AN ITALIAN SNAPSHOT

AN ITALIAN SNAPSHOT

The unstoppable rise of the sports economy

_{by Luca Paolazzi}

Forecasts for the sportswear market all indicate very high growth: 6-7% per year from now to the end of the decade, double the forecast rise in global GDP. 

World-wide, consumer spending on sporting goods is expected to grow at a much higher rate than that of the global economy. For several important reasons. We will summarise three of these in as many words: share, nature and health. There is a fourth, which moves in the opposite direction: ageing. Let's take a closer look at them.

Share. Actually, shares. There are two important aspects of personal spending on this particular type of clothing. The first share originates from an economic law that takes its name from its inventor: Ernst Engel. “Who was Engel?”: a German economist, born in 1821 and died in 1896. Studying the consumer spending and income data of 200 Belgian working families (this seems small for a representative sample, but at the time statistics were very scarce and one had to get by with what little information was available), Engel observed that the share of income allocated to buying food went down as income went up. In other words, expenditure on food rose from poorer to richer households, but not in proportion to the increase in income. Engel had the happy intuition of considering this empirical result a behavioural rule valid for the entire universe of consumers from any part of the world. What does Engel's law have to do with sporting goods? It's simple: the more family income increases over time, the higher the share of income gets freed up for other types of consumer spending - i.e., non-essential spending - above all relating to leisure time dedicated to well-being and enjoyment. This includes the time spent playing sports.

The second share is that of households with high purchasing power in the populations of emerging countries. The distribution of people according to their income is fairly constant in advanced countries and the increase in average income is the most important source of the breakdown and level of consumer spending, with relatively limited changes. In emerging countries, on the other hand, development is accompanied by a marked increase in income gaps (also linked to the initial geographical concentration of that development). So for many households, income grows much faster than per capita GDP, which also increases more than in advanced markets. This means that in those countries, Engel's law acts in a very decisive way, making them very promising in terms of potential growth.

Nature. Global megatrends include environmental sustainability. This also translates into outdoor activities and direct contact with nature. Especially for city dwellers. The population living in cities is set to increase more than the world's population. Thus, the number of people interested in the right clothing, especially footwear, for enjoying the outdoors, is set to rise rapidly.

Health. Mens sana in corpore sano, and a healthy body requires sporting activities that are suited to the individual's age and level of fitness. These activities also have a direct effect (i.e. not mediated by bodily health) on the mind, because they are rewarding and because physical effort prompts the brain to produce endorphins, which improve mood, reduce pain and increase tolerance to fatigue. If we think of the psychological damage inflicted by the measures needed to combat the pandemic, the need to counter them with time dedicated to sport becomes indispensable. Naturally, appropriate physical activity helps to counteract cardiovascular disease (the main cause of reduced life span) and body weight, by burning fat.