SIC 5091
SPORTING AND RECREATIONAL GOODS AND SUPPLIES



Establishments in this entry are primarily engaged in the wholesale distribution of sporting goods and accessories; billiard and pool supplies; sporting firearms and ammunition; and marine pleasure craft, equipment, and supplies. Establishments primarily engaged in the wholesale distribution of motor vehicles and trailers are classified in SIC 5012: Automobiles & Other Motor Vehicles. Those distributing self-propelled golf carts are classified in SIC 5088: Transportation Equipment & Supplies, and those distributing athletic apparel and footwear are classified in Industry Group 513: Apparel, Piece Goods, and Notions.

NAICS Code(s)

421910 (Sporting and Recreational Goods and Suppliers Wholesalers)

Industry Snapshot

The wholesale sporting goods industry, including apparel and footwear, enjoyed revenues of nearly $50 billion in 2003 up from $45.6 billion in 1998, despite the sluggish economy of the early 2000s. The Sporting Goods Manufacturers Association International (SGMA) expected modest growth of only 1.3 percent in 2004, but that included the lagging sales of sports apparel, which is separate from the this industry category. Still, that meager growth, according to the SGMA, was rooted in excess retail capacity and a decline in selling prices, along with consumers' growing tendency to buy on sale.

The late 1990s and early 2000s were marked by rapid consolidation. Like many wholesale industries, wholesalers of sporting and recreational goods were in a relatively weakened position compared to manufacturers, so instead of competing with their prices, wholesale distributors opted to emphasize value-added services not offered by manufacturers, in an effort to regain a larger portion of the market. Distributors were quickly forced to streamline their operations, most typically using sophisticated information technology, to implement comprehensive brand- and inventory-management and customer-data services for their clients.

Though it drove many smaller players out of the market, this consolidation carried many advantages for the industry. The remaining competitors boasted greater efficiency and the economies of scale and flexibility to adjust to manufacturers' and retailers' heightened demands. These firms served their clients with volume discounts, better financing options, and larger warehouses to accommodate a variety of product lines.

Organization and Structure

The sporting and recreational goods market is largely seasonal, requiring manufacturers to deliver product lines in a timely fashion in order to take advantage of the limited period of demand for many products. According to a 1997 survey of sporting goods buyers by Sporting Goods Business magazine, almost 75 percent of the buyers surveyed were buying closer to the selling season, rather than overstocking products during the off-season.

Because of the wide range of sports and other activities served by this industry, many retailers specialized in providing equipment for certain activities, such as fishing, hunting, boating, and so on. Other distributors specialized by market, dealing primarily with team equipment for schools and other institutions. Still others directed their business toward equipment popular in specific regions of the country, for example, providing fishing and hunting gear in rural areas. The latter strategy, in particular, gave smaller dealers or distributors an advantage over the superstores and chains, in that such operations could specialize in providing specific regional information, advice, and products.

Current Conditions

Wholesalers spent the early 2000s recovering from a glut of products in the marketplace, over-saturating the industry with large inventories of high-priced but weak-selling products, particularly in-line skates, ski equipment, metal golf clubs, and equipment for team sports, in which participation remained flat.

According to a SGMA International forecast report, the vast majority of sporting goods executives expected consolidation to be a major growth factor through the end of the first decade of the new millennium. Indeed, mergers and acquisitions continued at a brisk pace into the mid-2000s, with Gart Sports merging with Sports Authority to create the nation's largest sports retailer chain. Moreover, analysts predicted that the industry would grow increasingly diversified, with the development of sporting goods tailored to ever-more specific lifestyles. Of particular concern to wholesalers, however, was the anticipated growth in the retailers' strength in the industry, which will likely afford retailers greater leverage in demanding services and concessions.

The wholesale of sporting goods and recreational equipment was estimated at $18.27 billion in 2003. The exercise equipment sector was among the industry's saving graces, with sales of nearly $4 billion in 2003. Sales in this area continued to surf the wave of increased gym membership, which doubled between 1987 and 2003. Clubs, universities, and other institutional settings constantly upgrade equipment, ensuring a steady market for fitness equipment. Moreover, some fitness products, led by treadmills and stair machines, were particularly popular among individual consumers for use in the home.

Women's participation and interest in sports reached an all-time high during the 1990s and early 2000s. Women's sports enjoyed increasing high-profile media coverage during this period, slowly overcoming years of being relegated to the margins of the sporting world. Team sports, soccer and basketball in particular, saw robust growth in the numbers of female participants. Female basketball players who participated frequently rose from 2 million in 1990 to 2.4 million in 2002. Other sports and related equipment that experienced significant growth due to women's participation were tennis, free weights, step machines, treadmills, step aerobics, stationary bikes, and camping with tents. The SGMA projected that products for women would be among the few industry growth sectors while manufacturers, wholesalers, and retailers faced down an over-saturated market.

Basketball participation remained the most popular team sport in the United States, with the number of frequent players up 14 percent since the mid-1990s, while bowling was the most popular U.S. sports activity, with 53.2 million participants. Meanwhile, the rise in popularity of both gentler forms of exercise such as yoga and water workouts and extreme sports such as skateboarding and skydiving opened new market niches driving overall industry growth.

