Here's an analysis on wholesale sporting goods, an industry with intense competitive rivalry, done using Porter's five forces framework. Read on for more.

1. Post Link: Wholesale Sporting Goods: An Industry Analysis
Wholesale Sporting Goods: An Industry Analysis
I don’t know about you, but I'm a sucker for a good framework. I love discovering structured
approaches to evaluate a business, reframe a problem, or reduce the complexity of a nuanced
world. My all-time favorite business thought exercise (if I had to pick) is Porter's five forces, a
helpful way to think about the level of competitive intensity within an industry. In this series of
posts I'll use the five forces as a starting point to discuss some key evolutions in different
segments of the wholesale industry.
It's definitely a worthwhile exercise to think critically about the competitive forces in
your industry and the levers you can pull to gain an advantage.
Let's start off with an segment near and dear to my heart: sporting goods wholesale (equipment
for camping, hunting and fishing, exercise, golf, team sports, etc.). We'll go through the Porter
framework and look at each type of competitive force as a way to illustrate the market
landscape today.
Wholesale Sporting Goods: Porter's Five Forces Analysis

2. 1. Customer Power (retailers): Strong force
In this case, the customer is the sporting goods retailer. Over the past decade, the growth of
brick and mortar sporting retail outlets has been flat as more consumers move online. This
weak growth would lead us to believe that their power is weak. However, today’s retailers have
increasingly more options for online wholesale transactions. These alternatives can give the
retailer leverage over their suppliers, making each distributor’s eCommerce strategy critical to
future competitive advantage.
2. Supplier Power (manufacturers): Strong force
Manufacturers are implementing solutions, systems, and procedures that allow them to sell
directly to the retailer (wholesale bypass). This can give the manufacturer leverage over their
distribution network, who will be incentivized to provide value-add services and great customer
service to both sides of their marketplace in order to differentiate. That information in isolation
points to strong supplier power. However, while more manufacturers are attempting wholesale
bypass, they have had a hard time competing with the distributors who offer a broad range of
merchandise to the retailers.
3. Threat of Entry: Weak force
The cost of purchasing, storing, and distributing inventory, especially at scale, remains a
sustainable barrier to entry. This is proven out by the data which shows consolidation rather
than expansion with 17,002 wholesale sporting goods establishments in 2004 and 15,762 in
2013 (IBISWorld Industry Report 42391: Sporting Goods Wholesaling in the US).
4. Substitute Products: Weak force
If the threat from substitute products were especially high, we would expect to see consistently
decreasing revenue over time. What we see instead is that the annual growth is tightly tied to
overall consumer spending, and is not consistently decreasing overall. During the recent
recession, and resulting dip in consumer spending, the industry growth rates dipped negative,
but these numbers rebounded since 2010 with the industry-wide revenue projected to grow
4.0% in 2014 (IBIS).
5. Competitive Rivalry: Strong force
Sporting goods distribution is a mature market with moderate growth. To compete, many
distributors are angling to become a retailer’s one-stop-shop for a given category and this has
lead to mergers that intend to provide a more holistic assortment. Additionally, the introduction
of online platforms has been evolving the relationship between the manufacturer, distributor,
and retailer allowing retailers more purchasing choices online and enabling manufacturers to
more easily sell direct. To stay competitive, wholesalers will have to find ways to secure
exclusive distribution deals, efficiently manage inventory, secure a broad and compelling
assortment, and provide excellent customer service to both retailers and manufacturers.
The strongest forces influencing the level of competition in the sporting goods wholesale

3. industry are retailers’ increased purchasing options, manufacturers’ ease of digital distribution,
and an overall intense competitive rivalry between firms. The wholesaler’s differentiation and
sustainable competitive advantage will arise from a dedication to operational efficiencies,
assortment quality and breadth, and value-added customer service.
Are you in sporting goods, or have you done a similar analysis of your industry using Porter's
five forces or another framework? We'd love to hear your feedback in the comments below.
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