The second session of the European Outdoor Forum, held in Annecy last month, got a lot of praise from some of the 220 attendees, including many newcomers from countries all over the world. They generally felt that it was more focused on the themes that interest the outdoor industry the most, auguring well for its future editions.

Interesting and detailed updates on the state of the outdoor market in Europe, the U.S. and China – all of them growing but facing increasing uncertainties – were among the highlights of the forum, which was again organized by the Outdoor Sport Valley (OSV), based in Annecy, and by the European Outdoor Group (EOG). The Outdoor Industry Compass was again one of the sponsors.

Mark Held, secretary general of the EOG, used the opportunity to outline some more of the findings of market research carried out by the organization, after giving out the main highlights at the OutDoor show in Friedrichshafen last summer.

As previously reported, this landmark study provided quantitative information for the past three years on 11 product categories and their sales in 19 different European countries. A total of about 100 brands sold by 80 companies provided the breakdown of their wholesale figures, although some market leaders could not be persuaded to take part this time, such as Jack Wolfskin, Décathlon and many Scandinavian companies.

With the help of the Scandinavian Outdoor Group and its members, we at The Compass are going to try to make up for the details on the important Scandinavian outdoor market with an in-depth quantitative and qualitative study whose final version is scheduled to be released at the next OutDoor show in July.

As previously reported, the study conducted by the EOG so far has revealed a European outdoor market worth about €9.7 billion at the retail level in 2010, with shares of 49 percent for apparel, 28 percent for equipment and 23 percent for footwear. It confirmed Germany as the largest market, ahead of the U.K., France, Scandinavia and Switzerland. During the EOF, participants in the study fine-tuned their final estimates by complementing the data at their disposal, which probably cover more than 60 percent of the total market.

After presenting these and other figures, Held wondered aloud whether the European outdoor industry was using a flawed model. He recalled the time when he was working for Berghaus, which employed 600 people at its own manufacturing operations, allowing for short lead times and flexible deliveries. But in the last two decades, most companies have outsourced production to suppliers who are increasingly dictating their own terms, imposing absurdly long lead times and minimum orders that are hard to meet for the many small and medium-sized companies in the outdoor industry.

Held called for companies to reassess the ways in which they do business. He particularly advocated moves to bring production closer to European markets and to work with larger stocks of raw materials. However, he admitted that such moves would come at a cost, and that in some cases they may not be feasible at all, because components and the entire supply chain has moved to Asia.

Other issues highlighted by Held included increasing constraints in terms of legislation. He particularly pointed to French regulations that make it compulsory for companies to include information on CO2 contents on the labels of all their products. This initiative is closely watched by the European Union, which could roll it out in other countries.

Frank Hugelmeyer, president and chief executive of Outdoor Industry Association in the U.S., opened his presentation at the European Outdoor Forum with some significant facts and figures on the outdoor industry in his country. For example:

- Fishing is the activity that commands the highest participation rate of all outdoor sports in the U.S., at 15.1 percent of the adult population.

- A recent study has showed that, once they start a new outdoor activity, eight out of 10 Americans want to try more.

- Although there is still an obesity rate of more than 30 percent in the country, it is now declining for the first time in many years.

As reported by the Outdoor Foundation at about the same time as the EOF, nearly half of all Americans aged 6 and older took part in outdoor recreation last year, equivalent to 137.9 million people (with a much broader definition than in Europe, notably including cycling and snow sports). Participation among children remained flat instead of falling, and the rates increased slightly among adolescents and young adults.

Hugelmeyer showed estimates that the U.S. market for outdoor products was worth about $46 billion at retail level in 2007, based on the OIA's broad definition of the market, but the entire worth of the outdoor sector could be estimated at $289 billion, including services related to outdoor recreation. As Hugelmeyer stressed, this was more than the oil and gas extraction business in the U.S.

The outdoor market has vastly outperformed the U.S. economy since the downturn started in 2008. Sales by specialty retailers increased by 8.5 percent this year until August, driven by footwear, while last year's growth was mostly generated by equipment.

Among the major trends, the demographics of outdoor participants have been changing. To sum it up, there is a group of 75 million active Americans who are mostly white people around the age of 45 and who regard the outdoors as a way to get away from it all. This group is being replaced by a larger group of 100 million people who are now under 24 years old and who are health-conscious, globally oriented, socially responsible, diverse and tech-savvy.

Far from wanting to get away, the members of the new generation are more likely to welcome the availability of Wi-Fi in a remote mountain lodge. They see the internet as a lifestyle and a shared experience that reinforces their communal ties, said Hugelmeyer, indicating that these youngsters – especially women – could act as online ambassadors for some outdoor brands.

Young Americans are seeking transformational experiences and experiential hobbies. They go outdoors to do something meaningful in an uncertain environment. They tend to practice more than one outdoor sport but for a shorter duration. Men are turning toward more rugged and performance-oriented adventure, while women are more into ecologically friendly and cultural experiences.

