july 6, 2016 gym clothes are making their way out of the ... … · the athleisure trend....

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DEBORAHWEINSWIG,MANAGINGDIRECTOR,FUNGGLOBALRETAIL&[email protected]:917.655.6790HK:852.6119.1779CN:86.186.1420.3016Copyright©2016TheFungGroup.Allrightsreserved.

Gym Clothes Are Making

Their Way Out of the Gym: A Primer on Athleisure

• Athleisureisthetrendofwearingactivewear,clothing

designed for athletic workouts, both inside andoutside the gym. In the US, athleisurewear salestotaled$97billionin2015,up40%from2010andup7% from2014. Last year, the segment outperformedtraditional apparel, which saw more modest salesgrowth.

• Millennials tend to take a more holistic approach tohealth and wellness than older groups do. Theyexercise more, eat better and smoke less thanprevious generations. Fitness has become a moreintegralpartofday-to-daylifeformillennials.

• Athleisurebrandshavebeensuccessful inbuildinganemotional connectionbetween their productand thecustomer,making itmore likely customerswillmakemultiple purchases. Customers want not only thespecific itemstheyarepurchasing,butalsotheactivelifestylethatcomeswiththem.

• The athleisure universe is growing,whichmeans it isharder forbrands tostandout.Thebrands thathaveperformed best and have proven they canwithstandtheemergingcompetitionaretheonesthatdonotselljustclothes,butalifestyle.

• Athleisure is affecting big brands and traditionalapparel retailers in a significantway that looks to bepermanent.Thatsaid,wedonotseethecurrentpaceof category growth as sustainable, and we expectmoremoderategrowthgoingforward.

D E B O R A H W E I N S W I G

M a n a g i n g D i r e c t o r , F u n g G l o b a l R e t a i l & T e c h n o l o g y d e b o r a h w e i n s w i g @ f u n g 1 9 3 7 . c o m

U S : 6 4 6 . 8 3 9 . 7 0 1 7 H K : 8 5 2 . 6 1 1 9 . 1 7 7 9

C H N : 8 6 . 1 8 6 . 1 4 2 0 . 3 0 1 6

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Gym Clothes Are Making Their Way Out of the Gym: A Primer on Athleisure

WhatIsAthleisure?

Athleisure is the trend of wearing clothing designed for athleticworkouts both in the gym and outside it—for example, to theoffice, to the shopping center or to a social gathering.Athleisurewear has become increasingly acceptable to wear in avarietyof social situations, andeven towork, in some industries,andconsumersarequicklyjumpingonthetrend.Manycelebritieshave been photographedwearing high-end leggings, sweat pantsmadefromnontraditionalfabrics,sneakerswithgraphicprintsandstylishbackpacks—allexamplesofelevatedathleticwear.

There was a time when wearing anything other than atailoredsuitmeantonewasunderdressedandoutofplacein an office setting. In many industries, that time haspassed.Sincethe1960s,Americanyouthhavebeenpushingthe boundaries of how casually they can get away withdressing.Bythe1990s,studentswereshowinguptoclassinsneakers and sweat pants. Still, graduation from collegegenerally meant transitioning into more “proper” adultclothingthatwasappropriateforaworkplacesetting.Now,though,activewearoncereservedformorecasualsettingsisconsidered perfectly appropriate office casualwear in somebusinesses, and it is commonly worn in all but the mostformal settings. Leggings, hoodies and sneakers, oncereservedforthegym,arenowworneverywhere—evidenceofthestrengthoftheathleisuretrend.

Anunprecedentednumberof fitness apparel lineshave sprungup in the last few years. Boutique brands such as Sweaty Bettyand Outdoor Voices are competing against establishedathleticwear giants Under Armour and Nike, while higher-enddesignersToryBurchandStellaMcCartney,andretailersGapandAnnInc.,haveallventuredintotheactiveweararena.

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Proprietary, sweat-wicking compression fabrics are standard inathleisurewear, and the array of designs available rival thoseoffered in more formal apparel. Figure 1, below, illustrates thegeneral shift towardmore casual clothing and the emergence oftheathleisuretrend.Athleisurewentmainstreaminabout2010.

Figure1.TimelineoftheEmergenceofMoreCasualStyleofDressandAthleisure

Source:Companyreports/FungGlobalRetail&Technology

ALookBack:HowDemandforSneakersGaveBirthtotheAthleisureCategory

Werecentlyhadtheopportunity tositdownwithoneofthe leading apparel vendors in the activewear category,andweaskedoursourcehowathleisurecameaboutinthefirst place. According to our source, the category’s risemirrored apparel cycles more broadly. Apparel trendstypicallylastbetweeneightand10years,andathleisureandathletic-inspired apparel became more popular as the high-end denim fad began to wane toward the end of the lastdecade. At that time, vintage-inspired apparel was prevalentacrossmalls,bigboxstoresanddiscountstores,anddenimwasthemostpopulariteminthebottomscategory.

