Market Opportunity Analysis:

Yoga Apparel/“Athleisure” Wear

Bryan PeeblerPeebler Consulting

September 2016

Market Overview

The US Yoga Market (1 of 2)

Yoga Alliance + Yoga Journal recently released the quadrennial “Yoga in America” Study

Highlights:36M yoga practitioners*22M yoga “enthusiasts”**44% of practitioners classify themselves as “intermediate” or “expert”70% of practitioners are women81% of practitioners have practiced outside of the studio in the last 12 months

72%

3%

5%

4%

3% 2%11%

NeverPar/cipated

Today

Inthelastweek

Inthelastmonth

Inthelast6months

Inthelast12months

Morethan12monthsago

0%5%

10%15%20%25%30%35%

5ormore,mesaweek

2-4xaweek

Onceperweek

Several,mesamonth

Oncepermonth

Lessthanoncepermonth

Don'tremember

Frequency of Practice

Length of Time Practicing

Experience Level

30%

44%

17%

7%

0-1Years

1-5Years

6-10Years

0-1Years

56%42%

2%

BeginningPrac00oner

IntermediatePrac00oner

Expert/AdvancedPrac00oner

When is the Last Time you Practiced Yoga?

2015 Yoga In America Study Highlights

* Defined as people who have practiced yoga in the last 6 months in a class setting and who are not teachers

** Defined as people who have practiced Yoga once or more per week over the last 6 months

The US Yoga Market (2 of 2)“2015 Yoga in America” study highlights (cont’d):

~50% cite “improve overall health” as a reason to start/continue Yoga~$17B spent on clothing, classes, accessoriesClasses/instruction is the largest spending category, followed by clothing

2015 Yoga In America Study Highlights: Spending Patterns

FlexibilityStress Relief

General Fitness/conditioningImprove Overall Health

Physical FitnessStrength

Mental HealthSpiritual Development

Weight LossPhysical Therapy

Medical ConditionPrenatal Health

None of the AboveOther

Motivation to Start Practicing Motivation to Continue Practicing

Yoga Classes

Yoga Clothing

Yoga Equipment

Yoga Accessories

31%!

22%!

27%!

24%!

17%!

18%!

11%!

15%!

14%!

21%!

All Practitioners!

Enthusiasts!

30%!

23%!

34%!

31%!

19%!

21%!

9%!

13%!

7%!

12%!

All Practitioners!

Enthusiasts!

39%!

30%!

36%!

34%!

14%!

17%!

7%!

10%!

4%!

9%!

All Practitioners!

Enthusiasts!

65%!

52%!

19%!

20%!

8%!

11%!

4%!

7%!

4%!

10%!

All Practitioners!

Enthusiasts!

65%!

52%!

19%!

20%!

8%!

11%!

4%!

7%!

4%!

10%!

All Practitioners!

Enthusiasts!Nothing

<$50

$50-$99

$100-$199

$200+

Yoga Spending by Product Category (last 6 mos)

FlexibilityStress Relief

General Fitness/conditioningImprove Overall Health

Physical FitnessStrength

Mental HealthSpiritual Development

Weight LossPhysical Therapy

Medical ConditionPrenatal Health

None of the AboveOther

2015 YIA Study Highlights:Practice Motivations

$5,800!

$4,600!

$3,600!

$2,800!

Yoga Classes!

Yoga Clothes!

Yoga Equipment!

Yoga Accessories!

Total Yoga Spend by Practitioners ($M)!

Last 12 mos!

Last 6 mos!

