Sporting Goods Stores and Bicycle Shops

SIC 5941

Industry report:

This category consists of establishments primarily engaged in the retail sale of sporting goods, sporting equipment, and bicycles, bicycle parts, and accessories. Retail establishments primarily engaged in selling motorized bicycles are classified in SIC 5571: Motorcycle Dealers. Those engaged in the retail sale of athletic footwear are classified in SIC 5661: Shoe Stores. Establishments primarily engaged in repairing bicycles are classified in SIC 7699: Repair Shops and Related Services, Not Elsewhere Classified, while those renting bicycles are classified in SIC 7999: Amusement and Recreation Services, Not Elsewhere Classified.

For information on the industry that produces durable goods for athletic competition, exercise, and recreation, see SIC 3949: Sporting Goods Equipment.

Industry Snapshot

According to the U.S. Census Bureau, there were 21,628 sports goods stores in the United States in 2010. Together these companies employed 225,651 people, who earned a total annual payroll of more than $4.0 million. A majority of firms (74 percent) employed fewer than 20 people.

The economic recession at the end of the first decade of the 2000s hindered 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 held its own during the recession, waiting for the economy to recover.

By 2010 recovery seemed to be on the horizon, as consumers regained some disposable income that had been lacking during the recession. According to the National Sporting Goods Association (NSGA), sales of sporting goods in the United States (not including bicycles) totaled $26 billion in 2010 and $26.4 billion in 2011, up from $24.6 billion in 2009.

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 like Dick's Sporting Goods, this industry also includes 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 Walmart 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 with an average price of $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 whole new markets that only barely existed before. Expanding variety and specialization in equipment for all sports required space for the vast selections that were being 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. These factors combined to vastly transform the industry's base to 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 like 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, due in part to delivery delays that kept popular models out of shops. The European mountain-bike boom drained U.S. supplies and left many dealers in the United States with unfilled orders. Bicycle shops overall reported spotty sales on some popular bikes in 1990. East Coast bicycle shop dealers reported flat sales in 1990, but those on the West Coast reported an 8 percent sales increase.

Firearms, from handguns to hunting rifles to assault weapons, had long been available at sporting goods stores with virtually no guidelines. In 1993 and 1994, however, that changed. The Brady Bill, legislation championed by the Clinton administration that mandated a five-day waiting period before a consumer could purchase a gun, was ratified over the objections of the National Rifle Association and others. A ban on the manufacture and sale of 19 types of assault weapons also was passed by Congress 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 bankruptcy protection in April 1996, beginning a period of domination by Sports Authority.

One of the most striking features characterizing this industry in the late 1990s and early years of the first decade of the 2000s was the consumer shift from small, 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.

Massive consolidation of sporting goods stores, traditionally a fragmented market, during the 1990s and the early years of the first decade of the 2000s. Big-box chains grew to dominate the market and swallowed up small, less efficient competitors. These large firms enjoyed greater leverage with suppliers and manufacturers than the small firms, resulting in lower prices and higher margins, as well as assistance in promotional activities and inventory management. The most notable such consolidation was the 2002 merger 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 their greater economies of scale seriously damaged the specialty retailers, particularly in categories like exercise equipment, where big-box stores reigned supreme. the more value-added service provided by specialty retailers failed to overcome the overall price and service advantages big-boxes offered, particularly as technology has improved and the difference between introductory models and high-end models has grown hazy. According to the NSGA, 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 (SGMA). 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, garnered $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 was concentrating its efforts on less expensive children's bicycles, primarily for sale at mass retailers like Walmart. In its place, longtime industry players like 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 middle of the first decade of the 2000s. Meanwhile, 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 years of the first decade of the 2000s.

By the middle of the first decade of the 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 only 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.

According to the National Bicycle Dealers Association (NBDA), bicycle shops contributed $6 billion to the industry total in 2005. There were some 19.8 million units sold, up from 18.3 million sold in 2004. Meanwhile, specialty bicycle shops consolidated from 6,195 shops in 2000 to 4,705 in 2005. However, with an estimated 3 million bikes channeled through specialty retailers in 2005, industry observers projected 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 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. Rifles garnered $722 million; handguns reported $524 million; shotguns generated $534 million; and air guns accounted for $120 million in sales.

The sporting goods industry's overall growth through the first decade of the 2000s slowed in 2008 when the United States was hit with an 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 recession, which meant that many companies cut employee numbers. Companies like 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 NSGA, sales of sporting goods and equipment dropped 0.7 percent in 2008. Despite the overall slight decline in industry sales, firearms and ammunition increased 16 percent during 2008. Camping supplies and equipment was the only other major category to experience growth in 2008, up 1 percent over 2007. Exercise equipment, including motorized treadmills, was the largest overall sporting goods category. Revenues for this segment declined 3.5 percent during 2008. Golf equipment revenues fell 5 percent and fishing tackle dropped more than 6 percent. Overall sales of sports transportation equipment (including bikes, boats, recreational vehicles, and snowmobiles) lost nearly 30 percent.