As the denim trend evolved and grew stale, Nike refreshed itssneaker offering and added new colors and freshly inspiredassortments.Thecompany’sbusinesswithFootLockerandFinishLineflourished.Traditionalapparelretailerstooknotice,andbeganofferingapparelthatcomplementedthefootwearthatwassellingwell.Apparel thatpreviouslycame inonlyneutral tonesbegantofeature bright colors and, eventually, neon colors. Specialtyretailers (particularly “A” retailers) followed suit, as they werelooking for a category that could replace the declining denim

segment and their collections’ relatively stale themes. Themarketshiftsledtoactivewearforeverydaypeople.

1970s:

High-performance sportswear designed for mountaineering, sailing and hiking gained popularity

1980s:

Utilitarian styles swept through college campuses

1998:

London-based Sweaty Betty was founded

1990s:

Activewearbecame body-conscious, focusing on form-fitting garments

2000s:

Fashion consumers started to reconcile activewear and modern styles

2001:

Lululemonbegan selling yoga wear

2013:

Kate Hudson and JustFab Inc. co-founded Fabletics

2013:

Outdoor Voices was founded

2010:

Yogasmogawas founded in NYC

2009:

Gap added Athleta

2016:

Beyoncé launched Ivy Park with Topshop

2014:

Carrie Underwood launched Calia with Dick's Sporting Goods

Tory Burch introduced Tory Sports

2014:

Urban Outfitters launched Without Walls in NYC.

Ann Taylor and Loft launched Lou & Grey brand

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Theathleisureandathletic-inspiredapparelcategoryhasperformedverywell,oftenpostinghighdouble-andtriple-digitgains.However,inmanycases,theincreaseinathleisuresalesvolumeshasnotbeenenoughtooffsetthedeclinesindenim,asathleisuregenerallyhasalowerpricepointthanhigh-priceddenimdoes.

NewBrandsContinuetoEntertheAthleisureSpace

Nonetheless, traditional athleticwear retail players are stillexpanding into athleisure, and there are also many new brandsenteringthespacethatarefocusedsolelyonathleisure.Wehavegrouped the various players into three categories: pure-playathleisurebrands,whichsellonlyathleisuremerchandise;celebritybrands and partnerships; and more traditional athleticwear andmainstream retail companies that have expanded into theathleisure segment. Below, we discuss examples of companiesoperatingineachofthethreecategories.

Explosive growth in the athleisure universe has made it harderthanever forbrandstostandout.Theones thathaveperformedbest and seem to have proven they can withstand increasingcompetitionarethosethatsellnotjustclothes,butalifestyle.Thismakes sense, given that the athleisure trend is asmuch about alifestyleconceptasitisaboutfashion.

Figure2.SelectedAthleisureCompanies’MarketShare

Source:EuromonitorInternational

20.7%

3.9%

3.3%

3.1%

2.2%

2.1%2.1%

2.0%

1.4%1.4%

1.0%

56.8%

Nike

UnderArmour

adidas

Skechers

TheNorthFace

Timberland

Columbia

Champion

LululemonAthlekcaInc

NewBalance

PumaNorthAmericaInc

Other

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Figure3.SelectedAthleisureBrands

PurePlays CelebrityBrands TraditionalAthleticwearCompanies Retailers

LululemonAthletica IvyPark(Beyoncé) Nike ToryBurchSport

SweatyBetty Fabletics(KateHudson) Adidas WithoutWallsbyUrbanOutfitters

Athleta CaliabyCarrieUnderwood UnderArmour Lou&Grey(Loft)

OutdoorVoices – – Net-A-Sporter

Yogasmoga – – –

Carbon38 – – –

KitandAce – – –

Bandier – – –

Tracksmith – – –

Figure4.SelectedAthleisurePurePlays’Sales,2015(USDMil.)


PUREPLAYS

Lululemoncanbeconsideredthefirst tomarket in theathleisurespace.ChipWilsonfoundedthecompanyin1998,havingspentthefirst 20 years of his career in the surf, ski and skate industries.Whenhe startedpracticingyoga,he sawanopportunity tobringthemoretechnical,performance-enhancingaspectsofsurfandskiapparel to the basic cotton clothing that yoga practitionerswerewearing. He usedword ofmouth to sell his products, setting upshop inside yoga studios and enlisting instructors as brandambassadors—which the company still does today. In 2005,Wilson sold 48% of the company to private equity firms Advent

2,061

23346 10 3.8

0

500

1,000

1,500

2,000

2,500

Lululemon Athleta SweatyBeny

Yogasmoga Bandier

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International and Highland Capital Partners, and in 2007,Lululemonwentpublic.

