What the latest trends in sporting goods mean for brands

Pickleball, padel—yes, they’re hot. Nevertheless, a third of the world’s adults are inactive—and among youth, inactivity is even more pronounced, according to McKinsey Partner Alexander Thiel. In this episode of The McKinsey Podcast, Alexander joins Global Editorial Director and Deputy Publisher Lucia Rahilly to discuss this year’s whipsawing consumer trends, as well as what sporting goods leaders can do to harness them to combat slowing growth.

The McKinsey Podcast is cohosted by Lucia Rahilly and Roberta Fusaro.

The following transcript has been edited for clarity and length.

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Why sporting goods growth is slowing

Lucia Rahilly: Alexander, welcome to the podcast.

Alexander Thiel: Thank you for having me.

Lucia Rahilly: Kudos on your recent sporting goods report. I was surprised that growth in sporting goods is projected to slow over the coming year, although perhaps that’s because I’ve got a couple of tween kids who are obsessed with basketball and baseball. What’s driving this trend? Do you see this deceleration as a continuation of the postpandemic trajectory, or are there other factors at play?

Alexander Thiel: There are still some very healthy megatrends in place. First and foremost, people want to live a healthy, active lifestyle. As a larger number of people enter the global middle class, there is a global trend toward being more active and being healthier, and that’s driving growth in the broader sporting goods category.

But we do see some deceleration, particularly in Europe. This has to do with some factors that we can’t deny: economic headwinds, persistent inflation, higher interest rates, and slower GDP growth. And some European markets are already highly penetrated across key categories like performance footwear and outdoor gear, leaving less room for volume-driven growth.

Consumers are also becoming more cautious. They are looking for long-term durability over impulse buys, favoring more versatile, long-lasting products. They are putting more price and performance scrutiny on their purchases. So overall, megatrends are still driving growth but not at the same rate as in the past.

Lucia Rahilly: You mentioned economic headwinds—and of course, now tariffs are a big issue. Acknowledging that we’re all waiting to see how these geopolitical dynamics and disruptions play out, how are sporting goods companies making moves to become more resilient and to mitigate the potential impact of tariffs on consumer behavior?

Alexander Thiel: The unfortunate thing about the current tariff situation is the extremely high level of uncertainty. At the moment, many companies are in a state of limbo about what tariff regimes will look like. Instead of reallocating investments, instead of refocusing on other regions, you’re waiting, waiting, and waiting. The moment we have certainty, companies will make decisions. They will move forward and adjust.

Consumers want to pay less—or more

Lucia Rahilly: As consumers become more value driven and more cautious, leaders can obviously use price as a lever. Do you see brands taking steps to successfully differentiate themselves in areas beyond lower-priced goods?

Alexander Thiel: It is certainly not the only way, but it’s important. Inflation has made consumers more selective. Many are trading down to midtier or private label plans. And as I said, many are looking for more long-term durability. But value is also tied to brand value. If you’re a strong brand that can deliver more than simple functionality, you’re in a better position.

The market is, in a way, even more polarized than before the pandemic. On one end of the spectrum, it’s important to have offerings at an entry price range and to give consumers options for more value-oriented purchases. On the other, if you’re able to deliver value beyond pure functionality, if you’re successfully premiumizing, there’s also a large group of consumers willing to pay for that.

Lucia Rahilly: Are challenger brands posing a threat to the big incumbents that have inherent brand strength?

Alexander Thiel: Challenger brands not only pose a threat; they’ve also taken a lot of market share from large incumbent brands across all categories. That’s because they’re usually focused on a specific category, such as the outdoor market or wellness segments like yoga or Pilates. They also often focus on a certain consumer segment, such as hyperactive people who look at sports as a competitive endeavor. This allows them to be targeted with their products, their messaging, and their whole brand identity. That gives them more authenticity in the eye of the consumer, and in today’s market that wins.

If you’re a large incumbent brand that needs to be credible with your brand identity across 20-plus categories, and ideally all consumer segments, your key message often gets watered down. In an individual comparison, category by category, you’ll always find one or two challenger brands that are more credible in a specific area and may even have better tech or performance ratings and messaging that’s more focused toward target consumers.

Lucia Rahilly: Do you see any examples of big brands countering that threat successfully?

