What are the long-term implications of COVID-19 on the fitness and sporting goods industries?
COVID-19 has changed all of our lives immeasurably in the last few months. There is still much uncertainty about what the future holds. This looks set to continue until a vaccine can be found and authorised for widespread use, or it can be proven that having antibodies protects us from contracting the virus again. Even then, COVID-19 will leave its mark. For example, older people respond less well to vaccines so their lives may continue to be affected if the virus is not eradicated.
A common theme to emerge out of these testing times is the focus on wellness. Physical activity is being encouraged, given that the fitter we are, the less susceptible we are to chronic and long-term illnesses and, by association, the effects of this virus. But the way in which we are keeping active has changed profoundly during this pandemic. With the closure of gyms and studios, many of us have had to rethink our fitness regimes. Similarly, gyms and studios have had to rethink their approach to providing value and staying relevant in this period and beyond. The closure of non-essential bricks and mortar retail stores and manufacturing plants has also restricted the supply of fitness equipment and sporting goods, whilst placing even greater importance on e-commerce.
This article explores the potential longer-term implications of COVID-19,on the fitness equipment and sporting goods industries, namely:
Soft goods (e.g. apparel, footwear)
Hard goods (fitness equipment, sports equipment)
Consumer lifestyles - fitness trends
Consumer lifestyles - sports.
Soft Goods
According to the market research company, NPD Group, both athletic footwear and activewear sales in the U.S. declined in the mid-teens during the first quarter of 2020. The decline for the children’s segment, in both categories, was slightly more pronounced. Performance in both categories for all genders and ages worsened as the quarter went on and the virus spread. This data doesn’t include monobrand stores/outlets/e-commerce, but it is safe to assume that monobrand operations would have been affected in much the same way as multibrand retail operations.
Looking forward, if this pandemic is making us focus on fitness more than ever before, then surely soft goods like sportswear will rebound in the long-term as we look to renew or replace our current wardrobes? One could also speculate that if work from home becomes increasingly commonplace, sportswear could take market share away from office attire. It’s worth considering that soft goods may have suffered of late as they do not lend themselves to e-commerce as much as hard goods. There are factors, such as fit and feel, that affect the purchase of soft goods more than hard goods. The challenge for retailers dealing in soft goods will be to make e-commerce even easier, whether by reviewing things like delivery charges and minimum spend thresholds to qualify for free delivery, or introducing technology like virtual dressing rooms. This is all the more important if we have a long lockdown or if consumers don’t have the confidence to visit stores once they initially reopen.
Hard Goods
Unlike soft goods, hard goods fared a lot better, with significant sales increases experienced in Q1 2020. Bicycles, home fitness equipment and sports-specific training equipment are three key areas that have experienced growth during this crisis, boosted by the need to stay physically active and entertained whilst respecting lockdown initiatives. The below data demonstrates sales growth experienced in March 2020 (compared to March 2019 sales):
Soccer/Lacrosse/Hockey Goals/Nets: 38%
Golf Nets/Screens: 144%
Free Weights: 181%
Stationary Bikes: 170%
Yoga Mats: 146%
Children's/BMX Bikes: 56%
Adult Leisure Bikes: 121%
It should be noted that it is the digitally-minded players in the market that have been experiencing the most success, be it digitally native vertical brands like Peloton or retailers that have a strong focus on e-commerce. To illustrate this point, Peloton expects full-year revenues for the 12 months ending June 2020 to rise by just short of 90%.
Regarding hard goods, it is clear that home fitness equipment has benefitted as a result of the measures taken to combat this pandemic. Modern day living has changed to such an extent in these past few months that sales of home fitness equipment can continue to grow in a healthy way, even if gyms and studios open in the next couple of months. That is not to say the latter will become redundant. Although you can enjoy a varied training regimen at home with minimal equipment, training at home does not provide the variety on offer at a commercial gym or studio, and the reality is that most people have neither the space or the money to try and replicate what they can get from the gym. Simply put, home fitness will suit some, but not all.
Consumer lifestyles – fitness trends
Dirk Sorenson, sports industry analyst at NPD Group, suggests that the current pandemic is simply accelerating the home fitness trend that had been developing pre-crisis. In the 12 months ending February 2020, sales of home fitness grew 2% to a value of $2 billion. However, Sorenson makes specific reference to the growth of treadmills (+7%), rowers (+31%) and stationary bikes (15%) in the corresponding period, noting that all three increasingly allow for virtual coaching and competition amongst other owners of these items. The rapid growth of brands like Peloton that marry smart equipment with streaming media raises questions about the need to go to a gym or studio in order to receive the best training, or experience the thrill of competing with others.
