Sportswear is projected to grow at a 6.2% CAGR between 2017 and 2020. Sales of sports footwear are expected to grow slightly faster than sales ...
←
→
Page content transcription
If your browser does not render page correctly, please read the page content below
August 13, 2018
Source: Lululemon
In this report, we examine the US athleisure market, and discuss
Deep Dive: market size, growth rates, drivers and current trends.
Athleisure Update— • US sales of sportswear will total almost $116 billion this year,
a Market in Transition up 7% year over year. Apparel will account for $79 billion of
that total and footwear for $37 billion.
• Sportswear is projected to grow at a 6.2% CAGR between
2017 and 2020. Sales of sports footwear are expected to grow
slightly faster than sales of sports apparel.
• Athleisure is influencing traditional fashion categories such as
denim and formalwear. Ministry of Supply and other startups
are offering performance businesswear lines that appeal to
millennials’ desire for comfortable, easy-care apparel.
• The sports footwear market is being buoyed by “sneaker
culture” across market segments, from mass market to luxury.
The sneaker trend is one of the most visible manifestations of
the casualization of fashion, and it is fueling the
outperformance of the sports footwear category.
Deborah Weinswig
CEO and Founder
Coresight Research
deborahweinswig@coresight.com
US: 917.655.6790
HK: 852.6119.1779
CN: 86.186.1420.3016
Deborah Weinswig, CEO and Founder, Coresight Research
deborahweinswig@coresight.com US: 917.655.6790 HK: 852.6119.1779 CN: 86.186.1420.3016
1
Copyright © 2018 Coresight Research. All rights reserved.
August 13, 2018
Contents
Introduction ....................................................................................................................................................... 3
Athleisure, by the Numbers ................................................................................................................................ 3
Athleisure Sales Growth Has Outpaced Traditional Apparel Sales Growth, and the Market Continues to Expand .. 3
Sports Footwear Sales Are Growing Faster than Sports Apparel Sales .................................................................. 4
Trend 1. Athleisure’s Influence Is Expanding Beyond Sportswear ....................................................................... 5
Trend 2: Sneaker Culture Is Providing New Impetus to Athletic Footwear .......................................................... 6
Tracing the Development of Athleisure .............................................................................................................. 7
Top Athleisure Brands: Strategies and Performance........................................................................................... 8
Major Athletic Brands.......................................................................................................................................... 8
Athleisure Pure Plays........................................................................................................................................... 9
Athleisure Celebrity Brands ................................................................................................................................. 9
Retailers............................................................................................................................................................ 10
Changing Attitudes and Tastes Underpin Sustained Growth ............................................................................. 10
The Rise of the Wellness Culture ....................................................................................................................... 10
Fitness at Home ................................................................................................................................................ 11
Demographic Drivers ........................................................................................................................................ 12
Millennials Are Focusing on Active Lifestyles...................................................................................................... 12
Experiences over Products ................................................................................................................................ 13
The Macro Environment .................................................................................................................................... 13
Looking Ahead .................................................................................................................................................. 14
Deborah Weinswig, CEO and Founder, Coresight Research
deborahweinswig@coresight.com US: 917.655.6790 HK: 852.6119.1779 CN: 86.186.1420.3016
2
Copyright © 2018 Coresight Research. All rights reserved.
August 13, 2018
Introduction
A confluence of trends is supporting the steady growth of athleisure apparel
and sportswear. In the US, the casual zeitgeist has a broad swathe of the
population dressing in outfits that work from the office to the gym and from
the café to the college classroom. Time-starved consumers expect their
apparel to work in more than one setting throughout the day, and to be
comfortable and presentable no matter the environment. One size may not
fit all, as we note in a recent report on inclusivity in fashion, but one outfit
can now fit most occasions.