The Yoga Market: Other PerspectivesGoogle Trends: Online interest in Yoga topics has almost doubled since 2008.International Yoga Federation: 300M+ people practicing Yoga worldwide in 2010. Japan is fastest growing marketNHS: ~10% of the US adult population (24M people) practicing Yoga worldwide in 2010Multiple sources: US yogis are generally higher income, disproportionately white and college educated and mostly womenIBISWorld: US Yoga/Pilates studio business generates $9B/year;30K businesses employing 94K people National Health Interview Survey 2002-12

Google Trends Report 8/2016

International Yoga Federation Infographic

International Yoga Federation Infographic

Yoga Apparel: “Athleisure” BoomsYoga wear has spawned a new category -- “Athleisure” -- that has taken fitness wear mainstream

Athleisure on track to be a $100B market in 2016 (New York Times)In 2013, sales of yoga apparel increased 45%, while yoga participation increased only 4.5% (SportsOneSource/Forbes)Athleisure to be added to the Merriam Webster dictionary later this yearMost major fashion brands are acting on the trend

What started as a cultural acceptance of yoga pants being worn in after-yoga settings has spiraled into a fashion craze, with even iconic fashion houses like Chanel sending sneakers down the runway in their fall 2014 Ready-to-Wear fashion show. This shift from traditional to gym-ready, everyday apparel has so greatly surpassed the threshold of a fashion trend that it has evolved into its own lifestyle.

Kelton Global Consulting (2015)

Athleta store window display

Lululemon yoga pants display

H&M activewear

Yoga Wear is Becoming A “Red Ocean”The Yoga wear market is increasingly crowded, with a mix of established players & new entrants

Lululemon established the market for fashionable high-end yoga wear; other major and boutique brands followedDozens of high-end boutique players now in the marketMajor chains targeting mid-market with affordable athleisure apparel.

“There’s a lot of wannabes out there creating noise,” said Matt Powell, at the NPD Group, a market research firm. “The shakedown’s started. A lot of these brands are going to go away.”

New York Times, March 2016

AloBandierBeyond YogaBody Language HPEKarma AthleticsKatasanaKast FitnessKira G KoralraceLily LotusLorna Jane

LoleLucyLukka LuxMontielNina B. RozeOmGirlOnziePure YogaPranaSolowSweaty BettyTeeki

VarleyYoga DemocracyYoga RebelYogaSmogaZobha

High-end Boutique Mid-MarketCalia by Carrie Underwood

Calvin Klein PerformanceFabletics by Kate Hudson

GapFitGaiam

H&M SportswearJC Penny Exersion

Under ArmourZella (Nordstroms)

Recreate logo

Found from our ftp

High-end Major BrandsLululemon

Athleta (Gap)AdidasNike

Victoria’s Secret Sport

Big Players Dominate Yoga ApparelAthleta and Lululemon are dominant brands/sales channels

Taken together, they constitute over half of the US online yoga apparel market

Athleta

Lululemon

Nike

Under Armour

Victoria’s Secret

Adidas

GapFit

ASICS

C9 by Champion

Fila

Brooks

Puma

Reebok

Calia

Athleta

Lululemon

Amazon

Victoria’s Secret

Nike

UA

Other

Gap

Kohl’s

Zappos.com

Nordstrom

Target

Macy’s

Dick’s

Eastbay

Sports Authority

Foot Locker

Piperlime

Unclear how much sales volume moves through boutique online shops (included in the “other” category”)

* Market share data including brick-and-mortar women’s apparel sales is not publicly available; online data provide as a rough proxy or overall market share.

Yoga Apps & Online Classes ProliferateHundreds of yoga apps available for both iOS and Android

100+ Yoga apps available on the Apple App Store; 250+ on Google PlayMost are focused on demonstrating poses (replicating in-class experience). Some focus on specific aspect of Yoga, such as breathing or meditationMost have achieved only modest penetration -- only Daily Yoga, yoga.com and Simply Yoga (all free) have achieved >1M downloads. Numerous “niche” apps in the 100-500K download rangeOnly augmented reality Yoga app found is Saagara AR. Superimposes various yoga poses/yoga art on top of printable postersiYoga Premium shows anatomically correct poses demonstrating muscle groups

YogaGlo, Yoga Anytime, MyYogaWorks, Yoga International and several others offer paid, on-demand yoga classes

Yoga.com app Daily Yoga app main menu screen iYoga Premium screenshot

Saagara AR screenshot

Yoga Studio Chains EmergeYoga studios are largely individually-owned. However, several large and growing chains have emerged:

CorePower Yoga, described by some as the “Starbucks of Yoga studios”, now operates 150+ studios nationwide. Received private equity investment from Catterton Partners in 2013.YogaWorks operates 40+ studios nationwide, plus online classes. Acquired by Great Hill Partners in 2013.Snap Fitness recently partnered with YogaFit to launch a nationwide chain of studios. 10 open so far. Stated goal is 1000 studios. Yoga at Equinox offers Yoga practices at 89 high-end fitness studios in the US, Canada and the UK.Other players include YYoga (13 Canadian locations), Yoga to the People (9 US locations), Pure Yoga (16 locations across Asia/NYC + online app), Jivamukti Yoga (16 international locations) and Exhale (29 US Locations)

CorePower Yoga mission statement

Meridian Yoga is a Largely Untapped Market Space“Meridian Yoga” is relatively unknown -- although some Yoga enthusiasts are familiar with the role of meridians

Google Trends reveals very little online activity around Meridian Yoga (especially relative to other yoga types)Meridians in the context of Chinese alternative medicine is more widely discussed online -- highest interest in China Individual Yogis are peripherally aware, at best, of meridians. Instructors are more aware, but lack deep knowledge (see User Insights section for more details)

Daniel Orlansky Meridian Yoga chart

A few studios offer Meridian Yoga-based programsBob Cooley offers “Cooley Yoga”, which incorporates resistive stretching into Yoga posesDaniel Orlansky offers “Meridian Yoga” classes, which integrate “yoga poses and partner assists for the 14 acupuncture meridians”, along with resistive stretchingAnnie Cryar offers Meridian Yoga classes/teacher training in the UK, based on the philosophy of Vanda Scaravelli

Google Trends reports for different Yoga types (8/3/16)

Bikram Yoga

Meridians

Meridian Yoga

Online Interest Over Time

Online Interest by Geography

User Insights

User Insights -- MethodologyInterviewed 14 Yogis -- 5 instructors, 4 studio owners/instructors, 5 individual practitioners

Most were 30-minute phone interviews; 2 were conducted in personAll but one interview were with womenInterviews focused primarily on understanding the subject’s Yoga practice, purchasing habits, and well as their knowledge of/reaction to key themes and benefits associated with the product. Spent a small amount of time at the end of each interview getting reaction to broad product conceptInterview subjects came from a wide variety of Yoga expertise and backgrounds – although all are serious Yoga practitioners

Yogi interview participants

Instructor/Studio Owner Insights (1 of 2)Common themes from instructors and owners:

Most of their students are serious Yogis – many start focused on fitness, but get pulled toward the mental health and spiritual benefits as they get more familiar with Yoga. Not surprisingly, teachers at studios attached to fitness centers/gyms tend to see a higher proportion of casual yogis.Nearly all share a strong belief in fundamental health benefits of Yoga – instructors cited usual stress relief, mobility/flexibility, blood pressure benefits, but also ability to heal diseases and specific parts of the body, including organs.Awareness and use of meridians/energy pathways varies widely. All had at least some familiarity with the concept of Meridians/energy pathways, but it was usually fairly shallow knowledge. Two had studied Meridians in some depth (one studied with a teacher in India, one self-taught).Strong interest in learning more about the meridian concept and how to integrate. All were intrigued/excited to learn more. One is already planning to do more research. Most expect to be educated in workshop format. Several could see potential for a regular Meridian Yoga class. Those at fitness-focused studios believe students would be less interested.