Until a vaccine is in place, or proof that antibodies protect us from reinfection, it is highly likely that governments and therefore individuals will continue to adopt a cautious approach to everyday life. A recent article by James Gallagher, health and science correspondent for the BBC, states that most experts believe a vaccine is likely to become available by mid 2021. Then there is the logistical feat of administering the vaccine to billions of people. An antibody test has been developed, but it has not yet been proven whether having antibodies prevents reinfection. Conservatively speaking, lockdown will persist in some form for the rest of the year.
Yet in several countries we are starting to see lockdown measures being steadily relaxed. Indeed, in China, some gyms have now reopened, although preventative measures are being taken to mitigate the risk of the virus spreading. These include members being subjected to temperature checks on entry, registering their names and contact details, the obligatory use of face masks, maintaining a 2-metre distance from other users in addition to regular, thorough cleaning of equipment. The gyms that have reopened are subject to three spot checks a day from the sports authorities. In a recent webinar hosted by EuropeActive entitled “An Unprecedented Crisis: How the leading fitness CEO's are working through COVID-19”, the CEO of Iberian gym chain, Go Fit, Gabriel Sáez-Irigoyen, detailed a series of measures that go even further than those detailed above, that his chain would look to implement. Some of these include:
App-based booking system to control access;
Use of air filtering systems that fully retain the COVID-19 viral pathogen;
Provision of clean air 8 times an hour as opposed to 3 times an hour;
Individually isolated cardio equipment;
Guaranteed security distance of 6.25 meters per person; and
Complementary personal protective equipment and disinfectant gel
The initiatives being explored by Go-Fit are admirable and demonstrate the lengths to which certain brands are going to safeguard their customers and employees in the “new normal”. Nevertheless, even with such plans, it is possible that gyms may lose some custom. Some of the safeguards will inevitably limit capacity. Do people want to be restricted to certain time slots to use the gym or find that once they are in it’s more difficult to get access to the equipment they need whilst maintaining a safe distance? Moreover, will those aged 70 and above or with underlying health conditions return? The challenges ahead may drive people down the home fitness route.
An interesting point to note from the EuropeActive webinar is that the three fitness chains (Basic Fit, Go Fit and Pure Gym) that presented their initiatives were all making classes and workouts available live and on demand to both members and non-members during this crisis. This is another example of the importance of digital to businesses to help them survive this crisis and build for the future.
Some people will inevitably question their gym or studio subscriptions, when the latter are able to reopen, not least those most vulnerable to the virus, but others too as lifestyles change. Consider that there is much greater acceptance of working from home now. Add to the mix a depressed global economy and the effect this crisis is having on disposable incomes. People might find that home fitness is saving them money, time, or even helping to bring them closer to their family, say by working out together. The onus is on the commercial fitness sector to get creative. They might be able to monetize streaming content, for example. Or they might decide to extend their brand and bring out ranges of home fitness equipment.
Consumer lifestyles – sports:
It is difficult to speculate how recreational sports will be impacted. So many team sports put us in such close proximity to one another and it is hard to see schools or amateur/recreational leagues being authorised to continue these pursuits any time soon. There is talk about professional sports being brought back much sooner. Indeed, the UFC has already recommenced events, albeit with no crowds. It’s likely that this stance will be adopted by many other sports. The reality is that the UFC, NBA, English Premier League Soccer et al. are huge organisations that have the resources required to recommence (e.g. testing athletes routinely, money from broadcasting rights) that many schools and amateur leagues do not have. If that’s the case, sport-specific equipment and apparel brands and the retailers that specialise in these goods are in for a tough time. Whereas fitness training has a credible alternative in home fitness, sports does not.
Conclusion
COVID-19 has placed greater focus on keeping active and this is cause for optimism for both the sporting goods and fitness equipment industries, despite tough trading conditions.
This pandemic has led to major lifestyle changes and we are forming many new habits like home fitness and working from home that may possibly continue in the longer-term, and which is drastically changing the market landscape for both industries.
The crisis is causing companies to radically rethink how they engage with consumers. This may be their method of delivery e.g gyms/studios streaming workouts/classes online, or by extending their brands into new categories that align with the core offering e.g. a gym chain developing a range of home fitness equipment.
The digital evolution is accelerating at an unparalleled speed due to this virus. Companies that can successfully navigate the digital space and make this a focal part of their offering, seem best placed to survive, and even thrive, in the current environment.
What do you think? Is this post a fair reflection of the challenges affecting either industry? Is there too much emphasis being placed on digital? Have I missed any critical aspects in writing this post?