Sporting Goods Stores and Bicycle Shops

Industry Snapshot

According to a Dun & Bradstreet industry report posted in 2009, this industry was valued at $25 billion, down from $28 billion in 2002. There were approximately 57,646 retail sporting goods and bicycle shops in the United States, of which nearly 90 percent employed fewer than 10 people. However, the remaining 10 percent of companies (employing more than 10 people) generated over 60 percent of industry revenues. The industry as a whole employed 254,195 workers.

A recessive economy in the late 2000s stymied consumer spending, leaving sporting goods stores to compete for a shrinking customer base that was spending less, particularly on big-ticket items. Although the industry declined slightly overall in 2008, compared to many other industry sectors, the sporting goods industry was holding its own, waiting for better time to return, hopefully by 2010.

Organization and Structure

The types of firms listed in this classification include department and discount stores, franchise chains, specialty shops (bicycles and athletic equipment), mail-order businesses, and e-commerce businesses. Along with big box sporting goods stores such as Dick's Sporting Goods, this industry also included a large number of small specialty shops, such as those that marketed for a particular sport, including bicycling, soccer, and golf. In addition big-name general retailers also were an important segment of this industry, including Wal-Mart and Target.

Bicycles are sold in department stores; specialty bike shops; and discount, variety, and hardware stores. The typical American bicycle shop served a customer base of approximately 9,000 people. Approximately 40 percent of the bicycle shops in the nation were single proprietorships and were primarily "home-owned" facilities. A small percentage of bike shops were business partnerships. Only 25 percent of U.S. bike shops were as large as corporations, in terms of average sales.

Bicycle shops stocked four major classifications of bicycles: single-speed cruiser bicycles (the average price was $100 to $250); contemporary utility bicycles ($100 to $300); lightweight 10- to 18-speed bicycles (from $300 to more than $2,000); and specialty bicycles, such as mountain bikes, sports models, touring bicycles, folding bicycles, and all-terrain bicycles ($300 to $3,000).

Background and Development

Through the 1970s, the sporting goods industry was dominated by hunting and fishing equipment, and hardware stores competed with sporting goods outlets for business. By the late 1970s and early 1980s, however, several factors began to transform the industry. The nation as a whole grew increasingly health- and fitness conscious, sparking an increase in sales of exercise gear and apparel. In addition, the booming participation of women in sports of all kinds opened up whole new markets that only barely existed before. And expanding variety and specialization in equipment for all sports necessitated space for the vast selections now pushed by manufacturers. While adults between the ages of 25 and 44 constituted the mainstay of purchasers, industry leaders recognized a need to focus their marketing strategies on the inclusion of both younger and older consumer groups. Combined, these factors vastly transformed the industry's base toward large retail outlets featuring several departments catering to different sports and activities.

As the fitness industry sparked consumer appeal for exercise equipment, accessories, and athletic wear, trends gradually shifted from sporting goods stores, which were typically sole proprietorships and small "pro shops," to franchises and eventually sporting goods chains. Bicycle shops even began changing their names to "bicycling and fitness" shops and expanded their product mixes to include exercise bicycles, treadmills, climbers, and weight machines to capitalize on the craze. These types of stores appealed to a growing number of consumers who were exercising in their own homes.

Consumers started turning to discount chains and stores because they knew what equipment to purchase. When the technology was new, customers were more in need of experts to explain the products and their benefits before making a major purchase. As consumers used more types of exercise equipment and became more knowledgeable about fitness, however, they grew much more familiar with the types of equipment they needed. Consequently, store managers were changing their store displays to enable customers to "test drive" a product before taking it home. Such hands-on displays often proved helpful in alleviating customers' anxiety about assembly. Seeing the assembled product in the store could convince them that it was easy to set up at home.

Although the fitness craze leveled off in the late 1980s, traditional recreational activities such as golf, team sports, fishing, and camping all picked up the slack. Outdoor sports and recreational activities such as camping and fishing led industry growth in the late 1980s and early 1990s.

Sales of American-made bicycles also remained relatively flat in the late 1980s. This was due in part to delivery delays that kept popular models out of shops. The European mountain-bike boom drained American supplies and left many dealers in the United States with unfilled orders. All in all, bicycle shops reported spotty sales on some popular bikes in 1990. East Coast bicycle shop dealers reported flat sales in 1990, but their counterparts on the West Coast reported an 8 percent sales increase.

Firearms, ranging from handguns to hunting rifles to assault weapons, had long been available from sporting goods stores with virtually no guidelines. In 1993 and 1994, however, that changed. The Brady Bill, a piece of legislation championed by the Clinton administration that mandated a five-day waiting period before a consumer could purchase a gun, was ratified into law over the objections of the National Rifle Association and others. A ban on the manufacture and sale of 19 types of assault weapons also passed in May 1994. MCI Communications Corp. developed an automated system that enabled the registration approval process to be completed within the mandatory 10-day waiting period. The former, and less expedient, postal process required up to 20 days for completion.