Athleisure apparel’s popularity has led to it replacing more traditional
workwear in multiple industries, beginning with technology and then
spreading to marketing, academia and consulting. In the past five years, the
sportswear market has grown at a 6.5% CAGR, propelling overall growth of
the apparel and footwear market in the US, which grew at only a 2.5% CAGR
between 2012 and 2017.
As athleisure moves further into the mainstream, we note two significant
trends in the market:
Athleisure is influencing • Athleisure is influencing traditional fashion categories such as denim
traditional fashion categories and formalwear. Ministry of Supply and other startups are offering
such as denim and formalwear. lines of performance businesswear that appeal to millennials’ desire
for apparel that is both comfortable and easy to care for.
• The sports footwear market is being buoyed by sneaker culture, from
the mass market segment to the luxury segment. The sneaker trend is
one of the most visible manifestations of the casualization of fashion,
and it is fueling the outperformance of the sports footwear category.
Athleisure, by the Numbers
Athleisure Sales Growth Has Outpaced Traditional Apparel Sales Growth,
and the Market Continues to Expand
The definition of athleisure is fluid, because the difference between
“sportswear” and “athleisurewear” depends more on how consumers
choose to wear items than on specific characteristics of particular garments
or shoes. In theory, any sportswear item can be characterized as
athleisurewear, which means that estimating the size of the total
sportswear market is the most useful way to estimate the scope of the
athleisure market:
US sportswear sales are • US sportswear sales will total almost $116 billion this year, according
forecast to hit almost $116 to Euromonitor International, with apparel contributing $79 billion
billion this year. and footwear $37 billion. That forecast total is 46% higher than 2012’s
figure and represents a five-year CAGR of 6.5%.
• The $116 billion forecast represents a year-over-year increase of
almost 7%—which would be a very strong performance in an apparel
market that is otherwise growing slowly.
• Euromonitor expects the total sportswear market to be 12% higher
still by 2020, supported by 13% growth in sports footwear and 11%
growth in sports apparel.
Deborah Weinswig, CEO and Founder, Coresight Research
deborahweinswig@coresight.com US: 917.655.6790 HK: 852.6119.1779 CN: 86.186.1420.3016
3
Copyright © 2018 Coresight Research. All rights reserved.August 13, 2018
• We estimate that growth in the total US apparel and footwear market
will be lower, at only 4.3% between 2018 and 2020.
Sportswear growth is projected to slow modestly from a 6.5% CAGR
between 2012 and 2017 to a 6.2% CAGR between 2017 and 2020, according
to Euromonitor. This forecast slowdown reflects consumers’ transition from
the acquisition stage to the replenishment stage with regard to sportswear.
Figure 1. US: Sportswear Sales (USD Bil.)
Sports Apparel Sports Footwear
140.00 $129.49
$122.75
120.00 $115.61
$108.14
$97.67 $103.01 41.94
100.00 39.54
36.96
32.30 34.24
80.00 30.22
60.00
40.00 78.65 83.21 87.55
67.45 70.71 73.90
20.00
0.00
2015 2016 2017 2018E 2019E 2020E
Source: Euromonitor International
Sports Footwear Sales Are Growing Faster than Sports Apparel Sales
In the US, sports footwear sales have tended to grow faster than sports
Sports footwear sales have apparel sales, and Euromonitor expects footwear growth to accelerate this
tended to grow faster than year from the already strong growth seen in 2017. As we discuss later, the
sports apparel sales.
sneaker trend is supporting growth in sports footwear.
Within the category, growth is expected across both performance products,
which support atheltic endeavors, and sports-inspired products, which are
fashion items with a sports influence.
Figure 2. US: Sports Footwear and Apparel Sales, by Segment (YoY % Change)
2018E 2017
8.5
Performance Footwear
6.6
7.0
Sports-Inspired Footwear
4.9
6.0
Performance Apparel
3.8
7.2
Sports-Inspired Apparel
5.6
0.0 2.0 4.0 6.0 8.0 10.0
Performance footwear and apparel is specifically designed for sports activities. Sports-inspired
footwear and apparel includes nonperformance/outdoor items from major sports brands (such
as Puma and Adidas Originals) as well as sports-inspired products from general apparel brands
(such as H&M, Zara and Gap).
