MARKETING PLAN EXPLORER

Copyright 2002, Professor Jerome M. Katrichis

 

 

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B. Extent of Demand

 

1. Size and Growth of Sporting Goods Market

 
The U.S. sporting goods, athletic footwear and apparel industry reached approximately $45.5 billion in retail sales in 2000, according to estimates by the National Sporting Goods Association. Projections for the following year show a growth of 3.6% or $1.6 billion for a total of $47.1 billion in sales in 2001. This projection falls in line with the fact that since 1994 yearly sales have increased on average by 3% per year, with the exception of the period between 1998 and 1999 where industry sales declined by 4.2%.

 

Exhibit 12.

 

The division of sales by product category of equipment, footwear and clothing can be seen in Exhibit 13. Equipment sales comprise the majority (46%) of total retail sporting goods sales with the second highest being footwear at 29% and the third being clothing at 25%. This product composition has maintained the same market share over the past eight years, with only slight variations in the percentage makeup. In addition, the average sporting goods products have seen only a slight price increase from year to year, signifying only a marginal increase in unit volumes for the industry.

Exhibit 13.

 

Equipment

 

Total sales of sports equipment in 1999 were $20.3 billion and then increased 5% in 2000 to a total of $21.4 billion. In 2001, equipment sales are expected to increase by 3% for a total of $21.9 billion. Within this category, there have been two divisions that have shown the most significant growth, wheel sports (including scooters) that increased by more than 125% and tennis that increased by 12%.

 

For 2001, the National Sporting Goods Association expects golf ($3.7 billion) and fitness ($3.6 billion) to maintain dominant market positions. Golf equipment sales were up 5% from 1999 and fitness sales were up 7%. However, by combining camping, fishing, and hunting into one “outdoors market” sales exceed $5.5 billion and can be considered as dominating market share in the sports equipment sector. It is interesting to note that from the 1999 to 2000 period, there has been a 23% drop in shot gun sales, and an overall 7% decline in shooting sports sales. This implies that the increase in share of the “outdoors market” is mainly due to sales in camping and fishing equipment.

 

Footwear

 

Total sales of athletic and sports footwear in 1999 were $12.5 billion and in 2000 increased to $13 billion. For 2001, the same 4% growth rate is projected. Previously, from the period 1998 to 1999, there had been a 4% decline in footwear sales.

 

In 2000 the average price for all sports footwear was $40.32 a 2.2% increase from the prior year. In 1995, however, the average price of footwear was $36.10, a difference of 11.7% from the 2000 level.

 

Clothing

 

Sales of sports apparel are expected to reach $11.6 billion in 2001, an increase of 4% from the 2000 level of $11.1 billion. Since 1994 sales of clothing in the U.S. have grown at an average rate of 7% per year, with the exception of the 1998-1999 period where a drop of almost 20% occurred.

 

It is interesting to note that during the period 1999 and 2000, total retail selling square footage in the U.S. dedicated to athletic footwear and apparel declined by approximately 10%. This change is a possible result of following three factors: store closings by specialty retail chains; individual and retail store chains going out of business; and department stores relocating selling space away from athletic footwear and apparel. Part of this decline was offset by new store openings by some retailers.

 

2. Cyclicity

 

Sporting goods sales follow a pro‑economic cycle. When the economy is doing well, people have more disposable income and as a result spend money on leisurely activities such as sports. Deteriorating economic conditions adversely impact sales, specifically the equipment category of sporting goods, where per unit cost tends to be greater than the other sporting goods categories. With less disposable income, consumers are less likely to upgrade existing equipment or to engage in a new sport that involves a large cash outlay. With sporting goods, retail sales from year to year remain at the same level because as a sport falls out of favor, it is replaced by a new one. Sales are also affected by the popularity cycle and the introduction of "fad" products. This can be seen in the tremendous increase in popularity of sports such as skateboarding, which since 1995 has increased in popularity by 101.3% to total 9.1 million participants in 2000, or by fad

products such as the scooter which in 2000 sold between 10 ‑14 million units with 2/3 to 3/4 of those sales made during the holiday season.

 

3. Seasonality

 

Sales in the sporting goods industry are seasonal with higher sales occurring in the late spring/ early summer months of May, June, July (Q2 in chart below) and then the winter months of November, December, January (Q4). The latter quarter encompasses the holiday season, which traditionally has the highest sales due to the popularity in giving sporting goods items as gifts. This also is the time for New Year's resolutions that inspire the purchase of new sports equipment and apparel for the purpose of losing weight and looking good when exercising. In the spring, consumers also make heavy sporting goods purchases, as they now spend more time outdoors and begin to participate more in organized activities.


 

                          (Adapted from Sports Authority Annual Report 2000)

Exhibit 14.

 

4. Forecasts

 

Forecasts for future growth for the sporting goods industry as a whole remain strong and consistent with levels of previous years. Average 3% growth in sales will continue and average unit prices and volumes in the categories of equipment, footwear and clothing will remain stable. The popularity of different sports will change, but Americans will remain active and find other sports activities that will interest them. More and more each day, the importance of physical fitness is being taught to children as well as how to incorporate physical activity into their daily lives. The difference will be in the type of outlets consumers use to make their sporting goods purchases. Sales through the internet are expected to take an increasing market share from traditional and large‑format sporting goods stores.

 

 

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