(This story was updated on 9/26/2023.)
Sunlight Sports Principal Wes Allen doesn’t see a lot of bright spots for outdoor retailers at the moment.
“2023 hasn’t been a good year,” he said. “People are sitting on a tremendous amount of inventory. And their inventory is going to age poorly for many reasons.”
One glimmer of good news though – consumer spending has held up despite the doom-and gloom forecasts, he said. Not enough to solve all the inventory problems in the industry, but people are still spending money.
The Daily spoke with Allen about all that and more including industry trends, how business is going at the store, and the few brands showing promising returns.
Located in Cody, Wyoming, the eastern gateway to Yellowstone National Park, Sunlight Sports is an independent specialty outdoor retailer founded in 1971, offering outdoor equipment and apparel.
Aside from the inventory overhang, Allen flagged the looming PFAS (per- and polyfluoroalkyl substances) regulations as another major obstacle facing the industry.
According to Allen, a lot of the outdoor products being made right now for sale in 2024 are going to sit on shelves and languish before going through the discounting cycles during the holidays next year
Then, if the apparel products are still on the shelves in 2025, they may not even be salable in several states including California, New York, Maine, and Washington because of PFAS restrictions.
On top of that, Allen pinpointed the ever-changing MAP (minimum advertised price) policy statements his store receives as another indicator of industry struggles.
“Everybody changes their MAPs in-season now,” he said. “I can’t even tell you how many MAP update emails I’ve received cumulatively from my brands. It’s got to be in the hundreds. Because nobody can sell anything, so they’re changing the pricing policy on all products.”
He expects to see MAP policies discounting products for Black Friday and Holiday, and likely into 2024.
“But I guarantee they should have just saved the paper and the toner ink from the MAP policies they’re going to hand us during our buyer appointments (in November),” Allen said. “Because 95% of them are going to change and put a bunch more stuff on sale by the time we get to next fall.”
Outdoor Industry Needs to Make Less Stuff
With all of that in mind, Allen characterizes outdoor merchandise as a “rapidly depreciating asset.” He said he’ll commit to spending $50 for a product that might be worth $100. But by the fall of 2024 he expects there’s going to be a lot of $50 product that will only be worth $35.
To solve the problem, Allen said the industry needs to stop building so much merchandise. He admits that’s easier said than done, but to him the issue isn’t lack of demand.
“Despite what many of us feared over the last three years, the economy is actually holding up remarkably well,” he added. “Consumer spending has been strong.”
During the pandemic, however, brands over-manufactured their products and told retailers to order more than the previous year to keep up with demand and to help mitigate potential delivery and supply chain issues, according to Allen.
“All that product delivered,” he said. “’The supply overwhelmed the demand. We’re in a cycle where people have made too much product so they have to mark it down to move it, and because they’ve marked it down, they have to sell more to hit their budget.”
That cycle has resulted in the commodification of outdoor products to the point that the industry needs to sell a larger volume at a thinner margin, according to Allen.
“The commodity situation that we find ourselves in right now is not sustainable,” he added.
Sunlight Sports Business Update
Business at Sunlight Sports this year is in a similar rhythm to that of 2019, Allen said. While the store has had a stronger summer than 2019, that year is the closest in comparison in terms of supply and demand.
As for the customer demographic, Allen sees stickiness with the consumers who first started participating in outdoor activities during the past two or three years.
“We did retain some of the people who really found themselves during the pandemic,” he said.
The other demographic he’s tracking are the outdoor consumers who were already serious participants and went “all in” on getting outside and going to national parks during the pandemic. They already had the gear and the knowledge.
“They found themselves going, ‘Well, I can’t go anywhere else,’” Allen said. “’I’m going to hit this pretty hard.’”
Those customers were updating their gear, including buying $5,000 bikes, according to Allen. Many of them came to Yellowstone and the Teton Mountains.
“Those already entrenched outdoor consumers, they spent three years hitting (the outdoors) pretty hard,” Allen said.
But those customers aren’t participating as much this year, from Allen’s perspective. They’re traveling to Europe or elsewhere. To make up for that lost business, it’s the customers that began participating in the outdoors for the first time in recent years that have stuck around.
“It’s a much different group of people in national parks than it was over the last couple of years,” Allen said. “The traditional outdoor consumer over-indexed for three years, and now they’re somewhere else.”
Hardgoods Still Soft, Apparel Strong
Sunlight customers aren’t buying hardgoods like bikes, tents, and sleeping pads because many of them upgraded those items in recent years. Allen doesn’t expect to see a return to high sales in that category for a while.
“That ride for the moment is over,” he said. “Those things got purchased.”
Similar to what others have said, Sunlight Sports also saw a drop-off in sales for backcountry touring gear.
On the other hand, apparel sales have been “surprisingly strong,” Allen said, even if it’s at a discount. Sportswear, for one, including technical T-shirts and pants, has been doing well.
“Given the promotional environment that exists in the industry right now, we’re still selling clothing,” he added. “But there are not many full-price sales to be had in the upper end of the price spectrum.”
Rain jackets and down coats, for example, have been hit hard by oversupply and weak demand.
Sunlight Sports has also benefited some from the return to travel.
“Everybody’s in Italy,” Allen said. “The dedicated travel gear, like luggage and duffels and travel accessories, is selling well.”
That said, the travel category isn’t a big enough piece in his product mix to make up for the tents and sleeping bags he’s sitting on.
He attributes that to new customers in the outdoor market being interested in shorter-duration activities like day hiking and running.
Sunlight has a strong relationship with the local podiatrist who recommends Hoka and Altra shoes to patients.
They’ve also seen a brisk uptake with outdoor apparel brand Toad and Co., which Allen said has controlled its distribution in the last couple of years.
“They seem to be building the right amount of product to fulfill the market desire,” he added.
In camping, Sunlight has had success with higher-end gear from Japanese brand Snow Peak.
Rest of the Year
Allen is tracking the weather prediction that the United States is in for an El Nino year, which means those states in the northern half of the country should expect a drier and warmer winter than average.
“That really cuts demand,” he said. “Then people have to go promotional, and it leads to a spiral of everything being promotional.”
However, the bottom half of the country may still have a good year.
“The southern part of the country, the ski shops in southern Colorado, I bet they have an awesome, awesome experience,” Allen said. “We are not going to have that here in Wyoming.”
Bart Schaneman can be reached at email@example.com.