The early 1990s were prosperous for privately owned Herman's Sporting Goods Inc. as it posted $570 million in yearly sales. The effective marketing strategy by Sports Authority of providing the consumer with a wide selection of in-stock merchandise and low prices, however, reduced Herman's sales by more than $230 million. This paralyzing situation caused the 117-store, octogenarian chain to file for Chapter 11 protection in April 1996, ushering in a modern period of domination by Sports Authority.

One of the most striking features characterizing this industry in the late 1990s and early 2000s was the consumer shift from smaller, local sporting goods stores to so-called "big-box" retailers, or sporting goods superstores, bringing together an exceptionally wide product line under one roof. Combined with the explosive growth in e-commerce sales of sporting and recreational goods, this development gave the industry a complete facelift.

Sporting goods stores, traditionally a fragmented market, spent the 1990s and early 2000s in a massive wave of consolidation. Big-box chains grew to dominate the market and swallowed up smaller, less efficient competitors. These larger firms enjoyed greater leverage with suppliers and manufacturers, resulting in lower prices and higher margins, not to mention assistance in promotional activities and inventory management. The most notable such consolidation was the merger in 2002 of the two industry leaders, Sports Authority and Gart Sports, making Sports Authority the industry's first and only national chain.

The encroachment of big-box retailers with greater economies of scale seriously damaged the specialty retailers, particularly in categories such as exercise equipment, where big-box stores reign supreme. Particularly as technology has improved and the difference between introductory models and high-end models has grown hazy, the more value-added service provided by specialty retailers failed to overcome the overall price and service advantages big-boxes offered. According to the National Sporting Goods Association, between 2000 and 2001, the share of treadmill sales at specialty retailers fell from 14 percent to only 5 percent, while the share claimed by mass merchants grew from 67 percent to 76 percent.

Industry sales were led by exercise equipment, which registered sales of $3.78 billion in 2002, according to Sporting Goods Manufacturers Association International. Treadmills accounted for about 60 percent of this category, which also includes stair machines, elliptical cross-trainers, and exercise bikes. Golf equipment took second place, with sales of $2.6 billion. Outdoor sports, including fishing and hunting, raked in $1.7 billion; water sports posted sales of $425 million; and billiards and bowling reached combined sales of $472 million. Among specific sport categories, a handful registered significant gains in 2002. Snowboards, for example, enjoyed sales growth of 12 percent to $168 million; hockey equipment and ice skates jumped 6.5 percent to $245 million; and paintball equipment grew 10.4 percent to $370 million.

Following the shakeout of many of the late 1990s' biggest e-commerce stars, a crop of new and established e-tailers moved aggressively into the sporting goods market to grab some of the untapped online share. General e-tailers such as SportsLine.com and Sportsrus.com joined specialty online stores like Golfballs.com and Baseball Warehouse in rebuilding the market for online sporting goods sales. Moreover, in 2003, these firms were joined by e-commerce giant Amazon.com, which opened a Sporting Goods section on its Web site.

Bicycles represented a highly competitive $6 billion sector. Longtime market leader Schwinn, a subsidiary of Pacific Cycle, filed for bankruptcy in 2001. By the middle of the decade, the company concentrated its efforts on less expensive children's bicycles, primarily for sale at mass retailers like Wal-Mart. In its place, longtime industry players such as Huffy sparred with foreign upstarts, like China-based Giant, which forced their way to the leading spots in the U.S. bicycle market. In retaliation, U.S. manufacturers, including Huffy and Cannondale, tried to break into foreign markets.

Sales of mountain bikes skyrocketed through the 1990s, but sales leveled off by the mid-2000s. Meanwhile, the casual and recreational cyclists represented the fastest-growing sector of the bicycle market. Intense industry competition and the spread of innovative high-end racing technology forced prices downward in the market for specialty, mountain, road, and racing bicycles. The line between high-end bikes and their moderately priced counterparts blurred significantly through the 1990s and early 2000s.

The sporting goods and bicycle shops sector accounted for 31.8 percent of the industry total, with 16,440 establishments, 102,268 employees, and revenues of $15.46 billion. There were 7,381 hunting equipment, firearms, and ammunition retailers responsible for 14.3 percent of the market. Some 4,444 retailers of golf goods and equipment held 8.6 percent of the market. The bicycle and bicycle parts sector had 4,918 shops, for 9.5 percent of the market. These bicycle shops boasted $1.51 billion in revenues, employing 18,886 people. Specialty sport supplies, not elsewhere classified, contributed a meager 2 percent within the industry, but garnered $1.58 billion in revenues. Retailers of exercise equipment, including gymnasium equipment, not elsewhere classified, and trampolines and equipment had sales of $665.9 million. Of that total, exercise equipment was responsible for $627.9 million alone.

