The overall theme for the outdoor industry this year was grappling with the post-pandemic downturn.
Companies that were coming off a few years of record revenue numbers found themselves competing for spending dollars as the world opened back up and consumers struggled with rising inflation.
On top of that, a supply chain that had been constrained by pandemic-related problems finally opened the floodgates, and retailers experienced a glut of product.
To help make sense of all of this, The Daily spoke with outdoor industry analysts about the major themes that played out in 2023 and how they expect next year to develop.
Year of Reckoning
“A lot of people were planning on the COVID-19 boom continuing and that clearly didn’t happen. This was the year of the reckoning,” said Nathan Pund, managing director at Houlihan Lokey, a Los Angeles-based multinational independent investment bank and financial services company. Pund leads the company’s outdoor and active lifestyle banking practice as part of its consumer food and retail group.
“This has been a very disappointing year for a lot of people,” he added. “The inventory overhang is very strong, and retailers are being very cautious with their orders.”
To add to the difficult macroeconomic challenges, the weather also didn’t cooperate thanks to a mild fall, which typically is the key buying season for outerwear and footwear.
In the past, if a region was hit by heavy snow in the fall, people would go out and buy new jackets and boots. That wasn’t the case this year.
“It was a challenging year for the outdoor industry,” said veteran outdoor industry analyst Matt Powell. “It was not a good outerwear year, nor was it a good boot year, and those are the largest categories.”
Powell pointed out that outerwear sales make up approximately half of the apparel business, and apparel is roughly half of the overall outdoor business.
“If outerwear isn’t good, it’s a terrible season,” he added.
Participation Still on the Rise
Despite a healthy dose of skepticism, Kelly Davis, director of research at the Outdoor Industry Association, said she’s been surprised to see participation in outdoor activities continue to increase post-pandemic.
The industry has added 14.5 million total participants since COVID-19 first hit. Another interesting part of that is the mix of participants is becoming more diverse.
“When I look at their demographics, it does not look like the outdoor participant base that we’ve known for many, many decades,” she said.
One key difference: The new group of participants is more casual, less “core.” OIA defines core participants as those who participate in outdoor activities 51 times a year or more.
“It’s so much more than casual, it’s much more experiential,” Davis said. “They’re going out intentionally looking for fitness, looking to cope with mental health issues. It’s not necessarily about hugging a cliff.”
More people were out walking and taking short hikes. That translates to participants buying less “technical” gear. Instead of paying $200 for a pair of hiking boots to go on a long backpacking trip, they’ll just hike in their running shoes, Davis said. That also doesn’t necessarily mean people are buying less. The gear is just less specialized.
“That changes the market a little bit,” Davis added. “Instead of always thinking everybody wants the best stuff, maybe not. Maybe there’s a balance.”
Powell characterizes the sales promotions he’s seen this year as “quite aggressive.”
On the equipment side, big-ticket items such as treadmills, bicycles, and kayaks are not selling right now because a lot of people bought during the pandemic and don’t need to replace them yet.
Others bought equipment like paddleboards to try it out and now have decided they don’t like the sport or aren’t using it as often as they thought they would, Powell said.
That’s led to good deals on the secondary market because people bought so much equipment during the pandemic and have decided to sell some of it, he added.
Innovation as a Solution
In the case of hardgoods, Powell suggested that in order for companies to get people to keep buying, they need to offer innovative products that “perform better than the product I have in my garage right now.”
During the pandemic, many companies did the opposite, shutting down their research and development budgets because there was so much uncertainty.
Companies also weren’t forced to innovate because the “gravy train” of stimulus money kept pouring in, Powell said. Plus, it takes time, usually years, to bring a new product to market.
“There’s not really a new product out there,” Powell said. “Without that, there’s no incentive (to buy). The only incentive becomes price.”
But that’s a “dangerous game,” he added, because companies can price themselves out of the market.
Davis agreed, saying the industry could use some new ideas.
“I haven’t seen anything that’s blown me away this year,” she added.
Davis added that she’s a believer in the market economy, and that truly innovative ideas will trickle up in the marketplace.
“Consumers are looking for new stuff,” she said. “They’re looking for new ideas.”
Bright Spots Among Brands
Accessories have performed well despite the broader industry challenges, particularly the drinkware business driven by the shift from water bottles to tumblers.
Case in point: Stanley’s Adventure Quencher tumbler that got famous on TikTok last year and sold well this year.
“I was shocked when all of a sudden Stanley is like the 800-pound gorilla,” Davis said. “How did they do that?”
Davis also flagged the rise of footwear brands Altra Running, On Running, and Hoka, partly because those casual consumers she mentioned often purchase footwear to participate in their activities.
Pund highlighted ski brand Rossignol’s Essential, which is a ski that can be recycled at the company’s factory.
“I thought that was innovative and really in touch in terms of the environmental impact,” he said.
One trend for 2024 Powell pinpointed was smaller brands that are offering more innovative and interesting products than larger brands.
The main problem for those littler companies: They don’t have the same leverage for distribution and sales as a bigger company.
“But there are brands that are doing well here,” Powell said. “That’s an indicator for the market that newness and innovation are really critical.”
One company Powell called out was Salomon, which is making footwear that’s blurring the line between function and fashion.
“Retailers I talk to seem to be very optimistic that this hot brand, which is relatively small, can scale pretty quickly,” he said.
Trends for 2024
Looking ahead, Powell expects consumers who spent at the early stages of the pandemic might need to update or replace their products.
“Product that was bought in 2020 is going to start looking a little dog-eared,” he said. “Might be time for a new jacket or a new boot.”
While this isn’t the first time the outdoor industry has been hurt by a lack of cold and snowy weather, long-term weather patterns and climate change impacts suggest seasons will continue to be warmer, which isn’t good for significant parts of the outdoor business.
Davis flagged the increase in extreme weather and how that will impact the industry in the future. She mentioned how wildfires have closed major trails and affected outdoor recreation in Canada and elsewhere.
Another looming obstacle for the industry is the coming regulations around PFAS, which Davis flagged as a major shift.
Davis also expects participation to continue to grow, if not in a huge way, at least at a steady level.
Pund expects to see more consolidation in the market, though there might not be as many mergers and acquisitions as people expect.
“A lot of the strategic buyers aren’t in shape to really go do deals,” he said. “They’re very mindful of their own operations and having to work through their own challenges.”
Private equity has plenty of money to invest, he added, but is hesitant to make plays because of the volatility in the market, consumer behavior, and the overall interest rate environment.
“There will be deals. There will be consolidation,” Pund said. “But I think you’re going to see a lot of businesses that are in financial dire straits get acquired in different ways.”
Pund also predicts more bankruptcies and distressed businesses. “I’d be on the lookout for that,” he said.
Bart Schaneman can be reached at firstname.lastname@example.org.