Source: Euromonitor International
Deborah Weinswig, CEO and Founder, Coresight Research
deborahweinswig@coresight.com US: 917.655.6790 HK: 852.6119.1779 CN: 86.186.1420.3016
4
Copyright © 2018 Coresight Research. All rights reserved.August 13, 2018
Sports footwear was a $34.2 billion market in the US in 2017, according to
Euromonitor. It grew at a CAGR of 7.8% in the five years through 2017,
compared to a 5.9% CAGR for sports clothing over the same period.
Sports footwear is a concentrated market, with the two largest participants
accounting for well over half of the total: Nike is the largest name in sports
footwear, with its 46% market share in 2017 giving it a strong lead over
second-place Adidas, which had a 10% share per Euromonitor. Nike’s Snkrs
app, which provides early access to new launches of premium and exclusive
Nike products, drove digital sales growth of 41% in the final quarter of the
company’s 2018 fiscal year (ended May 31, 2018).
Trend 1. Athleisure’s Influence Is Expanding Beyond Sportswear
Athleisure’s influence is expanding beyond sportswear into more traditional
Athleisurewear has largely apparel categories, including denim and workwear. In many cases,
replaced denim as consumers’ athleisurewear has replaced denim as consumers’ go-to casual staple.
go-to casual staple. According to The NDP Group, the athleisure bottoms business (particularly
leggings and yoga pants) has displaced the jeans business one to one.
Denim, specifically premium denim, was a hot commodity around the year
2000, when some consumers were willing to shell out $200–$300 for a pair
of jeans. This year, however, the average price for a pair of jeans will be
$32, according to Euromonitor, and the firm forecasts that the US premium
jeans segment will decline by 1.8% in 2018 versus a low-single-digit increase
for the overall jeans market.
Instead of buying a new pair of designer jeans, many women have opted for
more comfortable and less expensive yoga pants in recent years. As the
trend gained traction with Lululemon Athletica’s success, new brands
entered the market at both ends of the pricing spectrum. Reflecting the
erosion of denim, US imports of women’s elastic knit pants totaled 200
million pairs in 2017, surpassing imports of women’s blue denim pants,
which totaled 179.8 million pairs.
Figure 3. US: Imports of Women’s Pants (Mil. Units)
Elastic Knits Blue Denim
250.0
200.0 200.0
179.8
150.0
100.0
50.0
0.0
1998 2000 2002 2004 2006 2008 2010 2012 2014 2016
Source: US Census Bureau
Despite the popularity of yoga pants and other athleisure offerings, denim
enjoyed something of a rebound in 2017, with Levi’s reporting an 8% sales
gain, its strongest growth since 2011, and other denim leaders reporting a
Deborah Weinswig, CEO and Founder, Coresight Research
deborahweinswig@coresight.com US: 917.655.6790 HK: 852.6119.1779 CN: 86.186.1420.3016
5
Copyright © 2018 Coresight Research. All rights reserved.August 13, 2018
sales lifts as well. Jeans companies are leveraging product innovation to
regain share and attract consumers accustomed to the comfort of
sportswear. Hybrid denim products that combine denim’s durability and
style with the comfort of athletic clothing are restoring denim demand, and
denim specialists’ commitment to innovation via labs and textile
partnerships should result in the continued flow of new product with
enhanced functionality.
Business and professional attire has also been impacted by activewear’s
attributes of comfort, stretch and mobiity. Ministry of Supply, a high-
performance men’s and women’s businesswear brand, was founded in 2012
by former Massachusetts Institute of Technology students, who used some
of the same temperature-regulating material in their designs that NASA
astronauts wore. The Ministry of Supply lines allow for full range of motion,
provide odor control and require no ironing or dry cleaning. The brand
caters to young executives working long hours, many of whom travel
extensively and often need to go straight from an airplane to a business
meeting without changing clothes. Today, the company has a substantial e-
commerce business along with seven US urban store locations.