Thecompanyhassincefacedseveralembarrassingpublicrelationsincidents,includingarecallofyogapantsthatweretoosheerandbacklash against a number of provocative statements made byWilson(whosteppeddownfromtheboardin2015).Thecompanyisnowworkingtorestrengthenitsbusiness.Abigpartofthemostrecentproductstrategyistochangethewayitsellspants.Ratherthansortingpantsbylength,Lululemonnoworganizesthembyfitandfeel,categorizingthembywhatthecompanycalls“sensation”:hugged,naked,relaxed,tightandheld-in.

In March 2016, Lululemon opened a new store in LowerManhattancalledLululemonLab. Itdiffersfromthebrand’sotherstoresinthatitisdedicatedtobothdesignandretail.ThestoreisLululemon’s second design lab (the first is in Vancouver). Whilesomeof thepieces in the store are forworkingout in,manyaremore modern takes on functional streetwear, and even work asbusinesscasualwear.Theclothes incorporatethetechnical fabricsthat Lululemon is known for and reflect the brand’s focus onperformance, but they can also be worn to dinner without thewearer looking like she has arrived straight from yoga class. Thecolorsareneutral,theclothesareangularandthepricepointsarehigher.Eachitemismadeinbatchesofonlyabout50items,givingthemanairofexclusivity.

SweatyBettyplanstodoubleitspresenceintheUSbyopeningsixstoresherethisyear.ThecompanywasfoundedintheUKin1998by husband and wife Tamara and Simon Hill-Norton, and wasoriginally a multibrand boutique featuring labels sourcedpredominantly from Scandinavia and Italy. In 2007, the companyshifted its business model to produce its own label. It nowoperates more than 40 stores in the UK, with annual sales ofapproximately $46 million. The company has also turned its

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attentiontotheUSmarket,where itcurrentlyoperatessixstand-alone stores, an e-commerce site and concessions in twoBloomingdale’sstores.InJanuary2016,thecompanyhireditsfirstUS President and CEO, Erika Serow, from Bain & Company. Thecompany’ssalesintheUShavedoubledoverthepastyear.

Scott Kerslake, a surfer and cyclist turned business executive,foundedAthleta in 1998 after listening to female friends complainaboutalackofselectioninwomen’sworkoutclothes.Thesewomenwere seeking athleticwear that held up on a 10-mile run but wasalso fashionableenough towear to theoffice.Athletabuilt a loyalfollowingforproductssoldthroughitscatalogsandwebsiteand,in2008, Gap Inc. bought the company for $150million to extend itsposition inwomen’spremiumsports clothingbeyond itsGapBodydivision. Gap has since used its expertise in operating more than3,000storestoturnAthletaintoabrick-and-mortarretailer.

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OutdoorVoiceswasfounded in2013byParsonsSchoolofDesigngraduateTylerHaney.Thecompany’sfocuswithinathleisureisonrecreational sports rather thancompetitive sports.Thebrandhasmore of a fashion tilt than some other athleisure players, andA.P.C. Creative Director and Founder Jean Touitou is a strategicinvestor. Signature pieces in the collection include color blockingand heathered fabric. Outdoor Voices specifically caters tomillennials and prides itself on using high-quality, sweat-wickingcompressionfabrics.ThebrandmanufacturesitsownclothinginafactoryinLosAngeles,andthereisanemphasisoncreatingitemsthat are very soft. This summer, the companywill launch its firstcollaborationwithA.P.C.andintroduceanewfabricthathasbeenindevelopmentforayearandahalf.

According to the company, sales have grown by 800% over thepastyear.Whilee-commercecurrentlymakesupabout80%ofthebusiness, Outdoor Voices has plans to expand its physical retailfootprintoverthenextyearwithanewstoreinNewYorkCity.

Yogasmogawas founded in 2013 by brother and sister Rishi andTapasya Bali. Its first collection of athleticwear sold out in threeweeks.Thecompanyhas12storesintheUSandplanstoopen25more by the end of the year. The goal is to enter into moremarkets in the US and Canada, and to service the rest of thecompany’s growing international customer base online.Yogasmogastartedoutsellingonlyyogawear,butnowsellsclothesforrunningandspinning,anddaywearaswell.Still,dedicationtoyogaasalifestyleisabigpartofitsbranding.

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ThecompanymanufacturesallofitsproductsintheUS—eventheyarnisboughtintheUS—andthefabricisdevelopedinCalifornialabs.AnotherpointofdifferentiationforYogasmogaisitstechnicalfabric, which the company says is resistant to pilling and offerssuperiormoisturewicking.

