the past. Basically, data from previous recessions indicate that sporting goods fare well, said Julia Day, director of sales and marketing for Boulder, Colo.-based Leisure Trends Group.
“People who are active and passionate about their sports won’t stop doing their sports in a downturn,” Day said.
One likely change will come in accessories, she said. They may be favored over big ticket items. If the weather is colder, hats and socks might sell well. Camping accessories such as lights, cooking products and headlamps might move off the store shelves faster than tents and sleeping bags. In the economic slump in 2001, sales of tents, bags and high-end backpacks headed south, Day said. Small fitness items may be the chosen purchase over large equipment.
“Consumers will participate, but less frequently,” she reassured. “They will change habits.”
Day said her market research firm tracks heart rate monitors and GPS devices as both accessories and technology products -- and buyers dig the gadgets. “If it’s new and hot, it sells,” Day said. “If it’s tech and consumers want it, it sells.”
Everything in outdoor retail sales, which tends to be resistant as a category, soared through August, but things changes in September, Day said. However, helping to offset the economic cooling is a trend toward healthier lifestyles.
“One thing we know is if you are active and healthy, you’re going to be happier,” she said. Leisure Trends monitors what if calls a “happiness track.” On it, they find that people who are active and participate in outdoor activities are happiest.
In another recently quarterly report, for example, Target Corp. noted that despite sales declines, fitness and yoga apparel remained strong.
Because cash is tighter, consumers may also be looking for higher quality goods. They want goods that last longer, Day said. Consumers may be leaning toward less of a throw-away economy.
“Consumers might be willing to pay more for quality but buying less,” she said.
One study Leisure Trends conducted on consumer buying intent shows that nearly 70 percent of their most active buyers will be making adjustments in their sports equipment and apparel purchases this year. And quality drove purchase decisions. “Over 92 percent of respondents agree that paying more for a sports product with the expectation it will last longer is their preferable buying strategy.”
Another key amid the gloom: 44 percent claimed they will take part in their favorite activities this fall and winter. And 27 percent they will participate more.
“Sales will go down, but we know that people who are enthusiasts will continue to do their activities. Skiers, for example, will still ski in a down economy, but they’ll ski more locally,” Day said.
Tom Doyle, vice president of information and research at the National Sporting Goods Association (NSGA), supported the view that there won’t be a huge drop in sporting goods equipment sales. Doyle has charted consumer purchases of equipment and footwear over the last 20 years. His research indicates fairly healthy sales even during slumps.
“My general observation is that consumer purchases of sporting goods flatten or decline slightly, less than 2 percent, in recessionary times,” Doyle said.
“A decline is likely to come in units, but will likely be offset to some degree by higher prices. I would expect to see any declines to be in the purchase of high-ticket items over the next several quarters.”
Doyle predicted the current economic crunch will create “a slackening, but it isn’t a huge disaster” for retailers.
He noted that treadmill sales did not drop off in 2001, but some other big ticket items such as backpacks and sleeping bags did, and they did not bounce back until 2004.
“It takes awhile for consumers to regain confidence,” after a recession, he said.
Maybe it’s the stress induced by job market conditions or plummeting stocks, but apparently consumers still find their way to health clubs.
Club membership leveling off
Health club memberships nationwide have leveled off since 2004 – the first year without a jump in several -- but haven’t fallen, according the International Health, Racquet & Sportsclub Association (IHRSA). Total health club memberships at the close of 2007 numbered 41.5 million, IHRSA said. That is statistically about the same as the 2004 number of 41.3 million.
Taking a long-term view, the health club industry expects strong 2008 performance despite the economic picture, said IHRSA spokesman Rosemary Lavery. The industry has seen 41 percent growth in total number of members since 1998, she said.
“While the economy has been enduring some difficulty,” Lavery said in an email, “the health club industry looks to the following positives for growth: the increase in industry revenue numbers on the non-dues services, the importance of exercise as overweight and obesity rates continue to rise, and the correlation between chronic disease and health care costs.”
Several factors can affect club membership levels, and there are indications the fitness movement remains strong. Major marathons continue to sell out and new runs are added every year. Anecdotally, one vendor at the recent New York City marathon said running enthusiasts were “crazy” there, and that “people are spending money. People still want to get out and do their thing,” he said.
Running specialty store franchiser Fleet Feet Inc., based in Carrboro, N.C., recently logged its best quarter in the company’s 32-year history. Retail sales shot up to $24.8 million, up 16.5 over third quarter 2007. Year-to-date sales were up 17.8 percent through September 2008.
That kind of business performance wouldn’t surprise market researchers at the Leisure Trends Group.
“During a downturn, people will still go for a hike. Running and trail running also does well,” said the firm’s Day. “All it takes is a good pair of shoes.”
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SNEWS is looking at different ways the economy is affecting our industries and your business in a periodic and ongoing series of stories. Stay tuned for more in-depth reporting on the current situation. Email us at email@example.com with any tips, comments or ideas on stories you'd like to see.