In 2017, Banana Republic introduced a similar performance businesswear
line for men: the Rapid Movement Chinos line combines tailoring and
performance, and the company hired four pro athletes to market it. By
incorporating activewear attributes into traditional workwear, as Ministry
of Supply and Banana Republic have, apparel brands can reinvigorate their
brand appeal by attracting younger consumers who are accustomed to the
comfort of athleisurewear.
Designers, luxury labels and Trend 2: Sneaker Culture Is Providing New Impetus to Athletic Footwear
athletic brands are capitalizing Sneaker culture is pervading fashion across segments, from the mass
on the sneaker trend. market to luxury, and is buoying the sports footwear market. The sneaker
trend is one of the most visible manifestations of the casualization of
fashion—with consumers increasingly wearing sports footwear in
traditionally formal contexts—and the trend is supporting growth of the
athleisure market.
Source: www.bergdorfgoodman.com
We have seen a proliferation of high-end sneakers and running shoes
designed by luxury brands such as Balenciaga, Coach, Fendi, Gucci and
Prada. The latest luxury shoe craze is the sock sneaker, and
Balenciaga,zDKNY, Fendi, Marni and Rick Owens have all offered sock
sneaker designs. These shoes have a minimal, stretchy knit upper attached
to a sole, with no laces. The design was partially pioneered by sports
apparel companies Adidas and Nike. According to fashion research firm
Deborah Weinswig, CEO and Founder, Coresight Research
deborahweinswig@coresight.com US: 917.655.6790 HK: 852.6119.1779 CN: 86.186.1420.3016
6
Copyright © 2018 Coresight Research. All rights reserved.August 13, 2018
Edited, from the first quarter of 2017 to the start of the third quarter
ofz2017, the number of sock-like sneakers offered by luxury brands
increased by 220%. The average price of new sock sneaker arrivals in the
third quarter of 2017 was $410, according to Edited.
On Nike’s fourth quarter 2018 call with investors, CEO Mark Parker
commented on consumer demand for comfortable sports footwear, saying:
In Sportswear, the consumer demand for all-day comfort is making
Air Max one of the fastest-growing platforms in our industry. Our
icons, the Air Max Plus, 95, 97 and 98, are all performing incredibly
well. Air Vaporzax built on that demand, and this quarter, we took it
a step further with Nike’s first innovation built specifically for
lifestyle, Air Max 270. Launching in March, 270 is the most successful
Air Max launch in our history.
Tracing the Development of Athleisure
Figure 4. Timeline of the Emergence of a More Casual Style of Dress and Athleisure
2018 Khloé Kardashian launches Good American activewear brand on August 2.
2018 Peloton introduces Fitness Tread in-home fitness equipment at CES.
2018 VF Corp. acquires Altra.
2016 Beyoncé launches Ivy Park with Topshop.
2016 Hilary Swank launches Mission Statement “aesthetic wear” line.
2015 Tory Burch introduces Tory Sport.
2014 Urban Outfitters launches Without Walls in New York City.
2014 Carrie Underwood launches Calia with Dick’s Sporting Goods
2014 Loft (Ascena Retail) launches Lou & Grey.
2013 Outdoor Voices founded.
2013 Kate Hudson and TechStyle Fashion Group cofound Fabletics.
2012 Peloton founded.
2010 Yogasmoga founded in New York City.
2008 Gap acquires Athleta.
2001 Lululemon begins selling yogawear.
2000s Fashion consumers start to reconcile activewear with modern styles.
1998 London-based Sweaty Betty founded.
1998 California-based Athleta founded.
1990s Activewear becomes body-conscious, focusing on form-fitting garments.
1980s Utilitarian styles sweep through college campuses.