Carbon38wasfounded in2013byex-balletdancersKatieWarnerJohnson and Caroline Gogolak. The company operates an e-commerce site that features high-fashion, high-end activewearmodeled by fitness instructors. In 2015, Carbon38 introduced anin-house label that was meant to fill the gap between theactivewearitsellsonitssite,frombrandssuchasLucasHughandAlo Yoga, and ready-to-wear apparel. The range features basicleggings,butalsoblazersandcoatsmadefromtechnicalfabrics.

Carbon38 is on track to generate nearly $20 million in sales in2016. Plans for the current year include collaborating with high-end designers on capsule collections, introducing sport-specificcategoriesandlaunchingamen’slineinSeptember.

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KitandAcewasfoundedin2014byJJandShannonWilson,withsupport from Lululemon founder ChipWilson,who is JJ’s fatherand Shannon’s husband. The company aims to outfit itscustomers ineveryday clothes thatperform likeathleticappareland can carry them throughout the various activities theyparticipateinonagivenday.

Thecompanycurrentlyoperates61stores in theUS,Canada, theUK, Japan and Australia. About 60% of the locations areshowroomsortemporaryspaceswithshort-termleasesthatallowKit and Ace to test the market before fully committing to aparticularspace.Thecompanyhasplanstoopenanotherroundofshowroomsinthesecondhalfofthisyear.

Bandierwas foundedby formermusic executive Jennifer Bandierandherhusband,NeilBoyarsky,andBarneysCo-opfounderJayneHarkness in2014.Thecompanyisamultibrandretailercarryingarange of athleisurewear and is known for bringing many smallerbrands under one roof by curating high-end, fashion-forwardwomen’sactivewearcreatedbyarangeofdesigners.Bandiersells

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close to 400 products from more than 40 different designers,including Human Performance Engineering, Varley and Ultracor.Printedleggingsrepresent45%ofBandier’ssales.

Thecompany’sFlatironstoreinNewYorkfeaturesa3,000-square-foot fitness studio that offers more than 25 classes each week.Bandier is planning to open aWest Coast flagship in LosAngeleslaterthisyear.

Tracksmith was founded in 2014 by Matt Taylor and LukeScheybeler, the latter of whom also co-founded cycling brandRapha.Tracksmith isarunning-firstbrandand isbased inBoston.The products are a take on the collegiate track-star gear of the1970sand1980s.Thebrandoriginallylaunchedwithmen’sapparelonly;awomen’slinewasintroducedninemonthslater.Currently,the male/female customer ratio is 70%/30%. According to thecompany,year-over-yearsaleshavedoubled.

CELEBRITYCOLLABORATIONS

IvyPark–BeyoncéandTopshop

IvyPark is a joint venturebetweenBeyoncéandSirPhilipGreen,majority owner of Topshop. The line launched on April 14 in 50countries at Topshop, Zalando, Net-A-Porter, Selfridges andHudson’sBay.Accordingtothecompany,thecollectionisaimedatwomenwholovetosweat,whethertheyare“running,lifting,yogastretchingorkickboxing.”Thepiecesaremeanttofitlikeasecondskin, with built-in support and moisture-wicking fabrics. Thecollection ismeant to perform in and out of sports andworkoutenvironments, and has been designed around a variety of bodytypes,withsizesrangingfromXXStoXL.

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CaliabyCarrieUnderwood–CarrieUnderwoodandDick’sSportingGoods

In 2014, Carrie Underwood, American Idol winner and currentcountrymusic artist, announced that she would launch a line offitness lifestyle apparel to be sold exclusively at Dick’s SportingGoodsbeginninginearly2015.Underwooddesignedthelinewithwomeninmind,strivingtohelpthemmaintainanactive lifestyle,whilealsobeingfashionforward,atanaffordablepricepoint.Thelinewasrecentlyextendedtoincludeaswimwearcollection.

Fabletics–KateHudsonandJustFab

Fabletics was founded by AdamGoldenberg, Don Ressler and KateHudsoninJuly2013andofficiallylaunchedinOctober2013.InJune2015, Fabletics launched FL2, its men’s activewear line with KateHudson’s brother, actor Oliver Hudson. In late 2015, Fableticsopeneditsfirstbrick-and-mortarretailstores.In2016,thecompanyexpanded beyond athleticwear by adding dresses and swimsuits toits line. In February 2016,Forbes reported that 75 to 100 Fableticsstoresarescheduledtoopenoverthenextthreetofiveyears.

