What’s a Sporting Goods Store Worth?

Views: 30 Comments: 0 0 Post Date: November 10, 2020

SPORTS DO NOT BUILD CHARACTER. THEY REVEAL IT. 

SIMILARLY, APPRAISERS DO NOT ADD VALUE, WE UNVEIL IT. 

 

Sporting goods stores are businesses that sell athletic apparel, athletic footwear, sports equipment, and related rentals and service. They could cater to men, women, and children. There are over 41,000 brick-and-mortar sporting good stores in the US, collecting $45 billion in annual revenue, keeping over 250,000 people employed.

There are FOUR TRENDS reshaping this industry as we speak –

  1. Athleisure – all age groups now like to appear fit and healthy. It’s important to ‘look the part,’ and athletic leisurewear doesn’t hurt. Brands like Athletica, Lulu Lemon, Under Armour etc. attract high margin customers.
  2. Personalization – laser body scans for precise fits, swing analyzers for golf enthusiasts, and branding/logos help attract higher budget and bulk purchase customers.
  3. Sustainability – water-soluble golf balls, water-based adhesives, biodegradable fabrics, and other eco-friendly brands and materials are changing the evolution of this industry.
  4. Online Competition – price shopping, size availability are two reasons why people prefer to shop online. Otherwise, most sports equipment being ‘high touch’, is best purchased at a brick and mortar outlet.

 

RULE OF THUMB – 25-30% of annual revenue, plus the cost of in-hand inventory. The trick is to maintain your margins between 25-45%, keeping cost of lease within 5%, and over three times inventory turnover annually.

 

The trick to this business is to continuously selling bigger and better to existing customers. If you have strong community relations, the customers will come in for essentials, but they will return for their growing families and sizes, and evolving interests.

One tactic a local store uses is to have a wall of ‘first timers.’  Adults and siblings can showcase the picture of their first equipments purchases, making them emotionally attached to the establishment.

As they say, people don’t buy for logic; they buy for emotions, stories and magic.

Bharat Kanodia – Founder and Chief Appraiser

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