1970s High-performance sportswear designed for mountaineering, sailing and hiking gains popularity.
Source: Company reports/Coresight Research
Deborah Weinswig, CEO and Founder, Coresight Research
deborahweinswig@coresight.com US: 917.655.6790 HK: 852.6119.1779 CN: 86.186.1420.3016
7
Copyright © 2018 Coresight Research. All rights reserved.August 13, 2018
Top Athleisure Brands: Strategies and Performance
Figure 5. Selected Athleisure Brands
Traditional Athleticwear
Athleisure Pure Plays Celebrity Brands Retailers
Companies
Lululemon Ivy Park (Beyoncé) Nike Tory Sport
Sweaty Betty Fabletics (Kate Hudson) Adidas Kate Spade (Tapestry)
Athleta Calia by Carrie Underwood Under Armour Lou & Grey (Loft)
Outdoor Voices Mission Statement (Hilary The North Face Net-A-Sporter
Swank)
Yogasmoga Fila Calia (Carrie Underwood/
EleVen (Venus Williams)
Carbon38 Dick’s Sporting Goods)
Kit and Ace Victoria Sport (Victoria’s
Secret)
Bandier
Tracksmith
Beyond Yoga
Source: Company reports/Coresight Research
The athleisure market is dominated by global brands such as Nike, Adidas
and The North Face and by athleisure pure plays such as Lululemon and
Sweaty Betty. But opportunities are bright for new brands whose selling
points span innovative technical fabrication, personalization and an
authentic social media presence. Barriers to entry have dropped, and textile
advances and technology-driven engagement make athleisure a lucrative
business for startup and traditional apparel brands alike.
In the US, the sports apparel market is more fragmented than the sports
footwear market is, according to Euromonitor data. The firm estimates that
Nike holds approximately 9.5% of the US sports apparel market, while its
nearest competitor, Under Armour, holds about 5.2%, followed by Adidas,
with approximately 3.3%. The top 10 sports apparel brands accounted for
less than 30% of total sports apparel sales in the US in 2017.
Major Athletic Brands
Reports of Nike’s demise faded fast when the company released its most
recent quarterly results on June 28. The company reported that North
America sales momentum turned positive and that digital sales rose by 38%
year over year. Nike’s focus on its direct-to-consumer strategy resulted in a
nearly 20% lift in the division’s sales in the fourth quarter and a 15% lift for
the fiscal year ended May 31. The women’s business is setting the pace at
Nike, with sales of the women’s Jordan sneaker line tripling in the
company’s most recent quarter and representing a significant fiscal 2019
opportunity.
Adidas is benefiting from the demand for classic retro styles in running and
training products and footwear, which is being driven in part by streetwear
culture. The company reported a 10% sales gain in the first quarter of 2018
(ended March 31, 2018), to $6.8 billion, and a 17% increase in net income
from continuing operations, to $668 million.
Deborah Weinswig, CEO and Founder, Coresight Research
deborahweinswig@coresight.com US: 917.655.6790 HK: 852.6119.1779 CN: 86.186.1420.3016
8
Copyright © 2018 Coresight Research. All rights reserved.August 13, 2018
Under Armour’s North America business, which accounts for about 73% of
the company’s global revenue, stablized during the first quarter of 2018
(ended March 31, 2018) at $868 million, reflecting a slight decline in
wholesale revenue that was offset by growth in the direct-to-consumer
business. The 2016 bankruptcy of Sports Authority and the closing of the
chain’s 450 stores impacted Under Armour’s US wholesale business through
2017.
Some top brands from the 1970s and 1980s, such as Reebok (which was
acquired by Adidas in 2005) and Fila, are enjoying renewed popularity,
particularly among young millennials. Meanwhile, Vans remains a perennial
favorite and Supreme consistently sells out. Reebok’s North America
business returned to growth (up 3%) in the first quarter ended March 31,
2018, and with the July 20 launch of the Victoria Beckham collaboration—a
unisex streetwear capsule collection inspired by Shaquille O’Neal—the
brand is attracting a new generation of shoppers.