LikeUnderwood’sCaliacollection,Fabletics’apparelismoderatelypriced.However,Fableticsusesasubscriptionmodel:membershipcosts $49.95 per month, and members receive discountedathleisurewear.Members can choose to skip amonth altogetherwithout charge. Upon registering, members are required tocomplete a survey regarding their workout and lifestylepreferences. At the start of eachmonth, personalized outfits arechosenforeachmemberbasedonthesestatedpreferences.

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TRADITIONALATHLETICWEARCOMPANIESThetopthreeperformancebrands,Nike,UnderArmourandAdidas,all started out targeting men with apparel made from high-performancematerials. But they have turned their attention to thewomen’smarket,whichtheyseefuelinggrowthinthenextfewyears.

Nikeisamajorplayerandthemarketshareleaderinathleticwear,so it makes sense that the company is moving into the growingathleisure space. It is actually going all in on the women’sathleisurewear, offering comfortable, fashionable and sportyclothesandfootwear.Asthegraphbelowillustrates,Nikehaslongdominated in the menswear category, while its women’s saleshavetrailed.Theathleisuremarket isaclearopportunity forNiketogrowitswomen’sbusiness.

Figure5.NikeWholesaleRevenue,byGender(USDMil.)

Source:Companyreports

Nike forecasts that sales of its women’s products will roughlydouble by 2020, though those products’ share of total sales willremain about the same. In Nike’s last fiscal year,women’s itemsaccountedforabout20%ofthebrand’s$25.8billioninsales.

The company’s approach to women’s gear remains performanceoriented.Nikesaiditsproductdesignprocessfocusesonaddressingits customers’ technical needs, but that that does not necessarilyhavetocomeattheexpenseofdesignandstyle.Thecompanyhasasizeableaudienceofbuyersprimed topurchase itsnewgear,as70millionwomenareconnectedtoNike’sonlinecommunity.

UnderArmour recentlyhirednewexecutives to lead itswomen’sapparel and footweardivisions. Earlier this year,CEOKevinPlankforecast that the company’s women’s business will eventuallyoutperformitsmen’sbusiness.

4,494 4,9715,724

13,07314,001

14,694

2013 2014 2015

Women's Men's

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Under Armour has also been aggressively pursuing the social-media-attuned workout junkie with a series of app acquisitions.Most recently, it debuted wearable fitness gear as well as arebootedapppoweredbyIBM’sWatsonsupercomputer.

Adidas recently hired Nicole Vollebregt to head its women’ssegment, and the company is exploring new retail options,including getting its gear back in some of the shops at Equinoxgyms. The company has also brought in former Lululemon CEOChristineDay to help advise on retail strategy and collaborationswithsmallerbrandsinthewomen’sbusiness.ItsReebokbrandhasteamed upwith New York–based graffiti artist Upendo Taylor tomakeexclusiveproductsforBandier.

Inaddition,FootLocker isparingback itsLadyFootLockerstorestomakewayforanewmodelofbiggerstorescalledSix:02.Dick’sSportingGoodsput expansionplansof its newChelseaCollectiveboutiquesonholdafterithadtoalterthemerchandiseinitsinitialtwolocations.

TraditionalApparelBrands

Tory Burch added Tory Sport as a complementary line to itsmaincollection in 2015. The Tory Sport line includes a number of sportcategoriesnotofferedbyotherathleticwearbrands,suchastennis,golfandstudio.Thecompany refers to the lineasa “toppriority.”ThereisoneTorySportstoreintheFlatirondistrictinNewYorkandthe company plans to operate a pop-up shop in downtown NewYork. In addition, it will convert an existing Tory Burch location inEast Hampton to a Tory Sport store. The line’s first wholesaleaccount,BarneysNewYork,waslaunchedinearlyApril.

UrbanOutfitters launched its athleisure brand,WithoutWalls, in2014. The retailer alsobegan sellingmerchandisebybrands suchas Patagonia and The North Face and gear such as yoga mats.Without Walls was advertised as “a community of adventureseekers—fitness enthusiasts, surfers, runners and trail-blazers ofallkinds—whoplayhardandliveforthejourney.”Theassortmentissoldprimarilyonlineandinselectstores.

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Also in 2014, Loft, a division of Ann Inc., launched Lou & Grey, acasual brand that is a fusion of activewear and streetwear, or“lifewear,”asitisbeingcalled.InitiallyofferedinLoftstores,theLou& Grey brand now has two stand-alone stores as well. The brandoriginally grew out of the Loft Lounge concept, and includesloungewear-type clothes in a muted color palette. The store alsocarriesmerchandisebyotherdesignersthatfitthevibeofthestore.

Net-A-Porter, the high-end fashion e-commerce site, launched asister site, Net-A-Sporter, in 2014. Net-A-Sporter featuresathleisurewearandassociatedproducts,andthesiteisdividedinto12 sections based on activities: gym/CrossFit, run, yoga/dance,tennis, equestrian, swim/surf, après, golf, accessories, outdoor,sailing and skiing. Theoffering is curated across different brands,asitisonthecompany’smainsite.

