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Industry Insider: An In Depth Analysis Of This Winter’s Sales Forecast

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November 18 2008
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Industry Insider is a new Transworld Business column featuring the views and opinions of, you guessed it, members of the action sports industry. If you’d like to share your thoughts, opinions, initiatives, or other industry related tidbits, drop us a line at business@transworld.net

By: Kelly Davis: Snowsports Industries America: Director of Research

This year, analysis of various weather variables, economic conditions, and sales and participation trends indicate that participation will remain steady at 15 million. Skier/Rider visits to resorts will level off in the West where there will be less snow, particularly in the Sierras, but will increase in the Eastern and Mid-Atlantic regions where there will be higher than average snowfall. The Rocky Mountain range will receive about average snowfall during the 2008.09 season and participation and sales will fall slightly from last year’s record season. Equipment sales will be flat or down slightly overall but apparel and accessories sales will continue to increase as snow impacts major urban areas across the East Coast and Mid-western states.

Source: National Climate Data Center, NOAA

In some regions such as the Northeast and mid-Atlantic regions, a neutral state between El Niño and La Niña brings the highest levels of snowfall over the course of winter. The National Oceanographic and Atmospheric Administration are predicting “neutral to La Niña” conditions for the 2008.09 snow sports season. Note the increased snowfall on the top map representing neutral conditions, the same conditions we face for the 2008.09 season.

Source: NSAA Kottke National End of Season Survey

The relationship between participation and sales is significant and can be clearly seen by comparing the two visually. Over the course of a season when participation, particularly in terms of skier visits is high, then sales trend up. In our analysis, snowfall clearly plays the most significant role in participation, and sales generally fall in line with participation trends over the course of the season.

All Snow Sports Products
Dollar Sales in Specialty Shops

Source: SIA Retail Audit, Specialty Sales 200.01 to 2007.08

Compare Sales and Skier/Rider Visits to the Water Temperature chart below. Note that sales and participation downturns correlate with El Nino seasons in which the water in the equatorial pacific was warmer than average producing below average snowfall across the U.S. Note the downturns in sales and participation in 2003/04, and 2006/07 correspond with El Nino conditions, and the upsurges in sales 2005/06 and 2007/08 correspond with La Nina conditions.

Source: National Climate Data Center, Running 3-Month Mean ONI values, calculated with respect to the 1971-2000 base period.
Note: The downturn in sales and participation for the 2001/02 may be attributed in large measure to after effects of the 9/11 terrorist attack on the U.S

The typical snow sports participant is in their early thirties, has at least a bachelor’s degree, and has household income above $100K. The median income for the average American is about $50,000, and unemployment rates for persons that do not have a college education is far higher than for those with a degree. In fact, the current unemployment rate for college educated workers (3.1%) is smaller than 1/2 of the overall rate (6.5%). The incomes of persons in the snow sports demographic as described above are not significantly affected by economic downturns as illustrated below. The typical snow sports participant would be found in the highest quintile (top 20%) of household income. Even during periods of economic hardship and recession the top 20% of earners grow their income. In the economic downturn we currently face, wealth is diminishing and investments have suffered, but income has actually increased for snow sports participants. Although spending across the economy is down, the day to day discretionary income of snow sports participants has not diminished. Sales and participation are dependent on weather more than a growing economy for spending, and the average participant still has discretionary income to spend despite weak economic conditions.