Instructor/Studio Owner Insights (2 of 2)Common themes from instructors and owners (Cont’d):

Owners generally receptive to workshops – owners were generally open-minded about hosting a workshop focused on meridian yoga, as long as it is led by a reputable Yogi. Higher barrier to new classes – some studios are open to experimentation, while others (e.g. Bikram, CorePower) have a fairly rigid set of classesMixed reaction to pants concept – two instructors loved the idea (one sent pictures of similar pants!), others were receptive, but needed to see a specific product concept. Hard for them to imagine how the pants would be used in a class setting; more for individual practice.The idea of an app with the pants was intriguing to some – two of the instructors/owners liked the idea (one even had specific suggestions about how it should work). Others had a hard time visualizing how it would work.In-studio retail is specialized/personalized -- Independent studios tend to sell branded wear as well as products that the owner/manager loves (sometimes with a trunk show to prove viability first). (Note that this does not necessarily apply to larger chains)

Individual Practitioner Insights (1 of 2)Common themes from yoga practitioners:

Strong belief in health benefits of Yoga, both mental/physical. Numerous mentions of digestive health, stress reduction, skin health, sciatica, scoliosis, eliminating toxins. One respondent mentioned help with kidney problems. Some use of Yoga to unblock/unlock specific muscle groups -- 3 of 5 respondents work on specific muscle groups during yoga. But not a huge focus. Little familiarity with Meridians – but most were somewhat familiar with the concept of Chakras and energy flow. 3 out of 5 respondents had done acupuncture and were familiar with pressure points. Positive reaction to the “organ health” benefit. None of the interviewees are actively incorporating meridians (or similar) into daily Yoga practice – but there is definite interest in learning more about them.

Most were intrigued by the concept of meridian-inspired Yoga wear, but need to see a specific concept to say more. Pants must meet functional and design requirements first, to be considered at all.

Individual Practitioner Insights (2 of 2)Common themes from yoga practitioners (cont’d):

Workshops are the preferred/expected way of learning how to incorporate meridians into Yoga practice. Yogis want to experience it before committing to it. Little current use of Yoga apps – mixed reaction to app as a way to learn about meridiansMost spend more on Yoga classes than they do on clothes. Yoga classes make up the biggest part of yoga budgets for serious yogis. Many paying $80-$100/month for class passes. Clothes purchases tend to be more practical – higher end brands are seen as luxury/occasional purchase.Most purchases made through traditional retailers – but most make occasional purchases at their studio. In-studio purchases are usually of branded studio wear and/or unique apparel items. Also a bit more likely to purchase mats/accessories there.

User Insights -- Overall TakeawaysSerious yoga practitioners would be a receptive audience for meridian-inspired products. There is definite willingness to learn more. And the idea of meridian-inspired pants intrigues Yogis, although they need to see more to give a valid response.BUT… there is significant education to do with Yogis about the meridians and the role they play in the body. (For example, most yogis don’t understand the difference/relationship between meridians and Chakras.)Given that, a purchase decision for pants alone would need to be informed by additional knowledge about the benefits of meridian-inspired Yoga. This would be a different buying process than Yogis are currently utilizing to purchase Yoga apparel. (More like a training aid than standard apparel?)The natural place for Yogis to learn more about meridians would be in a workshop-type setting. Unclear extent to which workshop would drive an apparel purchase decision. Value of an app is unclear from these interviews – some interest, but need to test specific concepts to get a valid read.Studios are a possible retail path for a specialized apparel product – but have to get studio owners’ buy-in, and they are small volume. With the exception of large chains, this is likely a very personal sales process with studio owners.Apparel must meet fit/function needs (including the right materials) and have good design for Yogis to even consider additional benefits.

Yoga Market Segmentation

True Believers Serious Yogis Casual Participants Fashion & Comfort

• Yoga as a lifestyle• Strong interest in spirituality,

in addition to fitness/health• Proactively study Yoga;

interested in new knowledge

• Being fashionable/looking good is lower priority. Fit and function of wear is critical

• Yoga as a very important lifestyle activity

• Practice weekly (most practice multiple times/wk)

• Some more focused on fitness, others more balanced

• Open to learning, but don’t proactively study

• Like to be fashionable, but fit/function/durability of wear is more important

• Yoga as one of many activities

• Attend class sporadically• Almost sole emphasis on

fitness and health• Take instruction, but not

motivated to learn beyond the class

• Being fashionable is more important

• Little/no participation in actual Yoga

• Wear yoga gear as a regular part of their daily wardrobe

• Some want to associate themselves with fitness/wellness lifestyle

• Brands, style and comfort are important purchase drivers

Yoga Participants

~10% ~50% ~40%

Persona: “Becca”Rebecca, known to her friends as “Becca” is a 28 year old, single marketing manager, living in an upscale condominium in Dallas. She is a busy professional, working 50-60 hour weeks and traveling occasionasionally on business. Becca has a serious boyfriend, a wide circle of friends, and a cat. Becca is active on social media and is generally tech saavy (she loves her Apple Watch), although she considers herself far from a tech “geek”.