Kate Spade announced an expansion into the athleisure spacethrough a partnershipwith Beyond Yoga in spring 2016. The 21-piece, limited-edition collection features Kate Spade’s signaturebright colors and Beyond Yoga’s silhouettes. The collaborationmarks the first time both companies have collaborated onathleisure. The assortment will be sold at select specialty storesandboutiquestudiosandthroughbothcompanies’websites.

Athleisure Has Outpaced Traditional Apparel Sales Growth, andtheMarketContinuestoGrow

According toEuromonitor International,US salesofperformance,outdoor and sports-inspired apparel and footwear totaled $97 -billion in 2015. Thatwas40%higher than in 2010 and7%higherthanin2014.

Figure6.US:SportsApparelandFootwearSales(USDMil.)


69,363

73,872

79,055

85,126

91,144

97,144

2010 2011 2012 2013 2014 2015

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Figure7.US:ApparelandFootwearSalesGrowthvs.AthleisureSalesGrowth


In many ways, activewear and athleisurewear have replaceddenim. According to The NDP Group, the athleisure bottomsbusiness (particularly leggings) has displaced the jeans businessone to one. Denim, specifically premium denim, was a hotcommodityaroundtheyear2000.Consumerswerewillingtoshelloutupwardsof$200–$300forapairofjeansatthattime;by2005,theaveragedenimspendwas$25.

Figure8.US:SportsApparelandFootwearGrowth(USDMil.)


6.50% 7.02%7.68%

7.07% 6.58%

2.96%2.24% 2.15%

2.39%

3.45%

2011 2012 2013 2014 2015

Athleisure ApparelandFootwear

48,922 52,180 55,572 59,740 63,658 67,432

20,44121,692

23,48425,386

27,48729,712

0

20,000

40,000

60,000

80,000

100,000

2010 2011 2012 2013 2014 2015

SportsApparel SportsFootwear

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DriversofCategoryGrowth

Millennials’FocusonBeingActive

According to theUSCensusBureau,millennials, defined as thoseborn between 1980 and 2000, are currently the largestdemographic in the US. As of 2015, they numbered almost 92million, compared to 61 million Generation Xers and 77 millionbaby boomers. To put that into perspective, millennials nowcompriseroughly28%oftheentireUSpopulation.

Millennials also now represent the largest segment of the USworkforce: they number 53.5 million workers—more than one-third of the total workforce. And that number is expected toincrease to 75% within a decade. So, the habits and spendingpatternsofmillennialswillbesignificanttotheoveralleconomyasthey enter their prime working and spending years. In general,millennials’ spending skewsmore toward creating a lifestyle andhavingandsharingexperiences than itdoesonacquiring tangibleitems.

Formillennials,healthandwellness isadaily,activepursuit.And,forthem,beinghealthydoesnotjustmeannotbeingsickorbeingingoodshape; itmeanstakingamoreholisticapproachtoeatingrightandexercising.Millennialsareexercisingmore,eatingbetterandsmokinglessthanpreviousgenerations.

DigitalagencyDeepFocussurveyedmorethan1,700AmericansforitsCassandraReportonhealthandwellness,andfoundthatmorethan one-third of millennials said they had cut back on otherspending in order to make more health-related purchases. Thesurveyalsofoundthat46%ofwomenrespondentsages19–34saidthey had become more interested in athleisurewear in recentyears, and athleisure is a category that millennials are willing tospendtheirmoneyon.

A survey undertaken by Aetna found that millennials are muchmore concerned about eating right and exercising than previousgenerationswere:24%ofthemillennialssurveyedsaidthateatingsensibly is themost important aspect to achievingwell-being. Bycontrast, only 12% of baby boomers responded that way. In theUS, 40%ofmillennials look for limited or no artificial ingredientswhenreadingfoodlabels,comparedwith33%ofbabyboomers.