According to the National Bicycle Dealers Association (NBDA), bicycle shops contributed $6 billion to industry totals in 2005. There were some 19.8 million units sold, up from 18.3 million bicycles retailed in 2004. Meanwhile, specialty bicycle shops consolidated from 6,195 shops in 2000 down to 4,705 in 2005. However, with an estimated 3 million bikes channeled through specialty retailers in 2005, industry watchers were led to believe that floor space could increase. Specialty bike dealers had nearly all the service market as well as the majority of sales, particularly of bicycles retailing for $250 or more.

The National Sporting Goods Association (NSGA) reported that hunting grew 8 percent as a sport in 2004, the highest increase in the overall athletic sporting goods and equipment sector. Firearms generated an estimated $1.9 billion in sales, up 9.5 percent. Riffles garnered $722 million; handguns reported $524 million; shotguns generated $534 million; and air guns accounted for $120 million in sales.

Meanwhile, online shopping for sporting goods and equipment was becoming increasingly popular. According to data from Forrester Research Inc., reported by the NSGA, online sales of sports equipment were expected to more than double between 2005 and 2010. Sales of sports equipment via the Internet, estimated at $4.1 billion in 2005, were expected to climb to $8.7 billion in 2010.

Current Conditions

The sporting goods industry's overall growth through the 2000s slowed in 2008 when the United States was hit with a significant economic recession. Because sporting goods sales are heavily reliant on disposable consumer income, when consumer spending drops, the industry is directly affected. Cost cutting was the primary means by which the industry reacted to the downturn, which meant that many companies cut employee numbers. Companies such as Cabela's also implemented a plan to focus on high-demand, core items and reduce inventories of low-selling items. Cabela's also made a choice to slow its expansion efforts. The company opened eight stores in 2007, two stores in 2008, and had plans for just one new opening in 2009. Dick's Sporting Goods looked to cut costs by freezing administrative-level hiring, reassessing its advertising spending, and cutting back on expansion to just 20 new stores in 2009.

According to the National Sporting Goods Association, sales of sporting goods and equipment dropped by 0.7 percent in 2008, with an anticipated drop of another 1 percent in 2009. Despite the overall slight decline in industry sales, firearms and ammunition increased by 16 percent during 2008. Camping supplies and equipment was the only other major category to experience growth in 2008, up by 1 percent over 2007. Exercise equipment, including motorized treadmills, was the largest overall sporting goods category; this segment declined in revenues by 3.5 percent during 2008. Golf equipment revenues fell by 5 percent and fishing tackle fell by over 6 percent. Overall sales of sports transportation equipment (including bikes, boats, recreational vehicles, and snowmobiles by nearly 30 percent.

Industry Leaders

In the late 2000s, the leading sporting goods retailers ranked by 2008 sales were Dick's Sporting Goods ($4.13 billion), The Sports Authority ($2.89 billion), Bass Pro Shops ($2.65 billion), Cabela's ($2.55 billion), and Academy Sports & Outdoors ($510 million).

Dick's Sporting Goods Inc. operated a total of 384 stores in 39 states, 89 Golf Galaxy stores in 31 states, and 14 Chick's Sporting Goods stores (acquired in 2007 and located in Southern California). The company had 27,600 employees. Dick's revenues grew steadily during the 2000s; the company posted sales of $2.1 billion in 2004, $2.6 billion in 2005, $3.1 billion in 2006; $3.9 billion in 2007, $4.1 billion in 2008. Net income also increased through 2007, but in 2008, despite posted gains in overall revenue, adjusted net income fell from $155 million in 2007 to $138 million. Earnings per share were reported as a loss of $0.31, down from a profit of $1.33 per share in 2007. Dick's continued overall revenue growth was fueled primarily by the addition of 43 new Dick's stores and 10 new Golf Galaxy stores.

Sports Authority managed over 450 stores throughout 45 states in 2009. In January 2006, an affiliate of Los Angeles-based Leonard Green & Partners purchased Sports Authority's management team. Bass Pro Shops operated 50 Outdoor World locations, averaging a whooping 280,000 square feet. The original location, in Missouri, provides a unique interactive experience and is a major tourist attraction. The company is privately owned by its founder, John Morris. Cabela's, headquartered in Sidney, Nebraska, operated 30 stores in 20 state, primarily in the Midwest. Like Bass Pro Shops, Cabela's floor plans are large (up to 245,000 square feet) and the stores offer attractions such as waterfalls and large aquariums. Academy Sports & Outdoors sells its merchandise at approximately 100 stores located primarily in the South and Southwest. The company, which employs 7,000, is still owned by the family of founder Max Gochman.

Research and Technology

Sporting goods of the twenty-first century are highly streamlined and are made with lightweight, but durable, metals and plastics. Developments in materials manufacturing made these sleek and colorful designs possible. Technological advances also gave rise to all-terrain bicycles, mountain bikes, high-tech athletic shoes, all-in-one weight machines, aerobic stair steppers, and computerized treadmills, stair climbers, and stationary bicycles. Similarly, sporting goods retailers were using sophisticated multimedia techniques to enhance store environments and make sports involvement more appealing to men, women, and children.