Hugelmeyer shared a feeling that the outdoor market should take advantage of the deep personal drive felt by an increasing number of Americans for meaningful experiences, stimulating self-respect and hope. However, he pointed out that some of the latest developments in the American outdoor landscape, particularly the political gridlock, represent a threat. He mentioned among others the speculative development of public lands and cutbacks in recreation funding, leading to the closure of some public parks.

David Udberg, president of the EOG, noted at the beginning of the conference that a challenging set of circumstances is surrounding the outdoor market in Europe and the U.S., including government debt problems and inflation in raw material costs. On the other hand, he pointed out, China and other emerging markets are growing very fast.

Roger Zeng, president and founder of the China Outdoor Retailer Association (Cora), noted, however, that the growth of China's economy is cooling down while it is shifting away from exports to consumption. In the last two-three years exports have decreased as a percentage of GDP to just over 26 percent, while consumer spending has risen to reach the equivalent of €1.5 trillion in 2010. Interest rates have come down and real estate prices are leveling out.

However, he said, government policies and consumer tastes are changing quickly in China. He also pointed out that knockoffs continue to thrive. Here are some of the key trends in the market:

1. The middle class is growing and is expected to rise from 125 million people in 2010 to 260 million by 2020. Their average age is 39 years. They are more informed and more skeptical about the information they receive.

2. There are 485 million internet users, out of whom 318 million use mobile internet, the largest in the world. Micro blog users (home versions of Twitter like Sina) are 195 million strong, up by 208 percent from one year ago, and they share information about products and brands.

3. The savings rate has been historically high at 30 percent of household income, but the new Labor Law that went into effect two years ago is providing new social benefits that are pushing the savings rate down. As a result, more money is becoming available for discretionary spending.

4. Outdoor products are not just functional items, but they are often seen as a lifestyle statement showing that the user belongs to the upper class, where spending on luxury goods is high and growing.

In the first half of this year, average wages in Sichuan province rose by 17.3 percent, but disposable income went up by 13 percent. However, farm income has gone up by 20.1 percent, leading an estimated 20 million people to stay at home in their smaller hometowns rather than returning to work in the coastal areas after Chinese New Year.

5. Between 65 and 70 percent of outdoor sales are taking place in the shopping malls, where traffic is high and there are many first-time buyers, but the malls take a cut of at least 25 percent of sales as a commission and 50 percent of sales go to cover various overhead costs.

6. Outdoor is seen as an upgrade from traditional sports fashion items such as those of Adidas or Nike. This is partly because the apparel and footwear of brands such as The North Face, Ozark, Columbia and Toread cost more. As a result, softgoods are growing faster than hardgoods and the lifestyle segment is outpacing the growth of the core outdoor market. The upper-middle price bracket is growing fastest, but other segments may become more fashionable in the future.

7. The main motivation for buying a new backpack is the introduction of a new style.

8. Taobao.com is the major online retail portal in China, but it is not as selective in terms of products offered as Buy360. The internet still accounts for 10 percent of the overall retail consumption. Websites are used more as a source of information rather than for transactions.

9.Much of the information leading to a purchase comes from outdoor community sites for 50 percent of consumers. Recommendations by friends and word of mouth are the key influences for 58 percent of the population, against 15 percent for traditional advertising.

10. The core outdoor market is growing slowly. Barriers are high at national and local parks (entrance fees are between $3 and $5 a day, which is a lot for the ordinary Chinese household).

11. Aside from companies such as Petzl, few brands cultivate the outdoor sports community. They are more focused on marketing products.

12. Top Sports, a subsidiary of Belle International, is going into outdoor products.

13. A total of 15 outdoor or outdoor-related shows are now held in China each year, creating a lot of competition and confusion. Ispo China, which started in 2005 and is changing its name to Ispo Beijing, is still the leader, especially in terms of the quality of the visitors. Asia Outdoor, the summer show in Nanjing, has been improving.

14. The market is getting more segmented: status seekers, lifestyle, fans of ultra-light product, “green” consumers. More niches are shaping up.

15. The “made in” message can be very effective with consumers.

16. Chinese consumers can be very brand-conscious: They respond to a compelling brand message and they will stick to the brand if they are satisfied with their first purchases.

17. Outdoor activities come ahead of watching TV or video games.

18. New infrastructures are being created and some new events are being organized, such as a trail-running contest recently held in a former coal mining town that attracted 15,000 participants.

As reported before, Cora estimates that the outdoor sports market grew by more than 30.2 percent last year, double the 15.6 percent growth of the general sporting goods market, reaching just under €1 billion.

In the next issue we will report more on what was discussed in Annecy – especially on new perspectives for global specialty retailing.