Yoga and Pilates enjoyed skyrocketing mainstream acceptance in the early and mid-2000s. The SGMA reported yoga participation jumped 31 percent to 9.1 million in 2001, with the trend expected to continue. Meanwhile, Pilates participation leapt 41 percent to 2.4 million. Yoga and Pilates classes were increasingly offered as part of overall fitness programs at health clubs, greatly accelerating participation.

Extreme or action sports were also on the rise in the mid-2000s. Skateboarding, surfing, snowboarding, skydiving, and wakeboarding were a few of the leading segments of this emerging niche. Primarily youth-oriented, extreme sports derived their appeal largely from marketing campaigns advertising a general lifestyle, rather than health or sportsmanship. Skateboarding exploded in popularity, due in large part to increased television coverage and its being marketed as a trendy extreme sport. The SGMA reported 11.6 million skateboarders in 2001, up a full 49 percent from the previous year.

Industry Leaders

SCP Pool Corporation, based in Covington, Louisiana, brought in revenues of $1.16 billion in 2003, up 17.6 percent over 2002. The firm was the world's largest wholesale distributor of swimming pool supplies and related equipment, with 161 service centers in 35 states and another 40 centers in Europe. SCP spent the late 1990s and early 2000s acquiring smaller, regional distributors and building its network.

Ellett Brothers Inc. was a leading wholesaler of outdoor equipment, based in Chapin, South Carolina. Its network included 800 manufacturers and suppliers as well as 30,000 customers, to which it distributed some 50,000 products for camping, hunting, and marine sports. Other leading industry firms included Gander Mountain Inc. of Bloomington, Minnesota, with revenues of $297.8 million in 2003, and Dayton, Ohio-based Outdoor Sports Headquarters Incorporated (OSHI).

Research and Technology

In the mid-1980s, OSHI and other distributors introduced the opportunity for customers to purchase powerful

SIC 5091 Sporting and Recreational Goods and Supplies

new computer systems that could track, report, and forecast inventory needs and quickly compute sales and profits. The systems offered customers several unique advantages. Programs could update inventory, track sales taxes, and create mailing lists. Given a certain amount of information regarding individual sales, the system might recommend additional products for the retailer to promote. The OSHI system provided firearms records required by the Bureau of Alcohol, Tobacco, and Firearms, as well as fishing and hunting license records. Furthermore, some programs allowed dealers to access the wholesaler's mainframe to obtain information on the status of the wholesaler's inventory. Other options included allowing the retailer to place an order directly to the wholesaler's computer and quickly learn whether the order qualified for any incentive programs. Some computer programs could also update prices in the dealers' computers, forecast seasonal sales based on the sales in previous years, track special orders, and generate daily sales reports.

Distributors were also increasingly relying on computerized distribution centers to improve service and profits. Easton Aluminum, the official supplier of equipment to the U.S. Olympic Archery Team, built a 100,000 square foot, state-of-the-art distribution center that served as a model for distributors and manufacturers. Located in Salt Lake City, Utah, this distribution center replaced four warehouses, one for each division of the company, providing a more stable distribution of merchandise in an industry that experienced severe peaks and valleys due to the seasonal nature of sporting goods. The system also allowed Easton to maintain extremely accurate inventory records.

Recognizing that the market is consumer-driven, both manufacturers and retailers used computer technology to gather market and consumer information. Retailers can track customer preferences from point-of-sale (POS) information and use it to manage inventory accurately. Manufacturers can use this same information to react to topselling products or discontinue shipments of slow-sellers. Both the retailer and manufacturer benefit by reducing the need for inventory build up and markdown.

The Internet became an integral part of business in the late 1990s, changing how and where consumers shop. The Internet allows retailers to store data regarding customer purchases, birthdays, and demographics. Retailers can use the information to suggest gifts, cross-promote products, and refer users to partner sites. In addition to offering products to consumers, many companies used the Internet to facilitate business-to-business e-commerce such as automating their inventory, offering customer service, distributing products, and utilizing order fulfillment functions. By the mid-2000s, however, industry-specific online stores faced encroachment from mass e-retailers. Amazon.com, for instance, launched a sporting goods store in 2003, partnering with a number of online sporting goods companies, including Golfballs.com, SportsLine.com, altrec.com, and others. Amazon.com aimed to compete directly with the major sporting goods retailers, offering brand names in over 50 sporting activities.

Further Reading

Carr, Bob. "Amazon Goes after Sporting Goods Dollars." Sporting Goods Business, October 2003.

Griffin, Cara. "Listening to the Experts." Sporting Goods Business, September 2002.

Howard, Brian. "Extreme Sports." Target Marketing, October 2003.

"Imagining the Future—The U.S. Sporting Goods Industry in 2010 White Paper." Sporting Goods Manufacturing Association International, 2004. Available from http://www.sgma.com/reports/2004/report1071667347-4528.html .

"Today's Sporting Goods Industry: The 2004 Report." Sporting Goods Manufacturing Association International, 2004. Available from http://www.sgma.com/reports/2004/report1073334018-29562.html .

Troy, Mike. "Newly Revived Yoga, Pilates Show Promise over Long Stretch." DSN Retailing Today, 7 October 2002.

——. "Super Show Hits the Mark as Industry Looks to Score." DSN Retailing Today, 10 February 2003.



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