SIGNIFICANT IMPACT OF COVID-19 ON THE GLOBAL SPORTING GOODS INDUSTRY

12 May 2020

The following article is courtesy of the World Federation of the Sporting Goods Industry.

The ongoing COVID-19 crisis continues to create challenging circumstances for many industries including sporting goods. At the World Federation of the Sporting Goods Industry (WFSGI), our thoughts continue to be with our global communities, members, colleagues, partners, families and friends who have been impacted by the unprecedented spread of COVID-19. As the global federation, we are committed to doing our best to help the Sporting Goods Industry successfully navigate through the COVID-19 crisis.

WFSGI recognises that knowledge is power and collaboration is key to help our Industry overcome the greatest challenge since WWII. It is for this reason that WFSGI is carrying out a monthly pulse survey to assess the global impact of the Coronavirus Disease (COVID-19) on the Sporting Goods Industry. WFSGI has made the pulse survey open to all companies within the Industry (not just WFSGI members) and will share the anonymous results publicly. The results of the pulse survey will allow WFSGI to: uncover the true global impact of COVID-19 on the Industry, provide key insights on the actions of Industry leaders to manage the crisis, and track the key trends of the Sporting Goods Industry as the world progresses through the COVID-19 lockdown and the easing of restrictions into the ‘new normal’. The survey is intentionally divided into specific questions for manufacturers and for brands/retailers to ensure that we are able to track trends throughout the supply chain.

The WFSGI President & CEO, Robbert de Kock commented ‘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. At this time and 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. Our monthly pulse surveys are one way in which we achieve that aim. WFSGI believes that the Industry must come together during COVID-19, more than it ever has before, and find global solutions through international teamwork. WFSGI is proud to be able to serve the Industry by providing a neutral platform for that collaboration and action to take place.’

To increase the data we are able to assess and therefore the value of the overall results, we would encourage all interested companies to participate in May’s pulse survey. All results will be anonymised and no individual company data will be shared.

EXECUTIVE SUMMARY

COVID-19 Manufacturing Trends

Supply Chain Disruption: Supply chains seem to be mostly affected in Far East (68%), followed by Europe (64%), South Asia (54%). Supply chains in Northern America are only affected for 22% of respondents and in Latin America less than 10% see an impact on their supply.
ORDER DECREASE: Around 90% of respondents see decreasing orders from customers in Europe and the Northern America. This number is significantly lower and around 30% for Latin America, Far East and South Asia.
MATERIAL SHORTAGE: Over 70% of respondents face material shortage due to the closure of suppliers’ companies. Around 40% face issues due to shipments being withhold, due to specific trade restrictions or delayed finish goods transportation. A little over 30% have to cope with a lack of capacities of shipping companies.
Labor: Close to 60% of respondents see a labor shortage due to forced company closure, however, none have infected staff members not showing up to work. a little less than 30% face labor shortage due to travel restrictions for workers and shut down of public transportation for workers. around 20% have seen staff not coming to work since they have to take care of family members or are reluctant to return to work due to fear to be infected.
Regulatory Requirements: over 86% are impacted by specifically implemented regulations due to the Covid.19 pandemic.
Finance: Again, over 86% are challenged by low cash flow. This issue is caused due to extended payment terms and order cancellations, orders that are not delivered in time and since salaries are being paid in advance. Interesting is, that even though close to 50% will restrain from investments, 40% plan to invest in software and people and close to 30% invest in ifrastructue.
Business Forecasting: None of the respondents predicted that there is no impact on their business. Most of them, close to 50%, see their business dropping by 50% in the upcoming month. Around 15% expect even a 70% respectively 80% drop. The more optimistic 22% of the respondents expect a drop of maximum 20%. The most affected region for respondents is Europe where 95% see a drop of their business. In Northern Amercia 77% expect business to decrease, While for Asia only 30% see a decrease of business followed by Latin America with only 18%.
Business Rebound: Respondents were rather pessimistic when it came to assess if their business will take off again after the pandemic. Most of them, close to 40% only expect that their business will rebound by 10%, a business rebound reaching 20% and also 50% is expected by a little less than 30%. Less than 5% expect their business to reach 90% of its former performance. None is expecting to reach 100% of their initial business performance. Less than 30% think that they will only need 61-90 days to get back to business after the pandemic. A majority of 60% foresee a timeframe of 91-180 days. Close to 10% even would predict that more than a year is necessary.
Measures Taken: Close to 70% will consolidate production capacities as a response to the pandemic. Nearly 60% will focus on adopting lean production to eliminate waste. Over 45% will need to look into worker retrenchment. Automation is a solution for close to 20% of respondents and finally, less than 15% have no specific plans.

COVID-19 Brand/Retailer Trends

Mitigation of Impact: Close to 80% want to increase their on-line sales. 47% will reduce their demand by cancelling orders in the following months. Around 40% will clean out all inventories to maintain their cash position and exploit market opportunities in the recovering Asian markets.
This will lead for 60% of respondents to deferred payment flows. Over 50% would opt for sharing the pains by keeping the same supply base but provide for less business volume for each supplier. Still 30% are looking to consolidate the supply base and keep only strategic partners.
Priorities: Close to 90% will focus on cash position while 30% are increasing their supply chain efficiency. 20% will look into product marketing and market shares. It was also mentioned that temporary unemployment for some staff supported by government payments is an option.
Expectations to suppliers: Most respondents, 90%, are welcoming flexbile suppliers while around 25% are awaiting efficiency and stability.
supply chain transformation after the pandemic: over 70% will work on a lean and adaptive supply chain. over 55% are looking for innovative ways to cope with disruption. 20% want to be close to market and cost sensitive.
Still close to 40% don’t want to reframe their sourcing priorities after the pandemic while 30% will look for a regional centric sourcing or global market centric sourcing. A little over 15% want to opt for local for local sourcing. Also, some respondents have not yet the answer to this question.
Emerging market trends: 70% consider environmental friendly products to be the most important market trend after the pandemic. In the same directions goes the answer of 46% which attach importance to recycle economies. Around 25% see functional driven and price points centric developments as important.
Prevailing sports after the pandemic: around 70% of respondents see running and outdoors as the most appealing sports after the pandemic. a little less than 50% consider walking to be practiced most after the pandemic. around 20% consider basketball and soccer to take that position. finally, cycling is also a seen as a popular activity after the pandemic.