Athleisure Pure Plays
Many of the athleisure pure plays evolved because traditional wholesale
Many of the athleisure pure plays brands weren’t addressing the needs of female athletes who sought both
evolved because traditional brands fashion and function in their workout gear. Some of these pure plays have
weren’t addressing the workout
also launched activewear for men. Celebrities are attracted to the category
wear needs of female athletes.
as well, as many have formidable workout routines that they want to share
with their fans on social media and through product lines.
Lululemon was among the first brands to address the unmet needs of
women seeking fashion and function in workout apparel, and the company
continues to drive industry growth. In its most recent quarterly earnings
report (for the quarter ended April 29, 2018), the company reported a 25%
sales increase that was driven by an 8% comparable store sales increase and
a 62% increase in direct-to-consumer (e-commerce) sales. Brick-and-mortar
accounts for approximately 75% of Lululemon’s sales, and increased store
traffic is lifting the comparable store sales metric. The company achieved a
strong financial performance in its most recent quarter, with gross margin
expansion of 270 basis points, to 53.1%; operating margin expansion of 400
basis points, to 16.1% of sales; and EPS up 71.9%, to $0.55. Lululemon is
benefiting from demand for men’s apparel as well as women’s. The men’s
business represented about 30% of the company’s first-quarter 2018 sales
and Lululemon is targeting $1 billion in sales for its men’s line by 2020.
Athleta contributed double-digit sales growth to Gap Inc.’s fiscal first
quarter (ended April 29, 2018) and is regarded as the “gem” in the
company’s brand portfolio. Gap CEO Art Peck said on the company’s first-
quarter conference call that Athleta is “becoming a very nicely sized gem,
and remains underappreciated.” Athleta also just became a B Corporation,
or a certified benefit corporation. To achieve certification, companies must
meet rigorous standards across social and environmental performance,
accountability, and transparency. This is a critical component of Athleta’s
brand identity and should enhance its brand engagement.
Athleisure Celebrity Brands
Kate Hudson, Don Ressler and Adam Goldenberg launched Fabletics in 2013
in the US. By 2015, the company had entered seven international markets,
Deborah Weinswig, CEO and Founder, Coresight Research
deborahweinswig@coresight.com US: 917.655.6790 HK: 852.6119.1779 CN: 86.186.1420.3016
9
Copyright © 2018 Coresight Research. All rights reserved.August 13, 2018
added a men’s line and opened six US retail locations. Today, Fabletics
operates 25 stores in North America. The company has also added plus sizes
to its women’s assortment. Fabletics has more than 1 million VIP members
who receive monthly recommendations of stylish, fashion-forward
activewear; membership is free and offers savings of up to 50%. In 2017,
Fabletics’ sales were estimated at $250 million.
Tennis star Venus Williams leveraged her visibility on the tennis court when
she launched her activewear brand, ELeVen, in 2007. The brand features
functional and fashionable workout gear. Williams opened a pop-up store in
Hong Kong’s Lane Crawford department store in 2017 and another at
Selfridges in London in June of 2018.
Khloé Kardashian’s activewear brand, Good American, is the most recent
addition to the celebrity athleisure segment, having just launched on August
2, 2018.
Retailers
Traditional apparel retailers have introduced new lines and line extensions
to take advantage of growing demand for athleisurewear. For example,
Victoria’s Secret launched the Victoria Sport line, whose tagline is “Inspired
by sport, but made to wear wherever.” Lou & Grey, launched in 2014 by
Loft (which is owned by Ascena Retail), fuses activewear and streetwear,
and the brand just launched another activewear subbrand, Lou & Grey
Form. Kate Spade partnered with Beyond Yoga, and J.Crew with New
Balance, to offer shoppers new activewear styles and in 2014, Tory Burch
launched Tory Sport, which now has six US brick-and-mortar locations.
