Retailer and manufacturer associations, as well as buying groups, use the February ispo sporting goods show in Munich, Germany, as an opportunity to discuss the past year's sales, how different categories are doing, and what the coming year seems to be shaping up like. This year was no different. SNEWS® attended German-speaking press conferences and studied all the detailed German transcripts of speeches to give you this summary of how the overall market is looking from different standpoints, and particularly how the groups are saying fitness and related categories are doing. Of course, you'll also note that the groups don't necessarily agree.
Preceding the groups' conferences and speeches was a speech by the trade show's Messe Muenchen management group's CEO Manfred Wutzlhofer in which he pointed out that consumers seemed to hold back on spending in 2003, but that for 2004 "all signs seem to be pointing toward growth." Convensis, a market research group in Stuttgart, Germany, has found that in Germany alone more than 500,000 people take part in some kind of sport or fitness activity, with billions of Euros invested annually by associations, clubs, counties and states. In a report by a German institute that studies the economics of leisure activities, German's expenditures for these activities doubled between 1998 and 2002 (from Euro 20 billion to Euro 38 billion), and the institute reported it expects expenditures to hit Euro 42 billion by 2005.
Here's what the various groups reported (We will leave Euros in Euros for an apples-to- apples comparison not tainted by shifting currencies):
- National Association of German Sporting Goods Industry (manufacturers) – Overall the suppliers group (Bundesverband der Deutschen Sportartikel-Industrie, or BSI) expressed guarded optimism and blamed poor revenues and sales for the industry in 2003 on the overall economic situation. But the group's CEO Siegfried Hoehne and its board chairman Siegfried Passreiter said in a statement that the industry's mood has improved based on a member survey in December. Some 29 percent of its members said they would describe the situation now as either "very good" or "good," compared to only 17 percent a year ago. In looking forward, 29 percent said the future looked better, while only 21 percent said that a year ago. That's partly because revenues seem to be going up: Higher sales were claimed by 44 percent (36 percent a year ago), and only 15 percent said they were less (a significant drop from the 28 percent who said sales were less the year before). With hard discussions going on in Germany regarding social reforms (work hours and unemployment, for example) and this year being an election year, the group said it expects the market overall to heat up again.
- Association of German Sporting Goods Retailers (specialty sports and sporting goods stores) – The retail group (Verband Deutscher Sportfachhandel, or VDS, which is a member of the international group, FEDAS) said although German retail revenues declined in the last three years, that overall European numbers actually inched upward by 2 percent in 2003 compared to 2002 – from Euro 35.545 billion to Euro 36.255 billion. In German retail, however, revenues sank slightly – from Euro 7.5 billion to Euro 7.12 billion, which the group blamed partly on weather (record-breaking heat in the summer of 2003, and a weak start to the 2003 winter). Among specific categories comparing 2003 to 2002, fitness equipment sales were down 12 percent. The group also spoke of a "mega-trend" in wellness that has huge potential. In addition, the group confronted a problem that has grown in the last year as the government relaxed price controls. This has lead to a situation where cheaper became the only way to sell, training customers to wait for sales instead of buying products a full margin. The group said it won't keep price as the main driver.
- Intersport (buying group) – Intersport has more than 4,500 associated stores in 27 countries, with 1,390 members in Germany alone. But the economic stagnation of late affected this group too, although it pointed to a minor decline in revenues overall among its German members of 1 percent as positive (total: Euro 2.2 billion retail with a total Europe-wide of Euro 6.9 billion). It too points to a running and fitness "boom" that pushed sporting goods supplier Asics to a No. 4 supplier position among its members from its No. 9 position a year earlier. Among equipment suppliers, Amer Sports is No. 6 among its suppliers (down from No. 4 a year earlier) and Kettler is No. 12, also down from its previous No. 8 position. It too pointed to extreme pressure in the last year to play the price card, advertise specials, and offer discounts to get consumers in the door. But management at the press conference said retailer-members were going to start attracting consumers by promoting new and great stuff rather than cheap prices. Intersport also said a big initiative for the group in 2004 is increasing its private label program. It nevertheless expects another tough year and a challenging market. The goal is over the next three years to raise the ROI by about 3 percent overall.
- Sport 2000 (buying group) – As a smaller group than Intersport, Sport 2000 claims 3,000 members – independent retailers -- across Europe, with nearly 800 in Germany alone. In its press conference, its management gleefully points to overall industry decline in revenues in 2003 of 1.2 percent, but says its members experienced "only" a drop of about 0.7 percent. Sport 2000 said it doesn't expect to begin to feel much of a turnaround until the middle of 2004. Just as others have expressed a call to arms in the industry against "cheap is better," Sport 2000 also said, "The consumer is unfortunately looking more and more frequently for the lowest prices. They come in and ask, 'OK, what's on sale?'" That must stop, management said, but of course if competitors continue with close-out sales, they would have to respond. For 2004? Conservatively, they are hoping group-wide for a jump in revenues of 2 percent to 3 percent, with France perhaps looking to be higher than that even. Said CEO Harald Ostermeir, "Where there's a will, there's a way."