What goes up…

Unprecedented demand, plus a generous investment era (ZIRP) encouraged aggressive expansion by these booming companies. They pulled 5+ years of demand forward over the course of about 24 months, demolishing expectations and drastically skewing inventory projections.

Like a snake trying to swallow an elephant, the big bump in inventory got stuck due to supply chain disruptions. Then, the pandemic slowed and restrictive policies began to loosen. Shipments came through, only to find customer spending crippled by inflation.

Sales dropped, while inventories stacked up.

When 2023 arrived, the party was over for most in the outdoor space. RV shipments had their worst year in a decade.

Bike makers operate on annual booking order cycles to determine their parts and manufacturing needs. They rapidly ran out of inventory early in the pandemic and the subsequent supply chain shock caused a delayed response to the spike. Orders were delayed well past cycling’s seasonal peaks and then demand fell back down through the floor.

69% of DTC bike shops reported negative sales, an increased cost of doing business by 52% and reduced margins by 47%.

Giant, the Taiwanese bike manufacturer, revealed that revenue dropped 9.6% in its first quarter ($22.3 billion to $20.1 billion).

All this is to say that Outdoor brands have faced powerful headwinds since the end of the pandemic.

First, a black swan demand surge that cleared out inventories while compressing years of demand into a short time frame. If you as a brand were not adequately prepared to ride this tidal wave, it likely drove you into the rocks.

Second, a post-pandemic macro environment that saw record high inflation, historic interest rate spikes, and a worldwide populace no longer constrained by lockdowns.

Yeti’s yearly sales growth dropped from 29% to 13% in 2022, and Solo Stoves reported a net balance loss in 2022.

But that’s not all!

As inflation hit, Russia invaded Ukraine, exacerbating inflation’s rise. In response, governments put an end to the 15-year-long Zero Interest Rate Policy (ZIRP) era.

Set after the 2008 financial crisis, ZIRP’s cheap money fuelled the rise of tech and DTC alike, enabling long runways to profitability and risky investment behavior.

Those times are over. First purchase profitability and contribution margins are the new sexy.