Board Member Insight
By Mike Wallenfels, Co-President OOA, SVP Global Sales Hydro Flask
The “K” Recovery and Outdoor Industry – What does it mean?
Forecasting revenue and expenses is critical in any business as it impacts the inventory you purchase, cash flow, staffing, and profits for the balance of the year. For Outdoor Industry brands like Hydro Flask, things suddenly became very unpredictable in February of last year with early supply chain disruptions followed by store closures. The Outdoor Recreation Roundtable (ORR) pushed out an industry survey (conducted by Oregon State University) which shows the pandemic impacts hitting last April and May with a majority of industry businesses reporting supply chain disruptions and layoffs. The big question was, when and how will we recover?
Outdoor Industry experts were debating what shape our revenue recovery graph would look like based on their relative level of optimism. Could it be a “V” with a steep drop and equally fast rebound, or a “U” with an extended down period, or as things dragged on a “W” with ups and downs post a second wave, or even a dreaded “L” where the economy doesn’t fully recover.
The “K” recovery model became popular after a blog post by Suzanne Clark, President the US Chamber of Commerce in September. This puts forward that some specific parts of the economy are booming, while others continue to struggle. This concept has now been embraced by the likes of Forbes, Bloomberg, and Fast Company.
How does this apply to brands like Hydro Flask and Outdoor? Well, it is a world of contrasts that seem logical now, but were completely unpredictable 10 months ago when all that early planning started to happen. Finding credible sources of information to help predict results and drive informed decisions is key at times like this…and boy did I dig into information to try and make sense of it all.
The downward and upward contrasts of the Outdoor Industry “K” can be broken down into channels and products that are up and down.
Channels: Not a shocker, but overall retail “store” sales have not recovered with a decline of -10% while eCommerce sales are booming. People are staying home and shopping with declines in store visits contrasted by increased online sales of over 40% through mid December per NPD reporting.
Products: What is interesting here is with reduced travel and closure of gyms, people have discovered the outdoors to exercise and safely recreate in record numbers. In a recent Surf Industry report, overall retail sales have increased +13% this year with products like Surf hardgoods booming at +83% vs Apparel down -5%. Outdoor Industry reporting for October shows Outdoor Sports Equipment sales are booming +23% while Outdoor Apparel sales continue to show declines such as outerwear down as much as -27%.
There are stories of people scrambling to purchase bikes, exercise equipment, and kayaks as fashion or trend apparel and accessories remain on racks with purchase orders cancelled by retailers. Knowing where and how your consumers are shopping is critical to understand. Outdoor Industry retailers and brands like Hydro Flask are needing to adapt in order to move from the downside to the upside of the K recovery.
Which channels and products are booming or declining for you? Lean into the ones that work or find new ones that embrace our new normal and don’t expend capital in areas that won’t return on the investment. Try to understand which of these consumer behaviors are temporary or permanent like gym closures driving purchases of bikes verses trendy apparel. Some of these will be long term like the major shift to online sales or growing participants in outdoor sports like surfing, biking, and running that will drive continued growth of the Outdoor Industry in Oregon.