The first trampoline parks in the US opened their doors in 2004. Since then, the market has experienced some relatively explosive growth. Although COVID 19 was a huge challenge for many facilities this past year, the future certainly looks bright for this up and coming industry.
The industry is forecasted for continued growth for the next decade and more. In the younger demographic the numbers continue predictably on an upward trend, and the good news is that there is also expectation to see growth in teens and older. As a matter of fact, the age group 21-40 now represents approximately 15% of the market.
In today’s world, however, even with continued sales growth, the costs of doing business must always be watched, as these continue to grow. Labor costs, rent, electric, water, insurance – all of these and more have significantly increased for most facilities over the past year.
With the increase of costs in doing business, any way that money can be saved/costs can be lowered is essential to profitability
One cost item to examine are non-slip socks. Trampoline socks/non-slip socks are an ongoing cost; a cost that must be incurred on a regular basis by every trampoline/entertainment park. However, socks can also be a source of income for a park that can charge more than they pay.
In looking for the lowest pricing/cost possible, some facilities order directly from manufacturers in China. If the order is large enough, and the facility can meet the minimum order requirement, this may have been a cost savings. However, there have always been a few downsides to that model.
- It typically requires a substantial order quantity, which means a fair amount of capital might be tied up into inventorying the socks. Ordering from a US based company (even if the US based company imports from overseas, that company will have a dedicated warehouse to handle the large quantities necessary for ordering) may be more efficient and cost effective, particularly for effective use of capital.
- It typically requires a certain amount of space to store that substantial quantity.
- There is always the risk of working with an unknown overseas vendor in terms of payments, receiving the correct product and the correct quantity. If any of these risks become a problem, options to remedy are much less than when buying from a supplier that is located in the US.
- Transport from an overseas vendor can be challenging, including costs and other logistics.
Nevertheless, some larger facilities may have previously been able to navigate the above downsides such that there was an actual cost savings at the end of the process.
Today, however, it is a good time to re-evaluate that business model.
Ocean freight has more than tripled, containers are in short supply, tariffs remain in place and a host of other logistical issues present themselves when buying direct from overseas.
A real-life example:
A US based Trampoline Park company with several locations has been ordering directly from overseas for the past 5 years. This has worked well for them as even with the above-mentioned concerns, the pricing was approximately 30% less than if they purchased within the US. This past year, however, the company has been questioning their decision to order from their overseas vendor. Tariffs have not gone away, ocean freight has shot through the roof and these two factors have narrowed the savings for the socks. In addition, and maybe worse, they have been waiting for months and months now for their container to arrive from overseas, and in the meantime, they had to continuously rush sock orders from local companies who stock thousands and thousands of pretty much the exact same socks. At the end of the day, the additional costs, aggravation and time have made it such that it makes sense to re-consider their supply chain. They will order direct from the local company for the next 6 months and then compare thereafter.
The past year and a half has been an unprecedented time in global trade and manufacturing, and these factors that are driving increased costs and shortage of product may change one way or the other as trade starts to normalize once again. Whether this happens or not will be more apparent in the next 18 months or so. In the meantime, keeping all options open is a prudent path.