Becca cares deeply about her own health and wellness. Given her busy life, she needs to be able to perform at her peak. She tries to eat well (she’s a vegetarian), reads a lot about wellness (mostly online), and keeps herself fit, though a combination of traditional workouts and Yoga. She often shares new things she learns about wellness with her friends -- she wants them to be healthier, too.

Becca has been practicing yoga for a little over three years. She now practices 2-3 times a week, mostly at her local Yoga studio. Becca originally got into yoga when a friend recommended it to deal with the stress of her career. She was initially focused on doing yoga for fitness and stress relief, but over the past couple of years, her yoga practice has evolved to also focus on spiritual connection. Becca believes that Yoga not only made her more emotionally centered, but has also made her healthier (especially her digestive health, which was a mess before she discovered Yoga). She practices mostly Vinyasa, but occasionally does a Bikram class just for the intense workout.

Becca enjoys learning more about Yoga, but finds it hard to make time to learn. Last week, she managed to attend a workshop on Pranayama (breathing techniques) and loved it. She occasionally takes an online class on YogaGlo to learn or perfect new poses. But mostly, Becca learns from her teachers.

She has some fleeting knowledge of energy flows through the body -- she knows a bit about Chakras and has heard her teachers talk about energy flow. She once heard one of her instructors mention that better energy flow can help organ health, which piqued her interest. But she really hasn’t had the time (or deep desire) to learn more.

Becca spends the majority of her “Yoga budget” on classes, but she also spends serious money on her workout clothes. She swears by Alo and Beyond Yoga -- not only are they fashionable, but she loves their materials. They fit her well, hold up during workouts, and don’t fall apart after two weeks like other cheaper brands. Given how much she wears them -- both in and out of the studio, this is critical for her.

Persona: Lifestyle LizLiz is a 28 year old mom with two young children. She is a part-time yoga instructor, and also works a few hours a week at her local yoga studio to earn extra cash

Liz has been practicing yoga for about 6 years. She now practices 3-4 times per week, plus teaches a Vinyasa Flow class on Wednesday evenings. Liz originally got into yoga when a friend recommended it to deal with the stress of being a young mom. She was initially focused on doing yoga for fitness and stress relief, but over the past couple of years, her yoga practice has evolved to also focus on spiritual connection. Yoga has now become more of a lifestyle for

her. Liz believes that Yoga not only made her more emotionally centered, but has also made her healthier (especially her digestive health, which was a mess before she discovered Yoga). She practices mostly Vinyasa, but occasionally does a Bikram class just for the intense workout.

Liz enjoys learning more about Yoga (she loved her teacher training), but finds it hard to make time to study. Last week, she managed to attend a workshop on Pranayama (breathing techniques) and loved it. In fact, she is working several of these concepts into her class. She occasionally takes an online class on YogaGlo to learn or perfect new poses. But mostly, Liz learns from other, more experienced teachers.

She has some fleeting knowledge of energy flows through the body -- she knows a bit about Chakras and is vaguely aware of energy pathways that distribute energy related to Chakras. It’s something that she’d like to learn more about, but isn’t something she’d made a priority before now.

Liz spends the majority of her “Yoga budget” on classes (it helps that she gets a discount at her studio). She generally buys her yoga clothes at Kohl’s or Target, but will occasionally splurge for a nice pair of leggings from Lulu or Beyond Yoga. Liz likes her yoga wear to be fashionable -- but its more important to Liz that her gear fit well and be durable, given how much she wears them.