Alexander Thiel: The only way to really respond successfully is through innovation and differentiation, and we do see some major incumbent brands making moves in that direction. You need to not only win against the other big global brands but also look category by category and ask, “Are we really the most innovative in outdoor? Are we the most innovative in base layer? Are we the most innovative in performance running footwear?”

You need to look like a consumer would, and ask honestly, “Do we have the best products?” If not, then use the vast resources at your disposal. That’s still an advantage if you’re a global incumbent. You have resources at your disposal that smaller challenger brands do not.

The shift from wellness to health

Lucia Rahilly: You mentioned wellness in the context of challenger brands successfully creating authenticity within certain segments. There’s strong momentum around wellness-focused products, at least in North America. What are brands doing well to meet that interest?

Alexander Thiel: There’s a health and wellness megatrend, meaning a sustained focus on physical and mental health that continues to boost spending on things like fitness equipment, running, yoga, and wellness apparel. People want to go to classes and do sports to balance negative emotions, to clear their minds.

Brands need to find an answer because, in a way, it’s much easier to be credible and authentic when it comes to the wellness element. You can easily convey an image of “feel good” when it comes to campaigns or products. The health aspect is a bit difficult. It’s more about enabling people to be as active as they want to be and achieve the lifestyle they aspire to have. This is more comprehensive and could force many brands to take more of an ecosystem view.

In the end, you need to work together with gyms, fitness classes, coaches, and providers of sporting goods tournaments and the like. You, as a brand, need to activate this whole ecosystem and make it work for your consumers so they can live a more active and healthy life.

Is sustainability still a priority?

Lucia Rahilly: In past years, we’ve seen sustainability as a stated priority for consumers, although that did not always translate into the willingness to pay more for sustainably made products. Is sustainability slipping as a focus for global brands in this value environment?

Alexander Thiel: It clearly is, in the short term. There’s no denying it has lost many, many ranks when it comes to how consumers make decisions. However, it would be very dangerous to presume this will remain true in the mid and long term. I believe sustainability will become part of how consumers define value overall, and that products made with recycled materials by brands with circular business model approaches and credible ESG stories will have an advantage.

We’ve taken one step back. But I believe we will take two steps forward again. I would be very careful as a brand to let my sustainability agenda, ambition, and action plan slip. Instead, I’d use this time to invest and double down because sustainability, in my view, is not going away.

Getting people moving again

Lucia Rahilly: You mentioned that populations are generally becoming healthier and more active, in part because of the rise of a more global middle class. But the report also talks about people becoming more sedentary, which also surprised me given that, at least in the US, sports feel culturally at the fore. What’s going on?

Alexander Thiel: Culturally, sports are more preeminent than ever. A growing group of people define their identity by being active. That said, global inactivity is at a record level. Almost one-third of adults globally are completely inactive. This is even more pronounced in the youth segment. All analyses suggest there are socioeconomic reasons: people living an increasingly digital life, certain habits that slipped during the pandemic. The result is catastrophic. We believe 500 million new cases of serious health conditions could be prevented by 2030, a cost of $300 billion globally, according to numbers we worked out with the World Health Organization.

I think it’s important to see this as a huge opportunity for individuals to improve their longevity, their health spend, their daily quality of life—and for societies to have more people active to avoid a big healthcare cost. It’s also an economic opportunity for sporting goods companies. We are talking about 1.8 billion people—a huge untapped market. It won’t be easy to get people off the couch, literally and metaphorically, but if it happens, it’s a win–win situation.

Lucia Rahilly: Are companies doing anything innovative to capitalize on this untapped market?

Alexander Thiel: We see three things that are really working, and companies are experimenting with all of them. They do, however, need to do them at scale.

One is what I call innovate to remove barriers. Brands have an opportunity to mobilize consumer segments that may have been overlooked or underserved in the past. So one strategy is to develop products that directly address the needs of specific segments and remove barriers for them. Examples showing real product innovation and design include Adidas’ Stay in Play product line, which helps women stay active during otherwise difficult times: period-proof tights, maternity bras, and trainers tailored to female foot characteristics, for example. There’s also Nike’s modest clothing designs, including a swim hijab to enable women to participate in sports activities while respecting cultural and religious customs.

The second strategy is campaigning and marketing to raise awareness, targeting not only people who are already following fitness influencers but also consumers who are hesitant to become more active. New Balance has the Run Your Way cross-platform marketing campaign, and Asics has The Desk Break, for people who are stuck at their desk way too much.

