Sports Business/05/04/2020

Sporting Goods Industry: Corona Crisis Mainly Affects Europe and Asia

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How is the global COVID-19 crisis affecting the sports industry? The World Federation of the Sporting Goods Industry (WFSGI) launched a survey on this question in April and provides a first sector-specific overview of the current situation.

Leere Stadien, leere Geschäfte: Wie reagiert die globale Sportbranche auf die Coronakrise?
Leere Stadien, leere Geschäfte: Wie reagiert die globale Sportbranche auf die Coronakrise?

The ongoing COVID-19 crisis poses major challenges for the global sporting goods industry. That is why the World Federation of the Sporting Goods Industry (WFSGI) wants to shed more light on the current crisis with a monthly pulse survey of all companies in the industry - including non-members. "The results of the first pulse survey confirm the significant negative impact that COVID-19 has had on the global Sporting Goods Industry throughout the supply chain", said WFSGI President and CEO Robbert de Kock. "In the interests of solidarity, WFSGI is seeking to help all sporting goods companies by harnessing the unique knowledge base and network within our membership to provide key trends, learnings and best practices." These are the most important results:

Retail: Expanding Online Business and Reducing Inventory

The closure of the stationary shops shifted the focus of the trade to online business. This has not changed in April: 80 percent of the brands and retailers surveyed want to expand their online business. At the same time, it is important to quickly find practicable solutions for high inventory levels. 47 percent of those surveyed want to cancel orders in the following months, 60 percent are making use of extended payment terms. Around 40 percent are planning to clear all inventories in order to maintain their cash position and take advantage of market opportunities in the recovering Asian markets.

About 30 percent of those surveyed are considering discontinuing suppliers. More than half, however, advocate continuing to work with existing suppliers and merely adjusting order volumes. The vast majority of those surveyed (90 percent) expect flexibility from their suppliers in the current situation.

Running and Outdoor Most Attractive Sport

Even after the pandemic, sport will continue to play a major role, especially outdoor sports. It is already apparent in many markets that the running and outdoor segments will be among the beneficiaries of the pandemic. Around 70 percent of those surveyed believe that this will remain the case after the pandemic. In contrast, slightly less than half see the greatest potential in walking, followed by football (20 percent) and basketball (16 percent). Biking is also seen by many respondents as a popular activity even after the pandemic.

Supply Chain: Europe and Asia Are Most Affected

The vulnerability of global supply chains was already evident when the pandemic broke out in China. In the meantime, almost all continents are struggling with production losses, material shortages and labour shortages - but not to the same extent. According to the survey, production facilities in the Far East are most affected, accounting for 68 percent of the total, followed by Europe (64 percent) and South Asia (54 percent). Supply chains in North America, on the other hand, are only affected by 22 percent of respondents, while in Latin America the figure is less than 10 percent.

When asked about the impact on incoming orders, the results show that 90 percent of those surveyed see declining orders from customers in Europe and North America. In Latin America, the Far East and South Asia, the rate is significantly lower at 30 percent. This has serious consequences for the financial situation. 86 percent of the companies surveyed have to cope with a lower financial cover because payment terms have been extended, orders canceled and deliveries delayed. Half of the companies therefore want to put planned investments on hold, 45 percent are considering layoffs and 20 percent want to rely on more automation in the future.

Bottlenecks in Material Procurement and Logistics

More than two-thirds of all companies also complain about bottlenecks in material procurement because suppliers had to close down. 40 percent suffer from logistical restrictions caused by trade restrictions, delayed deliveries or bottlenecks at shipping companies. The companies surveyed are also directly affected because parts of the workforce do not come to work due to caring for sick relatives, fear of infection (20 percent) or due to travel restrictions and lack of public transport (30 percent).

Bad Forecast - Especially in Europe

The companies are not expecting any improvement in business development in May either: all of them are expecting considerable losses, most of them (approx. 50 percent) are expecting a decline in sales of around 50 percent, 15 percent even a decline of 70 to 80 percent. 22 percent give a moderate forecast and expect a decline of 20 percent at most. Regional differences also play a major role here. The most affected region is Europe, where 95 percent expect their business to decline, followed by North America (77 percent), Asia (30 percent) and Latin America (18). Even after the pandemic, nobody expects business to recover quickly. Around two-thirds of those surveyed believe it will take three to six months before the original business performance can be achieved again, while 10 percent expect it to be more likely a year.