Outdoor gear industry facing challenges after ‘insane’ growth
DENVER
Across 30 years in downtown Golden, Bent Gate Mountaineering has withstood three economic downturns including the Great Recession of 2008 and the pandemic recession of 2020.
The store attracts customers ranging from serious mountaineers to tourists who buy T-shirts and rain ponchos for shows at Red Rocks Amphitheatre, but it’s facing increasing competition in the outdoor retail world.
A banner that hangs out front hints at the market pressures confronting it and other independent outdoor retail stores: “HUGE HUGE HUGE SALE” it says in big letters and vibrant colors.
That sign, a semi-permanent fixture, is an example of fallout from turbulence the outdoor industry experienced during the pandemic and its aftermath. Following boom years in 2021 and 2022, outdoor retail sales saw a 3% decline last year to $27.5 billion, and independent specialty shops got hit hardest. Half of them endured doubledigit declines, according to the Outdoor Industry Association’s annual retail sales trends report, and on average they declined 9.7%.
So, Bent Gate finds it necessary to run continuous sales to compete with direct-to-consumer marketing from outdoors manufacturers and vendors, other e-commerce outlets and used gear sellers.
“That sale banner does a good job telling the story,” said Bent Gate general manager Ryan Mayer. “We had to get a new one, since it was up all the time and our old one deteriorated. Not our favorite, but does the job for now.”
Industry experts say the distortions of the outdoor industry market started during the pandemic when people were desperate to get outside, including many who rarely gave it a thought before. The surge was felt at Bent Gate, as well as the Golden Bike Shop (which Bent Gate owns), and stores across the country.
“People would walk into the bike shop and say, ‘I’ll take whatever you’ve got,’ whether it was a $5,000 bike or a $15,000 bike,’” Mayer said. “Those (2020) numbers were gigantic and unrealistic. A lot of retailers maybe bought (inventory) off those 2020 numbers for ‘21 and ‘22.”
A surplus of goods resulted in aggressive price competition, even as participation in outdoor recreation hit a record 168.1 million in 2022 according to OIA figures. Independent specialty retailers found themselves competing with manufacturers and wholesalers who resorted to direct-to-consumer sales with prices that were difficult or impossible for small retailers to match.
“It’s because of that overbuying, over-producing that we’re seeing these constant sales,” Mayer said. “It’s a game that we have to play. It’s more than, ‘OK, we’re going to have our Fourth of July sale, and a winter sale.’ It’s one of our day-to-day biggest challenges, dealing with markdown prices, not being able to sell at retail (prices), hurting our margins overall.”
More headwinds came with inflation. “You go to the grocery store and a half-gallon of milk is now $5.50, after it was $3 not so long ago,” said Jon Dorn, an executive with Boulder-based Outside Inc., a digital media company that focuses on sports, recreation, fitness and nutrition. Dorn sees last year’s
decline as a “correction,” though, one of several he has seen over 30 years in the industry.
“I saw this in 2014 and 2009-10,” Dorn said. “I saw this in 2001, in 1997. You have these periodic booms and busts. I think this is a small one.”
Equipment sales in 2023 declined 6.2%. Apparel dipped 3%, footwear 2%. In January, REI announced it was laying off 357 employees, its third workforce reduction in a year. In a letter to employees, chief executive Eric Artz said outdoor specialty retail revenues declined in all four quarters of 2023, adding that the co-op expects another decline in 2024. Still, REI plans to open 10 new stores in 2024, including one in Loveland.
“Overall, there is still clearly a strong desire on the part of our members and customers to spend time outside,” REI Co-op chief financial officer Kelley Hall said in an email to The Post. “We saw solid results and year-over-year growth for the first three quarters of 2023.
However, that trend materially shifted in the fourth quarter. We believe this is due to two strong external factors. The first was a historically warm and dry winter, resulting in significantly weaker performance in our cold weather categories compared to our plans. The second was a broad shift in consumer spending toward off-price (sales and discounts), largely due to inventory-driven price cuts across many outdoor brands and retailers.”
Feral mountain gear owner Jimmy Funkhouser, whose Denver shop specializes in buying and selling used gear, says the decline in 2023 should be seen as a market correction after two years of “insane” growth.
“Any business in the outdoor industry that thinks 2021 and 2022 was a result of something we were doing as an industry, they’re kidding themselves,” Funkhouser said. “There was a lot of artificial growth in the economy in 2021 and 2022 as a result of stimulus money. I don’t think there’s any real reason to be alarmed about a small pullback in 2023 after two years of just massive growth.”
With its reputation as a place to save money on used gear, Feral is thriving. In fact, Funkhouser will soon open a second store in Grand Rapids, Mich.
“Fortunately we continued to see really strong growth in 2023,” Funkhouser said. “We’ve continued to see growth overall in our business, but our used side of the business does continue to outpace the overall business.”