Changing Attitudes and Tastes Underpin Sustained Growth
The Rise of the Wellness Culture
For many US consumers, wellness is the new status symbol, and increasing
For many US consumers, numbers of health-minded individuals are participating in aspirational
wellness is the new status fitness classes and social fitness events; enjoying healthy, organic and
symbol. natural food; and using devices to measure health metrics and track their
fitness progress. Consumers are also showcasing their healthy lifestyles on
social media, posting photos of themselves dressed in activewear,
participating in healthy activities and preparing to eat healthy meals.
We have discussed the wellness trend in depth in previous reports, and it is
one of the drivers of demand for athleisure products. The wellness
economy is booming: according to the nonprofit Global Wellness Institute,
it was worth $3.7 trillion in 2015.
Deborah Weinswig, CEO and Founder, Coresight Research
deborahweinswig@coresight.com US: 917.655.6790 HK: 852.6119.1779 CN: 86.186.1420.3016
10
Copyright © 2018 Coresight Research. All rights reserved.August 13, 2018
Figure 6. Global Wellness Market, 2015 (USD Bil.)
0 200 400 600 800 1000 1200
Beauty and anti-aging 999
Healthy eating, nutrition and weight loss 648
Wellness tourism 563
Fitness and mind-body 542
Preventive and personalized medicine and public health 534
Complementary and alternative medicine 199
Wellness lifestyle real estate 119
Spa industry 99
Thermal/mineral springs 51
Workplace wellness 43
Source: SRI International/Global Wellness Institute
In 2017, there were 38,477 health clubs in the US serving 60.9 million
members, according to fitness industry trade organization IHRSA. Fitness
club membership grew at an average of 3.9% per year in the five years to
2017 and total member numbers have grown by more than 10 million since
2012. For some consumers, gyms are replacing bars, restaurants and cafes
as social hubs, and these gym-goers are seeking to meet like-minded peers
and potential partners at their health clubs.
Figure 7. US: Total Health Club Membership (Mil.)
70
60.9
55.3 57.3
60 52.9 54.1
50.2
50
40
30
20
10
0
2012 2013 2014 2015 2016 2017
Source: IHRSA
Fitness at Home
Another growing fitness trend is at-home workouts on expensive
The fitness-at-home market is equipment. Many popular at-home programs offer livestreamed classes led
expanding as new technologies
by “fitfluencers,” or trainers with celebrity status and their own groupies,
and platforms allow time-
starved millennials and Gen Xers followers and tribes.
to personalize their workouts. Peloton is one such program: riders purchase the Internet-connected
Peloton bike and participate in streamed classes led by live instructors.
Peloton’s CEO, John Foley, is disrupting the traditional at-home exercise
Deborah Weinswig, CEO and Founder, Coresight Research
deborahweinswig@coresight.com US: 917.655.6790 HK: 852.6119.1779 CN: 86.186.1420.3016
11
Copyright © 2018 Coresight Research. All rights reserved.August 13, 2018
business and planning to create a fitness-as-a-service model, whereby users’
monthly subcription fees allow for regular fitness equipment upgrades.
For many consumers of at-home fitness programs, the combination of
personalization, convenience and access to instructors creates an
experience that is worth the cost of the equipment. According to Forbes,
the top 10 fitness influencers have a total social reach of 106 million
followers across Instagram, Facebook, Twitter and YouTube.
While it might seem probable that the fitness-at-home trend will dampen
demand for fashionable workout clothing, the rise of social media platforms
indicates otherwise. Twitter, Instagram and Facebook provide new ways for
people to share various aspects of their lives, including their fitness and
wellness regimens, and to interact with others who share their interests
around the world. Social media not only allows people to share their
experiences, but also adds pressure on them to look good and to be seen as
living fulfilling lives, providing further support to the fitness industry.