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Figure9.ShareofUSPopulationthatConsidersEatingRighttheMostImportantBehaviortoStayHealthy

Source:Aetna

Figure10.ExerciseHabitsofAdults

Source:Nielsen/LesMills

Figure11.ExerciseHabitsofMillennials


12

14

24

0 5 10 15 20 25

BabyBoomers

GenerakonX

Millennials

%

22%havenointerestinexercising

39%exerciseregularlywith87%exercising3ormore

kmesaweek

Another39%arenotcurrentlyexercisingtokeepfitandhealthybutwould

liketo

Globally,78%oftheadultsover18yearsoldexerciseorwouldliketo

20%havenointerestinexercising

45%exerciseregularly

36%arenotcurrentlyexercisingtokeepfitandhealthybutwouldliketo

81%ofmillennials(18–34-year-olds)exerciseorwouldliketo(vs.only61%ofbabyboomers)

39%

22%

39%

45%

20%36%

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Millennials are as social in their fitness activities as they are inotherpartsoftheirlives,unlikemanyinpreviousgenerations,whomight have lifted some weights and then left the gym withouttalking anyone else. Surveys show participation in group fitnessand exercise classes is up among young adults in the US and,according to Nielsen, female millennials are particularly fond ofclasses.Astheydowithmanyaspectsoftheirlives,millennialsareusing social media to share their fitness experiences with theirfriends.FormanyyoungerworkersincitiessuchasNewYorkandLosAngeles,spinningclassesarestartingtoreplacecocktailbarsastheafter-workgo-todestination.

Boutique fitness studios such as SoulCycle, Flywheel, Pure Barreand Barry’s Bootcamp are extremely popular, and many fitnesscenters now offer a wide variety of exercise classes, includingCrossFit, high-intensity training, yoga, Pilates, dance, barre andZumba.

Figure12.FitnessClassParticipation,byAgeGroup


46%

10%

19% 20%16%

24%

13%

30% 30%

24%

13%

39%

5%

11%15%

7% 10%

5%

20% 20%16%

3%

27%

5%8% 7% 6%

4%

12% 12% 12%

1%

FITNESSCLASS

ACTIVITIES*

GROUPTRAININGINDOORS

FITNESSCLASSES

TOMUSIC-INDOORS

YOGA PILATES DANCE WORKOUT

WITHPT

FREEWEIGHT

WEIGHTMACHINE

CARDIOMACHINES

BOXING

18-34years 35-54years 55+years

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IncreasedFocusonHealthyLifestyle

Athleisure companies have also benefited from a general shift intheUStowardhealthiereatingandliving.McDonald’srevenuehasfallen consecutively for the last two years, but the company hasbenefited from the addition of healthier options, including newsalads, to its menus. Carbonated soft drink sales have alsodropped,foratleastsixconsecutiveyears,aspeoplehavefocusedoneatingrightandlivingahealthylifestyle.

Figure13.McDonald’sTotalGlobalRevenues(USDMil.)

Source:S&PCapitalIQ

Figure14.USCarbonatedSoftDrinkSales(GallonsBil.)

Source:Trefis

24,074.6

27,006.0

27,567.0

28,105.7

27,441.3

25,413.0

23,000

24,000

25,000

26,000

27,000

28,000

29,000

2010 2011 2012 2013 2014 2015

13.8913.78

13.54

13.3

12.8712.75

12

12.5

13

13.5

14

2009 2010 2011 2012 2013 2014

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Athleisure brands have been successful in building an emotionalconnectionbetweenproductandcustomer,making itmore likelycustomerswillmakemultiplepurchases.Customerswantnotonlythe items they are purchasing themselves, but also the activelifestyle that comeswith them.They lookand feel thepartwhilewearingathleisure garments,which inspires them toembody thecharacteristics that athleisure brands represent.With health andwellness trending as a lifestyle, athleisurewear’s outperformanceversusoverallapparelshouldnotbeasurprise.

RelaxationofOfficeDressCodesandCasualizationofGeneralStyleofDress

Since the 1960s, American youth have been pushing theboundaries with regard to casual dress. By the 1990s, studentswere showing up to class in sneakers and sweat pants. Butgraduation from college generally meant transitioning into more“proper” adult clothing that was appropriate for a workplacesetting. These days, activewear once reserved for the gym isconsidered, at least in some industries, appropriate office-casualattire. Leggings, hoodies and sneakers are athleisurewear basics,andtheyareshowingupinallbutthemostformalsettings.

Another part of athleisurewear’s attraction is that it meetsconsumers’ desire for clothing that is both comfortable andfunctional. Many people are so overscheduled that they do notwant to focuson theirwardrobe—theywould rather spendmoretimethinkingaboutanddoingmoreimportantthingsintheirlives.Theycanwearathleisureweartothegym,inthegymandfromthegym.Itallowsthemtonolongerhavetoworryaboutthehassleofdraggingalongmultiplechangesofclothingfordifferentsettings.

AthleisureTrends

LuxuryRedefined

As athleisurewear has become more popular and acceptable towear in various settings, luxury and higher-end designers havebecomemore prevalent in the space. In some cases, consumersarepayingseveralhundredtooverathousanddollarsforapairofleggings. Designers are mixing materials, adding patterns andtexturetoenhancetheirofferings,andmakingthemmorefashionforward inordertorationalizethepricepoints.DesignerssuchasDonna Karan and Brunello Cucinelli have even offered cashmereleggings.

