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Italian Market Insight: Store Margins Take A Big Hit Due To Sales Pressure

The economic update remains evenly balanced as interest rates remain high, purchase power is still low and even if inflation rates are theoretically sinking, it is nothing the regular Citizen can really feel in his wallet. Price increases are still real in most cases and everyone really hopes for a better Q3 and Q4 in 2024 as the economy in total is struggling.
By Franz Josef Holler

On a positive note, for board sports, ski-resorts, especially in the northern part of Italy, saw really good growth numbers, and snowboard / ski holidays are still high in demand, especially for tourists from outside of Italy which are bringing in some fresh cash.

There is also currently a similar trend relating to summer holidays, where the booking numbers are again better than expected. It’s clear that people are willing to spend on holidays and rather save on other consumer goods. Being outside, having fun and spending on their personal lifestyle seems the most relevant to most teenagers nowadays.

The boardsports business started quite slow into Q1 – 2024 as skate hardgoods stocks are still very high, and brands, distributors and stores are struggling to get back to the good numbers from years ago. There’s just too much product in the warehouses and on shelfs overall, as is also being seen for surf boards and especially for wetsuits which are being heavily discounted.

Most products because of this are seeing discounts all over the place, which reduces the margin and profitability for the whole business sector. This is something streetwear sales will also experience a lot of in 2024. When talking to bigger Italian streetwear dealers they agree that there is too much discounted product on the market and that the customers have got really used to buying on sale items and are now not willing to pay full price if it is not a hype or limited-edition product, which are mostly sold D2C.

This puts pressure on the stores as sales, or so-called mid-season sales, are starting earlier every year which makes it tougher and tougher.

Having limited-edition products or brands that focus on certain retailers are now a must for many business owners as it keeps them making the margins they need to write down positive numbers.

Brands really have to focus on segmentation, price and distribution channels to not lose track. There are still many brands doing well out there, but many smaller ones, and also smaller stores, are struggling really hard during this 2024 as low margins and high stock levels are not easy to manage.

Also snowboard hardgoods experienced this sale pressure in 23/24. More and more stores are focussing on selling outerwear, clothing, outdoor gear and shoes rather than snow hardgoods as margins are too low and inventory levels are too high. The store landscape from pure core skate and snow stores has seen a big decrease over the last decade, in which we have lost many historical doors over the years.

On a positive note, it seems we have touched the bottom line, and things are starting to pick up again as the warmer temperatures have kicked in. Skate wheels and trucks are again more in demand and skate events are coming back on track after the corona pandemic, which saw many events and local contests taking a break.

Many local brands and stores have seen this decrease in business as a chance to try to re-organize themselves. Many have successfully cut unnecessary costs, added new brands, tried innovative marketing, collaborated with other businesses and so on. It is for sure a time of chance for many business owners, and as the market gets faster and keeping track is not always possible, so being creative and thinking outside the box is the new normality.

Most of the retailers see the end of 2024 as a changing point and are looking positively into the future which is very promising for our market.

Recap our last Italian Market Insight.