Sporting chance

How has the recession affected the sports industry? John Bensalhia investigates

Nowhere to run. Nowhere to hide. The country is in the grip of a recession, and don’t we know about it.

Each day, there’s always some snippet of doom and gloom about the recession from a media industry that seems hell-bent on depressing Britain into a gloomy haze. Ever since September 2007 - arguably the date when the whole mess started - there have been non-stop reports of job losses, mortgage defaults and financial crises, not to mention the closure of several high-profile shopping chains and brands.

BLAME
So who’s to blame for this crisis? There are a number of obvious culprits, including the greedy bankers, a government that’s failing to keep order over proceedings, but also the media for adding fuel to the fire. Unfortunately, while there’s some glimmer of truth in the media stories, endless speculation about future events. which even Mystic Meg couldn’t predict, causes the majority of the public to panic. As a result, that semblance of truth is blown out of proportion, and is turned into an all-powerful statement that no one can deny.

And, as a result, the sports industry has been affected. Taking sport as a whole first, this sector has been torn in two by the recession. On the one hand, there are sports that are arguably immune from the effects of the recession. Sports such as football, rugby, cricket, golf and athletics still remain as popular as ever. Football still creates an interest, and with a World Cup looming in 2010, that interest is unlikely to wane.

Similarly, athletics will still prove to be popular, given the widespread media coverage of the 2012 Olympic Games. Although, that said, the Games have been blighted by the recession, with budget cuts announced for the so-called lesser sports, including water polo, shooting and weightlifting.

Professor Simon Chadwick, founder and director of Coventry University’s Centre for the International Business of Sport, has investigated the sports that were regarded as safe from the recession and those that were vulnerable. The research was collated from reports of the changing economic climate, ticket sales and consumer spending. Professor Chadwick commented: “The sports suffering the most from the downturn receive little mass-media coverage, and therefore, have limited appeal to sponsors and other commercial partners.”

While this point cannot be ignored, given the ubiquitous coverage of football and rugby, not to mention the endless promotion of the 2012 Olympics, there’s an interesting counterpoint to this claim.
Barry Hearn, sports promoter and chairman of the Professional Darts Corporation, claimed that darts was recession-proof. Hearn has a sports portfolio that also includes snooker, ten-pin bowling, fishing, pool and poker. In particular, Hearn argued that darts shops were doing good business. This was due to the entertainment factor. Speaking in ‘The Independent’ newspaper, Hearn said that: “People just want to have a great night out that’s not too expensive, a bit of rock ‘n’ roll. This is particularly true of darts, which seems to be the one sport that’s recession proof.”

Hearn also presented the argument that football was more of a costly proposition, since the game insists on paying high profile players huge salaries. While football receives huge sponsorship deals, is it in danger of paying certain footballers too much money - so much, in fact, that it may be in danger from the recession? Certainly, Premiership football grounds have slashed corporate hospitality budgets, a trend that’s been par for the course for the last year or so, not only in the ‘Beautiful Game’, but also for practically all sports. The Rugby Football Union lost £2million of corporate hospitality business for games. Wimbledon has also suffered. A spokesperson for the BBC Trust commented that: “We have decided that the right thing for us to do as a publicly funded organisation is not to offer any corporate hospitality at Wimbledon this year.”

TICKET SALES
However, even general ticket sales are feeling the pinch. In late January 2009, 3,000 tickets were still available for an England vs Italy Six Nations game. Meanwhile, Birmingham City chairman, David Gold, warned that the recession was affecting football ticket sales. “There has been a noticeable drop in attendances in the last couple of seasons due to the increasing price of match tickets and the continued draw of television, and now a curveball has been thrown at us in the form of the recession,” he said. “Every club outside the Premier League is hurting as a result. As the recession gets worse, so will our attendances and this is a trend we must reverse. The sight of so many empty seats at grounds across the Football League gives the impression that our product is pathetic and dying.” Gold added that a way to reverse this trend would be to gradually reduce ticket prices by 50 per cent over the next couple of years.

As for sports shops, the reports are similarly conflicting. On the one hand, JD Sports published uniformly positive figures in spring 2009. The sportswear retailer reported that like-for-like sales for the 52 weeks to January 31, 2009 grew by 3.9 per cent. The company also reported that it had grown its market share, and via acquisition, broadened its range from only sportswear products. The company’s executive chairman Peter Cowgill made a good point about the figures: “Our typical customer is 15 to 30 years old. They are brand savvy and they are keen to keep up with the trends.” Cowgill reasoned that this was a key market, since the people in this age bracket are more immune to the current economic climate than others.

On the other hand, JJB Sports has not presented such a happy picture. More than 400 workers in its lifestyle division were made redundant after its OSC fashion retailer and Qube footwear stores went into administration. The company reported an adjusted loss in 2008, before tax, of £9.7million for the 26 weeks to July 27, as sales fell by 5.6 per cent to £344.7million. Similarly, Sports World did not perform so well in 2008. The parent company Sports Direct said that: “Trading conditions continued to be the hardest the group has ever faced in its history.”

SURVIVING THE STORM
So how can sports shops ride out the recessionary storm? Selling products at bargain prices can have both advantages and drawbacks. While more units may be sold, unfortunately this will have the adverse side effect of dropping profit margins. Whether or not enough customers take advantage of bargain prices to bring in enough profit is a moot point, but the risk is still present.

Instead, shops would do well to make the most of what they have. They should strive to provide the best customer service. With high quality products on the shelves, this must be matched by equally top quality service. Training should be provided for staff on customer service and also product knowledge, in order to create the best shopping experience possible for customers. If they are happy with the service, they will return, and also make recommendations to friends. Interest in business frequently spreads by word of mouth, so the better the service, the higher the reputation.

With that in mind, effective marketing of a sports shop is one of the best methods of attracting more custom. Calculate a marketing budget that is feasible, and work around this. One of the cheapest methods is to create a website, through which you can advertise your goods and special offers. On that subject, create a special deal for a selected range (rather than blanket slashed prices across all goods) - another good way to attract eager customers without sacrificing your profits. If your budget will allow for it, print leaflets, brochures and posters. Striking advertising deals in magazines and papers also have the potential to create interest.

On top of all this, realise your strengths and limitations. If you do not have the budget, do not enter acquisition deals in the vain hope of broadening your finances in the future. The risk is taking on too much too quickly, and while there is a chance that acquisitions can prove to be effective, in these times, that risk can be too great. Instead, take what you have, work with it, stick to your budget and entice the punters with whatever unique selling point you may have - your products, your staff, your company history - and capitalise on these, not to mention capitalising on any important sporting event, such as the 2012 Olympics or any of the current sporting tournaments of the time.

If you believe the media, the recession is starting to ease out - well, at the time of writing, anyway. The country will ride this recession out, just like the last one in the early 1990s. As a result, the sports industry has a good chance of surviving the storm and prospering in the future - so long as an eye is kept on finances and the most is made of the sector’s various individual merits.

  

Works With: