Christiaan Jones

Introduction to Sports Business

December 11​th​, 2017

Dr. Scott Jones

Industry Analysis Paper (Major Assignment)

When looking through the topics on different industries, it was easy for me to decide on the
topic of Athletic and Sporting Goods Equipment. What led me to choosing this topic is from an
athlete’s perspective, wanting to learn more on how companies and or businesses run and
what it really takes for them to be successful. There are many primary activities within this
industry, these activities include: athletic uniform retailing, fishing supply retailing, diving
equipment retailing, bowling equipment and supply retailing, exercise equipment retailing,
saddlery retailing, golf equipment and supply retailing and bicycle retailing. Each of these
primary activities are key components within this industry.

Looking back, over the past five years the Sporting Goods Store industry has had major
benefits because of the increased rate in participation of different sports by many individuals.
This growth has caused a huge demand for athletic footwear, sporting goods and also athletic
apparel. Sports participation rate is expected to grow at least 2.4% in the year 2017 and more
individuals require products from industries for sporting activities. However there is a growing
competition between department stores, mass merchandisers and online retailers which has
slowed down industry revenue growth due to strong based price competition. This does not
have an effect on revenue and is anticipated to grow at an annual rate of 1.5% to $49.1 billion
over the next five years, including a 1.3% revenue growth in the year 2017 alone, which was
strengthened by more healthy individuals whom require sporting goods or athletic equipment
for their daily exercise or sporting activity. Profit is still expected to drop from 3.4% of industry
revenue in the year 2012 to 3.0% in 2017 based on increased external competition and
investment in expanded product line offerings.
 Sports are a very important part of
American culture especially with team
sports such as basketball, football and
baseball. These three major sports have
been dominating the sporting
landscape. Based off of data found in
the year 2013, ​ ​and the Sporting Goods
Manufacturers Association, an estimated 206.7 million Americans over the age of six have
participated in at least one sport, which accounts for an estimated 65.8% of the total US
population. Although it seems that all participation in sports has been on a steady rise over the
past years, in 2014, the NSGA reported that kids from ages seven to seventeen had been
participating in fewer team sports in recent years. In this situation, the NSGA found that in
2013, participation in team sports had declined by 1.8%. If this specific trend continues to
decline at this rate then it could have an long term effect on this industry.

Trends in sports participation rates will continue to push for a demand for sporting goods over
the next five years. Demand from businesses and adolescents will also prompt industry revenue
growth. Over the next five years a renewal in consumer disposable income will support more
demand for sporting goods. This will lead more industry operators to enter the market Larger
sporting chains will continue an expansion for those individuals whom compete in a number of
sports. Small sports retailers that continue to provide athletic equipment to certain sporting
activities such as golf will continue to be popular for many years to come. Over the next five
years to 2022, the number of industry operators is expected to grow at a rate of 0.4% to

40,733 because more operators with superstore retailers will continue to enter the market.
Employment is also expected to grow at a rate of 1.1% to 326,785 during the time that sporting
stores have product portfolios in which a larger workforce is needed.

Revenue Outlook

Year Revenue $ million Growth %

2018 49,803.8 1.4

2019 50,330.5 1.1

2020 50,773.8 0.9

2021 51,279.0 1.0

2022 51,841.9 1.1

2023 52,444.0 1.2

Competition in the Sporting Goods Stores industry is high and the trend for this industry is on
a steady increase. Sporting goods retailers have continued to compete with other operators on
the basis of price, product range, brands offered, customer service and store location. Although
this may be the case, Price remains the single largest basis of competition among retailers​. ​As
competition continues to increase within this industry, great customer service will be needed in
order to differentiate. Bigger retail stores such as Walmart and Target have put pressure on
sporting goods stores in the past five years because these major retailers are able to use
economies of scale to maximize cost savings by purchasing a huge amount of inventory at one
time for their businesses.

Barriers within the Sporting Goods Stores industry are medium and they are steady. What
seems to be the most significant barrier is that operators will need to consider is high fixed
startup costs. Retailers need to establish relationships with suppliers to guarantee a consistent
and reliable supply of quality products which may be a new barrier for those who are becoming
new entrants. Even though there is a low level of market share concentration it is becoming
more concentrated over the past five years due to different activities. As a result, national
chains offer many products at competitive prices. These players have continued to benefit
from their brand awareness, strong relationships and loyalty to consumers. However, many
sporting goods retailers have formed what are known as distribution agreements directly with
sporting goods manufacturers, such as Nike, which may be a barrier to potential entrants. New
entrants without an establishment for themselves in the local community may find it tough to
remain profitable.

The supplier power is relatively low in this specific industry. There are so many sporting goods
stores retailers to choose from. Companies can decide whether they want to sell certain sports
equipment or a huge variety of gear. Sporting Goods Stores have the option of what they want
to do within their industry by selling certain gear based off of sporting seasons or selling the
same products year round. These options typically decrease the power that suppliers have over
the industry.

Buyer power in sporting goods stores industry are moderate. Sporting Goods Stores are not
essential, meaning that consumers can choose when they want to go into stores looking for
certain products. This can cause retailers to have discounts on their items to bring in
consumers.

The level of change in technology for the Sporting Goods Store industry is low and seems to
be remaining that way. Sporting Goods Stores have benefited from many different
technological advances in the past few years. Technological advances such as barcode scanning,
electronic data interchange, and introduction of the point of sale have all helped in the Sporting
Goods Stores industry by keeping track of inventory, controlling merchandise, distribution, and
stock and sale markdowns can be seen by using POS (point of sale). Barcode scanning offers the
advantages of higher labor productivity and increases the speed at which information can be
exchanged. These scanners also provides retailers with greater control over the distribution of
goods and reduces potential errors along supply chains.

The level of regulation is light and the trend is steady within the Sporting Goods Store
industry. Sports retailers that sell firearms have to hold a federal firearms license and also agree
with the Federal Brady Handgun Violence Prevention Act. This act requires retailers to perform
a presale background check on consumers who want to buy guns and rifles. The background
check either confirms that a sale can be made or that the sale must be denied, or the sale
should be delayed for a review in the future. Certain states have put in their own laws to make
sure that the public is given the best products at what can be the best prices along with the
best quality.

Sporting Goods Stores industry has a low level of capital intensity. According to IBISWorld,
there is an estimate that for
every dollar spent on wages, operators of industries will spend $0.06 in capital investment.
Capital investment is mainly found in fixtures and things such as cash registers and point of
scale systems. A huge part of labor in this industry is employment on part time basis. Times
such as winter holiday seasons, Father’s Day and back to school season are all peak selling time
for business such as Sporting Goods Stores. The overall capital intensity of the industry is
looking to change little over the next five years. IBISWorld anticipates that the industry will
continue to have a low level of capital intensity through the year 2022​.

Spending by consumers has an impact on Sporting Goods Stores in a major way. During
times in need spending money at a high rate in Sporting Goods Stores would take a decrease.
While income is plentiful, money spent by consumers is more than likely going to increase..
Sports are a huge part in the American culture. While increasing participation in sports, it
pushes the industry of Sporting Goods Stores. All people have favorites, whether it be a favorite
player, team, or sport at the pro or college level. As long as money keeps coming into this
industry and stores keep their sales intact, there will be great future for this industry.

Works Cited