LOOKING AHEAD TO 2023

ANational

BAWCUM

ARE SPORTS RECESSION/ INFLATION PROOF?

BAWCUM: I would say sports as a whole and even the sporting goods industry are immune to inflations/recessions. That is not to say some companies may suffer during these times if they are not prepared or operate on very thin margins. If you look at the household level during these times, sports programs for kids up through high school are almost seen as a necessary household expense, like school. You may see school budgets drop during these times; however, parents and the booster clubs often pick up the slack through fundraising to make sure teams have everything they need.

When we started Trigon Sports in 2007, we were smack in the middle of a huge recession. Although this was a risky move on our part, we found that our business thrived. This was due, in part, to school sports programs finding funding no matter what and ordering from our team dealers, which, in turn, brought profits up to the manufacturers and distributors.

RACHELLE MANNING

CHANNEL MANAGER –SPORTING GOODS

SANMAR SPORTS

ISSAQUAH, WASHINGTON

DUSTY RHODES

CAREY: I thought for many years the team side of the business as a whole was recession-proof. But with the COVID pandemic I found that not to be true. I think the Southern states weren’t affected as much because we seemed to muddle through the situation a little better than most. Still it created problems for us all in one way or another.

HAUFF: I think that question varies within our country. During a previous recession, we in South Dakota and Nebraska did not participate in the recession. Schools receive their funding from taxation, so as the value of property increases, so do one’s taxes. So, school funding increases based on the taxes collected in a county or district.

Non-school programs may have a more difficult time raising funds based on corporate advertising/donations. When a recession occurs, corporate sales in our company slow down, but do not quit since some industries are not affected by a slowdown of the economy. Parents find a way to help fund programs for their children.

I think inflation affects more schools than does recession. We have noticed the shock factor of the inflation in many clients — “you mean I paid $10 for a product last year and now it is $15 this year?” We are not sure if budgeting will be affected for the 2023–24 school year as we are working with schools to format their budgets now. We will see what happens to our sales for the next school year.

MANNING: Historically the sporting goods channel has been relatively recession-proof. Families will forgo that family vacation to allow their kids to play a sport if money is tight. They may buy the glove this year and not the bat until next year. But the industry hasn’t experienced a significant decline.

Where I’m not sure is if prices keep rising, do people trade down? Instead of the expensive new “X,” do I buy a mid-tier “X” instead. We still might sell the same unit volume, but at lower overall revenues if people are feeling squeezed. SanMar Sports can have a big impact if consumers choose to “trade down.” We have a large non-branded and aggressively priced assortment of apparel, bags and hats.

RHODES: It depends on the type and scope of the recession, right? The industry is definitely vulnerable, albeit less than other industries. When customers have limited funds it will ultimately be about value and quality.

WHAT CONCERNS YOU ABOUT THE INDUSTRY AS WE START 2023?

BAWCUM: High inventory levels and rising shipping costs are a big concern. The pandemic shutdown really did a number on our industry supply chain and many companies suffered. Other companies reacted by buying heavier to fulfill the backlog and consequently, have a surplus on hand to meet demand. Now with the container prices back at pre-pandemic levels, many companies are taking full advantage of the lower costs and still buying heavy. Domestic truck freight costs are steadily increasing, especially with high diesel fuel costs. It is my hope that the lower container prices may help offset the higher domestic shipping costs so there are no adverse pricing issues passed down to our customers.

CAREY: I’m very concerned about stabilization of the hard goods side of our industry for ‘23. Even though it has improved somewhat it’s still an ongoing challenge. We have found that the “Made in the USA” companies seem to have better fill rates than those that import most of their goods. The imports are still at the mercy of shipping costs and on-time deliveries.

HAUFF: We hope that deliveries get closer to previous commitments. We are working with vendors that have taken care of our company during this two-year disruption in the markets. Our staff hopes to quote our clients for budgeting purposes one day and not have to requote them with increased prices as it gets closer to the purchase.

We are hoping for price stabilization in the industry. Most of our vendors honored the orders we placed in November 2021 for deliveries in 2022, but there were two vendors who increased the prices on our purchase order. We ate the increase as we did not go back to the customer with an increase. A contract is a contract and we held up our side of the agreement.

MANNING: My biggest concern isn’t sales to the players on the teams, it’s sales to all the “extras.” That extra practice shirt, the travel suits, etc. People in the stands and faculty, boosters, etc., may choose to wear last season’s product, not the “new” team’s for this season. Recession and decrease in consumer spending could mean fewer fans are buying that team hoodie or hat to show their support. However, this also benefits the non-branded suppliers like SanMar Sports. We provide an exceptional value for when the industry is searching to reduce spending.

RHODES: Inflation is huge for sure. But I think every year it is about being more innovative and improving relationships. How can a company in our industry solve the pain points and needs of our customers? If we do a great job in that area we’ll be just fine.

WHAT GIVES YOU OPTIMISM FOR THE INDUSTRY IN 2023?

BAWCUM: Import costs are returning to pre-pandemic levels, which is fantastic for our industry and customers. It appears manufacturing and raw material costs are becoming more stable, so, hopefully, we can get back to more stable pricing for our dealers instead of the constant price fluctuations we have seen over the past few years. If you talk to most dealers and manufacturers, most had a fantastic 2022 fiscally, and I feel this trend will continue into 2023 despite the recession that looms. Sports will be played and these teams will need product. It’s a good thing our industry will have a beefier inventory now to take care of any demand that might come.

CAREY: Uncertain times create a tougher, more creative way of doing business. After getting back from our last Sports Inc. show I feel a positive sense of resolve from both dealers and manufacturers. We have all been paddling upriver since COVID. But I think with the continued efforts of our industry we will reach the other side sooner than later.

HAUFF: I think deliveries will be more reasonable in 2023 as vendors are receiving product quicker than in 2020 and early 2021. There is not the huge container problem now. We are hoping for price stability now. I think a lot of the problems of the supply chains have eased which will help the vendors deliver orders. Also, I think our vendors have consolidated their product offerings and will do a better job of stocking merchandise. We as a company will order more product for inventory so we eliminate the price changes that occur during a season. We experienced a sellthrough on inflatable products this year so we had to increase our pricing at the beginning of the sports season. Those schools that ordered early benefited from our purchase plans, but our backup inventory was not good. We have a positive staff that works hard with our clients. We visit each school regularly, work the buying shows and work with the sales reps. A positive, hard-charging staff will find a way to be successful. Our model has changed but our forward-thinking staff continues to be the best as 2022 has been a record year for Hauff Mid America Sports.

MANNING: I think our industry continues to show its value and resilience. I believe we will continue to grow our overall market by taking volume away from brick and mortar and exclusively catalog businesses. Even if things slow down, our industry has the ability to continue growing if we are creative in how we pursue opportunities. We are also growing our assortment of products. You can always find something new at www.sanmarsports.com.

RHODES: I’m a huge fan of improvement and innovation. In 2023, I’m stoked to bring to market the easiest way to take and place orders. We grow by over 50% every year ... each year we are excited to show the industry what we’ve been working on and what we know will positively impact our industry over the next year.