2020. Yes, we’re going there again. Covid-19, lockdowns, upheavals, free government money, etc.

For the DTC universe, however, it was a very interesting time. Especially for the brands that made outdoor gear. As lockdowns came into effect, people turned to the world’s last unregulated space - nature. 

In the largest one-year jump on record, the Outdoor Industry Association (OIA) reported 7.1 million new people participating in outdoor activities in the US in 2020. 

It was also the highest participation on record, totalling 160.7 million (52.9% of all Americans). 

Source: OIA 2021.

Casual camping (i.e. within a ¼ mile of your vehicle or home) grew by 28% year over year, equivalent to 8 million new participants. That’s 8 million new customers shopping for camping gear, all with nowhere else to go and precious little else to do. 

Hiking attracted the same amount of newbies (shoes, anyone?). There were 5 million new road bikers, 2.4 million new RV campers, and 2.5 million new bird watchers.  

And that was just in 2020. The trend continued through 2021 and 2022 as demand entered hyperspace for the outdoor industry. 

Brands that capitalized became giants overnight.

Yeti, a popular cooler and drinkware brand, increased its DTC channel net sales 50% to $580.9 million in 2020. They broke a billion dollars in valuation that same year. Solo Stove, famous for smokeless outdoor fire pits, went from under $40M in valuation in 2019 to over $500M in 2021. 

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.

How are faltering outdoor brands adapting?

Yeti had a tough Q4 in 2023, having to deal with both reduced consumer spending and a big recall. This year’s revenue expectations are also more humble than Yeti is used to, set at 4% to 9% adjusted sales growth. 

However, they are still profitable, have low debt, and a lot of cash. So, what do they do? 

Expand. They acquired cookware company Butter Pat and entered a $10B market, and bought Mystery Ranch whose backpack sales exploded during the pandemic.

Solo Stove went for a hail mary with its “Snoop Dogg Goes Smokeless” campaign, led by the Martin agency. It went viral. Then, Solo Stove lowered its revenue expectations for 2023, parted ways with CEO John Merris and said the campaign “did not lead to the sales lift that we had planned.”

Many blasted the ad, claiming Snoop was a poor ambassador choice for an outdoor brand and its targeting was off.  The thing is, it wasn’t built to sell. 

Broad targeting, star power: it was a brand awareness campaign. In that sense, the ad was a success. What’s more surprising is that Solo Stove expected immediate revenue. 

John Merris, of the ZIRP era, may have intended the campaign to generate long-term revenue with new customer segments. Not a bad bet, but risky in today’s environment. 

His successor, Christopher Metz, might be more concerned with Solo Stove’s stock being down ~80% since it went public in 2021. His focus might be on fixing the bottom line as soon as possible. 

Expect to see this preference for demonstrable profitability across DTC, but any outdoor brand drunk on the pandemic sugar rush will need to adjust their spreadsheets and expectations accordingly.

What’s Next?

Outdoor’s pandemic boom was a double-edged sword. A massive, artificial growth in demand, followed by backed-up supply chains, and then a macroeconomic downturn that popped the bubble. 

A lucky few made it rich, while others had to scramble to stay afloat. No one seemed adequately prepared, which is defensible when it comes to once-in-100-year viral outbreaks and governments enacting policies no one has ever seen before.

The hope is that 2024 will signal a return to normalcy. 

US core inflation slowed to 3.8% in February. The Federal interest rate has held steady for months. Outdoor categories, swung around from extremes by 48 months of conflicting tailwinds and headwinds, may see their industries settle back into historical norms. 

Entrepreneurship is never easy, and direct-to-consumer is especially challenging these days. If you are in the outdoor category, however, you’ve faced even more challenges since the onset of 2022. The good news is those who persisted through troubled waters may see (relatively) smooth sailing this year.