Insights

COVID-19 & the Impacts on Sports & Outdoors

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COVID-19 and its widespread effects on retail have left many sports and outdoors brands between a rock and a hard place. Big brick-and-mortar names like REI temporarily closed their doors and adapted to an online presence. Then in March, Amazon limited FBA eligibility to “essential” items, leaving many sports and outdoors brands scrambling for information on their eligibility.

“New normal” is the term that’s often used to describe the post-COVID-19 state of retail. Each retail category has been affected differently, and brands have adapted to the new normal in different ways. In this article, we’ll take a look at what some of the short-term effects have been in sports and outdoors and how brands are adapting.

 

Production was the First Thing Hit

Before anything else, COVID-19 started by affecting production in China. By February, industrial production had fallen by 13.5% compared to the previous year. This disruption had serious consequences for supply chains in the US. According to the Institute for Supply Chain Management, nearly 75% of companies reported having supply chain disruptions due to COVID-19. Of that 75%, one-in-six companies decreased their revenue targets by an average of 5.6%.

Many brands struggled to procure production and were forced to recast their capabilities. Then, stay-at-home orders and social distancing presented a new problem: even if you can get inventory, where should it go?

 

Primary Sales Channels Have Shifted

Brick-and-mortar retailers have been hit the hardest by COVID-19. Social distancing measures and stay-at-home mandates exacerbated many of the issues brick and mortar retailers were already facing. Over the last couple of months, order cancellations from struggling retailers have become all too common. But while some sales channels declined, others flourished.

As more people stayed home, consumer demand flooded online marketplaces and e-commerce. Much of that demand landed on Amazon, and as unprecedented pressure was put on its supply chain, the retail giant was forced to prioritize high-demand items over others in mid-March by limiting FBA eligibility.

Sports and outdoors brands took an immediate hit on the marketplace. Fulfillment via FBA was no longer an option for some brands. Although those FBA restrictions have since loosened, shipping times were, and still are, significantly delayed in many cases.

Convenience has always been a main driver of the online marketplace, and with some of that convenience diminishing, DTC channels experienced a huge boost in sales. Is that DTC boost here to stay? Some of it, probably, but it’s hard to say how much. As Amazon regains its speed and convenience, a portion of that DTC traffic will most likely shift back to the marketplace. What that shift will actually look like has yet to be seen.

 

Some Products are Experiencing a Boom

Social distancing and stay-at-home measures are causing certain products to boom. With the closure of gyms, at-home workout equipment — such as adjustable dumbbells, yoga mats, stationary bikes — have experienced surging demand. Bicycles and bicycle equipment have also experienced a boost. In Philadelphia, for example, the use of some bicycle trails has increased 400%.

While some product categories are experiencing a boost, others are experiencing a decline. More people staying home from work and social activities has resulted in reduced consumption in the apparel and footwear categories.

Demand is likely to shift again as more sports and outdoor activities become available. Some states, such as Washington, are planning to reopen state parks in the month of May, which could lead to increased demand in some areas.

 

Preparing for the Next “New Normal”

It’s difficult to say how COVID-19 will continue to affect retail in the long-term, but we can make some educated guesses on how things will continue in the short-term.

More consumers will shop online – More consumers are comfortable with shopping online than ever. COVID-19 has made e-commerce a necessity for many people all over the world. It’s likely that many of those consumers will continue to shop online even as things move back towards a new version of normality.

Brick and mortar will struggle – COVID-19 exacerbated many of the issues brick and mortar retailers were already facing. The return to a new version of normality will likely be a slow and gradual one. Even after stores are allowed to reopen, it’s difficult to predict how many consumers will go back to shopping in them.

Amazon is going to be more important than ever – If COVID-19 showed us anything, it’s that there are certain retailers that have the resources to withstand substantial challenges like a global pandemic. Amazon is at the top of that list. For brands, Amazon is now — if it wasn’t already — a primary sales channel. It’s absolutely essential for brands to have an Amazon strategy in place moving forward.

 

These are challenging times, not only for the sports and outdoor industry but for retail in general. Brands are being forced to adjust and re-adjust and then adjust again. There aren’t any easy decisions right now. All you can do is adapt to each change in the best way you can. Right now, that means trying to keep up with the way consumers are shopping, and that requires an e-commerce strategy where Amazon and DTC are integrated and seamlessly working together.

Ryan Riggs, Netrush Vice President of Sports & Outdoors