The sportswear industry is a developing market, which is expected to move from $170.94 billion in 2021 to $267.61 billion in the next 6 years, showing significant growth (Fortune Business Insights, 2021). The increasing focus of health conscious customers on physical activity has further boosted the industry growth. The following section covers Porter’s five forces analysis of the sportswear industry, outlining the challenges, barriers and favorable circumstances that work together to form the industry dynamics.
Threat of New Entrants
The sportswear industry largely constitutes of few big organizations, with small scale companies also operating in the market. The industry composition shows that the mainstream sportswear is not favorable for new entrants, unless the organizations have massive financial backup. Innovation in sportswear industry is an avenue that is being used by the new organizations to enter into the market. Some new entrants have brought forward innovative ideas fueled by technology and creative designing to create unique sportswear products.
For instance, Inpulse developed riding shorts through the use of AI technology, bringing comfort and utility to the buyers as the sportswear provides the users feedback about their physical activity (Fortune Business Insights, 2021). Overall, the sportswear industry has low threat of new entrants due to large capital requirements, presence of some pre-existing major players and market dominance by these few large scale firms on the industry.
Threat of Substitute Products
Substitute products pose a higher threat to the players in an industry when the consumers can switch from one brand to another without facing any notable price change or difference in terms of the quality and product features. There are no direct substitute products that can be considered a replacement for sportswear and customers have to opt for the specific type of sportswear that is suitable for the specific physical activity (West, Ford & Ibrahim, 2015). One way to view substitute products is considering the different sportswear brands that offer similar products to the market.
The different brands that are offering sportswear can serve as a substitute for each other, as customers can switch from one brand to another. The customers can make a choice from varying price ranges, indicating the availability of multiple substitutes. In addition, the counterfeit products positioned at lower price also threaten the market share of the original manufacturers who can lose customers who are willing to compromise over quality and prefer low prices. However, loyal customers and individuals seeking quality would not consider the counterfeit manufacturers. It can be seen that sportswear industry has moderate threat of substitute products.
Bargaining Power of Buyers
The bargaining power of buyers stems out of the market size, availability of manufacturers, and switching cost. The buyers of the sportswear industry hold low power. When shifting from one leading brand to another, customers may receive the similar quality and price, thus switching doesn’t bring a significant change in the product the customers received.
As far the counterfeit products and low prices items are concerned, the quality declines which reduces the utility gained by the customers. In addition, the established brand image makes it difficult for the customers to choose another brand over their preferred one. These factors contribute to the low bargaining power of buyers as they have to choose from the available brands and can’t readily switch from one company to another.
Bargaining Power of Suppliers
The supplier landscape of the sportswear industry is favorable for sportswear companies as there is low level of differentiation and there are many suppliers in the industry. Majority of the manufacturing operations are being outsourced to under developed countries, where suppliers strive to get contract with big brand names. The suppliers operating in the under developed countries have low bargaining power as there are numerous manufacturing options that the major sportswear companies can consult. In case if few suppliers try to establish a higher price for the supply of raw materials and manufactured items, the companies can easily change their supplier due to the large pool of suppliers available.
The large brand names such as Puma, Adidas and Nike hold a substantial degree of power and the suppliers have limited bargaining power. Losing contract from these large scale firms is seen as a threat for the business by the suppliers, sustaining the power imbalance where the sportswear brands are at an advantage (Nooh, 2022).
Competitive Rivalry
Sportswear industry is marked by very high level of competitive rivalry, with stiff competition between the top few brands operating in the market. These brands have covered the global sportswear industry, making their presence across the globe, thus the competition is at an international level. The top brands in the sportswear industry include Puma, Nike, Adidas and Under Armor. Nike has around 28% market share of the international footwear market and higher revenue than its rivals, suggesting the competition that other companies have to face.
In order to compete and stand out among the rivals, the companies have to make substantial investment in R&D and marketing, along with the sponsorship of sporting events to retain the top position in the market. This intense competition makes it difficult for the start ups to survive in the market as the well established companies that have financial backup can create new entrant’s survival challenging (Nooh, 2022). The leading companies are competing on the basis of their brand image, product features and quality.
Conclusion
The sportswear industry is although developing and showing promising growth in the coming years, the new entrants are not likely to benefit from these industry trends. The industry is unattractive for the new entrants as the established companies would retaliate and creates obstacles in market entry of the start ups. The moderate threat of substitute threat is another factor that makes the industry unfavorable, along with the intense competitive rivalry which would make it difficult for the new entrants to flourish. In addition, the top players in the industry engage in cut throat competition through the marketing campaigns and sponsorships in an effort to maintain their leading position.
References
Fortune Business Insights (2021). Market Research Report: Sportswear Market. Retrieved from https://www.fortunebusinessinsights.com/sportswear-market-102571
Nooh, M. N. (2022). Designing A Sportswear Strategic Marketing Plan: A Data Analytics Approach. ASEAN Entrepreneurship Journal (AEJ).
West, D. C., Ford, J. B., & Ibrahim, E. (2015). Strategic marketing: creating competitive advantage. Oxford University Press, USA.