Current Conditions

The outlook for sporting goods stores was good at the beginning of the 2010s. According to the NSGA, 32.6 percent of all sports equipment, valued at $24 billion, was purchased from a sporting goods retailer in 2010, while discount stores, warehouse stores, and department stores accounted for only 13.2 percent, 2.2 percent, and 6.6 percent, respectively. Of all sporting goods sold that year, exercise equipment garnered the most sales, with $5.4 billion, followed closely by hunting and firearms with $5.3 billion. Other top categories were golf ($3.2 billion), fishing tackle ($2 billion), and camping equipment ($1.7 billion). Snow skiing equipment brought in $619 million. Although baseball/softball remained the biggest seller in the team sports arena, with $452 million, lacrosse and volleyball/badminton showed the largest gains between 2002 and 2010, with sales of lacrosse equipment increasing from $30.7 million to $43 million and volleyball/badminton showing an increase from $31.8 million to $37 million.

In the more specific sector of bicycle retailers, the NBDA reported that sales were up 15 percent in 2010 and that the sales of bicycles and parts garnered $6 billion. The NBDA estimated that about 19.8 million bicycles were sold in 2010, which the organization called "a very healthy number for the industry." The number of specialty bike shops in the United states dropped from 6,195 in 2000 to 4,256 in 2010, accounting for 44 percent of all bicycle sales in the United States that year. Bikes and accessories were being sold through fewer but larger stores, according to the NBDA. One stable factor in the industry was the primary sources of products obtained by bike retailers, with an estimated 99 percent of the bicycles sold in the United States in 2010 being imported from China and Taiwan. The future of the bike industry depended on the play-out of certain trends. According to the NBDA, "New niche markets...exist and continue to have great potential, including electric bicycles. Others to watch are recumbent bicycles, folding bicycles and urban/utility bikes."

Industry Leaders

In 2011 the leading sporting goods retailers by sales were Dick's Sporting Goods ($4.8 billion), Cabela's ($2.8 billion), Academy Ltd., which owned Academy Sports & Outdoors ($2.4 billion), The Sports Authority ($1.2 billion), and Bass Pro Shops ($829.3 million).

Based in Coraopolis, Pennsylvania, Dick's Sporting Goods Inc. operated a total of 474 stores in 42 states, in addition to 81 Golf Galaxy stores in 30 states, in 2011. The company had 26,700 employees and sold products for just about any sport imaginable, from team and individual sports items to exercise equipment, bicycles, and apparel. Dick's revenues grew steadily during the first decade of the 2000s, posting sales of $2.1 billion in 2004, $2.6 billion in 2005, $3.1 billion in 2006, $3.9 billion in 2007, and $4.1 billion in 2008. Dick's continued overall revenue growth at the end of the first decade of the 2000s was fueled primarily by the addition of 43 new Dick's stores and 10 new Golf Galaxy stores. Dick's continued to expand into the 2010s.

Cabela's, headquartered in Sidney, Nebraska, operated 30 stores in 20 states in 2011, primarily in the Midwest. The company employed 13,700. Like Bass Pro Shops, Cabela's floor plans are large (up to 246,000 square feet), and the stores offer such attractions as waterfalls and large aquariums. Cabela's specialized in gear for hunting, fishing, and other outdoor sports.

Academy Sports & Outdoors of Katy, Texas, sold its merchandise at approximately 135 stores in 11 states, primarily in the South and Southwest. The company, which employed 15,000, was owned by the family of founder Max Gochman until 2012, when it was purchased by investment firm KKR.

The Sports Authority, based in Englewood, Colorado, managed 470 stores throughout 45 states in 2012. In January 2006, an affiliate of Los Angeles-based Leonard Green & Partners purchased Sports Authority's management team. With 15,000 employees, it sold a wide variety of sporting goods in addition to providing services like snow ski rental, bike repair, and racquet stringing.

Bass Pro Shops operated 50 Outdoor World locations, averaging 280,000 square feet, and employed 12,000 people in 2011. The original location, in Springfield, Missouri, provided a unique interactive experience and was a major tourist attraction from the time it opened in 1981. Other similar locations had opened by the early twenty-first century. The company remained privately owned by founder John Morris.

Research and Technology

Sporting goods in the twenty-first century are highly streamlined and made with lightweight, but durable, metals and plastics. Developments in materials manufacturing made these sleek, 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.

Like just about every business in the United States, the increased use of the Internet impacted the sporting goods industry at the end of the first decade of the 2000s and the early 2010s. Every major sporting goods store sold their products online as well as on-site, and, according to NSGA, the percentage of total revenues in the sports equipment industry that came from online sales more than doubled between 2002 and 2010, rising from 4.6 percent to 12.5 percent. Sports Authority, for example, reported estimated Internet sales of $57 million for 2009. Edward Stack of Dick's Sporting Goods acknowledged that firm's commitment to an Internet presence in 2011, saying "Our goal is to provide a high-quality, seamless shopping experience for our customers across all channels" and noting that the firm expected to continue the "significant growth of our e-commerce business" begun in the previous decade.

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