Ultimately, though, consumers buy athleisure apparel at a higherpricepointbecause they aremotivatedby theperceived lifestylebenefits that come with the clothing. The emotional connectionwith the brand is what keeps consumers keep coming back. Theluxuryaspect isnot in thegarment itself; it is in the lifestyle andtheconcept.

Luxuryandpremiumbrandsaccountedforacombined16%oftheathleticwear market in 2015, according to apparel analytics firm

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Edited.Themajorityofthesegment,81%,belongstomass-marketbrands.

Figure15.MarketSegmentationofAthleisure

Source:Edited

Figure16.SelectedAthleisureBrands’PricePositioning


81%

13%

3% 3%

Mass Premium Luxury Value

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BringingFitnessClassesintoRetail

Severalretailers,includingAthleta,Bandier,LululemonandSweatyBetty, have started offering fitness classes in their stores. Fitnessstudiosareincorporatedintotheirretaillocations,andsomeofferasmanyas fiveclassesaday.Someclassesare free,whileotherscostaboutthesameastheywouldatagym.

Fitness classes can boost store traffic, and retailers benefit byhaving health-and-fitness-minded consumers walking throughstores filled with merchandise that appeals to those veryconsumers. In-storefitnessandwellnesseventsengageathleisurecustomers beyond their shopping experience, catering to theiroverallwellnesslifestyleneeds.

Bandieroffersrewardssuchasdiscountstocustomerswhoattendclassesatitsstores.Thecompanyholdsfourtofiveclassesperday,led by well-known instructors. Class offerings include NicoleWinhoffer’s NW Method, popular SoulCycle instructor AkinAkman’s own Akin’s Army, Yoga for Bad People flow classes andIntenSati.

SweatyBetty’sGetFit4Freecommunityinitiativeincludesin-storeclasses aswell as online videos of classes, including boxing, HIIT,barreandevenboutiqueclassessuchasBarry’sBootcamp.

Nikealsomakes fitnessaccessible toeveryone.Mostmajor citieshaveaNike+RunClub,whichoffersaseriesofworkoutsaimedathelping runners improve. Expert coaches teach classes for speedtraining and long runs, among other things, to members of thegroup.

AdjacentAthleisureCategories

Giventhewidespreadpopularityofathleisurewear,new,adjacentcategories have emerged to support the lifestyle beyond thegarments themselves. Birchbox, the beauty subscription service,recently launchedArrow, amakeup and skincare line targeted towomentowearduringandafterworkouts.Thehigh-performance

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linewas created to “help you look yourbestwithout looking likeyouaretryingtoohard”andwasinspiredbytheathleisurefashiontrend. The offering currently includes a cheek tint, lip balm anddeodorant. In addition, Birchbox plans to add five new Arrowproducts later in the spring, including a facial mist, a water-resistant mascara, cleansing cloths, a tinted serum and a tintedbrowgel.

Conclusion

Somehavequestionedwhethertheathleisuretrendissustainable.Does it represent just a fleeting fashion or a more structural,cultural shift in the way people dress? That is the key questionrelatingtotheathleisuresegment.

Willconsumersgrowtiredofthiscategoryandcast itasidewhenthenexttrendcomesalong?Noonecansayforsurehowlongthetrendwillbearound,butwebelieveithasroomtogrowandcouldmorph into other categories. The case for athleisure’s stayingpower is underpinned by a larger cultural shift toward a healthylifestyleandbydemandforclothingthatiscomfortable,functionalandversatile.

Therehasbeen some recentdiscussion in the industry about theathleisure segmentpeakingandathleticproducts’ salesdeclining,and we think this is a reflection of the trend having played out(giventhe8–10-yearcyclethatcharacterizesmostappareltrends).We do not think the current rate of growth in the category issustainable. But we do think the structural changes in the waypeople live and the way they want to dress to support theirlifestyle will ensure that the category continues to exist—and togrow—albeitatamoremodestrate.

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DeborahWeinswig,CPAManagingDirectorFungGlobalRetail&TechnologyNewYork:917.655.6790HongKong:852.6119.1779China:86.186.1420.3016deborahweinswig@fung1937.comShoshanaPollackSeniorResearchAssociateHONGKONG:10thFloor,LiFungTower888CheungShaWanRoad,KowloonHongKongTel:85223002470LONDON:242-246MaryleboneRoadLondon,NW16JQUnitedKingdomTel:44(0)2076168988NEWYORK:1359Broadway,9thFloorNewYork,NY10018Tel:6468397017FBICGROUP.COM

july 6, 2016 gym clothes are making their way out of the ... … · the athleisure trend....

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