And the third strategy is to target youth. As I said, youth are even more inactive than the general population. Brands can design outreach programs to target youth in schools, universities, clubs, and online. Companies should do these things not just in small, socially oriented programs with ESG funding but at scale, tapping into a market of 1.8 billion inactive people. If you have that mindset, then instead of $10 million, you’ll invest $100 million or even more. And these kinds of investments are needed.

Tapping into outdoor and social sport trends

Lucia Rahilly: I want to ask a follow-on about a couple of categories you raised: outdoor and running. If people are becoming more physically inactive overall, it’s a bit surprising that these are fast-growing categories. But again, I assume this is about segmentation. How do you see brands, large and small, responding in these areas?

Alexander Thiel: Postpandemic, all outdoor sports—running, hiking, cycling, climbing, walking—have seen huge growth. Why? Because people like to be outdoors and got used to doing sports on their own schedule, which offers a lot of freedom. So these segments saw a lot of growth and are still growing. But we are seeing another segment grow even faster—social sports, something people do with friends, to seek a community element.

Our research shows most people do both. They want part of their activity schedule on their own terms, doing sports by themselves and maybe listening to a podcast at the same time. But they also want the social element of sports, where they go to a Pilates class or rent a padel court with friends. If brands are smart and can do it, they should speak to both elements.

Digital? In-store? Both?

Lucia Rahilly: You talk to sporting goods clients every day. Are there questions you think they should be asking themselves but aren’t?

Alexander Thiel: There are certainly things that can be easily overlooked. One, when it comes to Europe, is that the digital market is still not as developed as it is in the US or parts of Asia. Having smooth online journeys, flexible returns, product personalization, and omnichannel availability are part of what consumers view as good value.

The other point is to focus on innovation, which has never been more important than it is today. With many companies facing productivity and profitability challenges, these budgets are often under scrutiny. But you need to take a through-cycle view because the innovation of today will be the differentiation—and the market share gains—of tomorrow. Innovation in the whole circular economy—having more reselling and refurbishment built into your value chain and using materials with a lower CO₂ footprint—can mean better performance.

Lucia Rahilly: As e-commerce continues to grow, how do you see North American retailers balancing digital and in-store experiences to meet rising consumer expectations?

Alexander Thiel: North America has some of the most sophisticated sporting goods retailers in the world. Most of them understand well that to be successful today, you need to balance a strong in-store experience with seamless convenience, particularly when it comes to e-commerce.

Rising e-commerce rates should not lead you to the false conclusion that it’s all about online and that you can forget about the store. If you look at actual consumer journeys behind those e-commerce purchases, yes, some of them are purely digital. They start with an ad on Instagram leading to a retailer’s website where people make purchases. But many of them are omnichannel journeys. They start in-store, where consumers are inspired to try a new sport and category. They continue in-store with an employee making recommendations. Customers might still place the order online, sometimes even in-store, or later, after looking at some other options or thinking about it from the comfort of their home.

Overall, we see that most people want both. They really do want to get inspired by stores. If they are brand stores, then the brand can be an experience for them. By being in the store, people understand what a brand is about, what it stands for, and what its values are. If they identify with the brand, a little magic happens, there is a connection made, and that will often create purchases. Or if you’re talking about a multibrand retailer, then it’s often about the selection, the service, the quality of advice and consultation that retailers could offer in the store. Always look at the entire consumer journey.

The next growth markets

Lucia Rahilly: Since you mentioned Asia, the report zeros in on Asia–Pacific as the fastest-growing region through roughly the end of the decade. Is that shaping how companies are thinking about where to focus or to invest globally?

Alexander Thiel: Despite its challenges, the US is still the most dynamic economy in the world. So you need to be in the US. Europe is a more difficult picture. It’s suffering more economically, but it has pockets of growth to go after. Then there’s China. No one can really predict where the Chinese economy will be in 12 to 24 months, particularly when it comes to consumer spending. You need a scenario approach.

You should also look at other markets—those that are highly attractive and early in their adoption curve, like India and Indonesia. There are interesting economies in Asia–Pacific, and the large economies of the Global South—Brazil and Mexico—have fantastic growth outlooks. They have a middle class of people who are quickly adopting sports at rates comparable to the US or Western Europe. These are areas where I think a lot of future growth and market share gains will be.