Demographic Drivers
Millennials Are Focusing on Active Lifestyles
According to the US Census Bureau, millennials, or those born between
1980 and 2000, are currently the largest demographic in the US. As of 2015,
they numbered about 79.4 million, compared with 65.7 million Generation
Xers and 75.5 million baby boomers. To put that into perspective,
millennials now comprise roughly 25% of the entire US population.
Figure 8. US: Population by Generation, 2015 (%)
Greatest Gen:
1.2%
Silent
Gen:
8.9%
Gen Z: 21.5%
Baby
Boomers:
23.5%
Millennials:
24.7%
Gen X: 20.3%
Source: US Census Bureau
Millennials’ habits and spending patterns will be significant to the overall
economy as the group enters its prime working and spending years. In
general, millennials’ spending skews more toward creating a lifestyle and
having and sharing experiences than on acquiring tangible items.
Millennials are also defining fitness and health in ways that reflect their
values and lifestyles, and they are taking a more holistic approach to
wellness than prior generations have. Members of the millennial generation
Deborah Weinswig, CEO and Founder, Coresight Research
deborahweinswig@coresight.com US: 917.655.6790 HK: 852.6119.1779 CN: 86.186.1420.3016
12
Copyright © 2018 Coresight Research. All rights reserved.August 13, 2018
tend to look for simplicity and convenience in fitness programs, but they are
also quick to try new regimens.
Experiences over Products
The trend of consumers valuing experiences over products began as early as
the year 2000. Factors contributing to the trend include the natural
progression of a developed culture as society aims higher on Maslow’s
hierarchy of needs, a lack of exciting fashion and the growing proportion of
healthcare expenditure as a percentage of total personal consumption
expenditure. The good news for athleisure brands is that they are part of an
experience, whether at the gym, at home, on the track or on fitness-
inspired vacations. So, athleisure apparel and footwear is somewhat
insulated from consumers’ shift away from spending on goods to spending
on experiences.
The Macro Environment
US macroeconomic trends are While the US macro environment is marked by positive trends in GDP,
supporting consumer spending unemployment, consumer spending and confidence, uncertainty regarding
in 2018. tariffs and their impact is mitigating robust consumer spending, as are low
savings rates.
The US unemployment rate fell to 3.8% in May 2018, the lowest rate since
April 2000 and an 18-year low. The labor participation rate notched lower as
well, to 62.7% from 62.8%. At the end of June, consumer sentiment
backtracked slightly, reflecting growing tariff concerns. According to Richard
Curtin, Chief Economist of the University of Michigan’s Surveys of
Consumers, one in four consumers surveyed cited the potential impact of
tariffs on the domestic economy as an area of concern, with most expecting
a negative impact on the domestic economy.
Meanwhile, personal incomes are growing in the US. At nearly $15,000, US
disposable personal income rose by 3.9% year over year and by 0.5%
sequentially in May 2018. Tax cuts early in 2018 are benefiting the retail and
consumer services sectors this year, but the volatility of the stock market is
mitigating the wealth effect from 2017.
Year after year, American consumers have dedicated a greater share of
their total discretionary spending to services and a lower share to goods.
We chart this bifurcation below, showing that spending on goods as a share
of total discretionary spending fell from 50% to just over 45% between 2000
and 2017.
Deborah Weinswig, CEO and Founder, Coresight Research
deborahweinswig@coresight.com US: 917.655.6790 HK: 852.6119.1779 CN: 86.186.1420.3016
13
Copyright © 2018 Coresight Research. All rights reserved.August 13, 2018
Figure 9. US Discretionary Spending: Split of Spending on Goods vs. Services (%)
58.0
Discretionary Goods Discretionary Services 56.7
56.4
56.0
55.7
56.0 55.4
55.0
54.6 54.7
54.2
53.7
54.0 53.1 53.1 53.1
52.5 52.7 52.6 52.8
52.0
51.6 51.7
52.0 51.3
50.4 50.7
50.0
50.0
50.0
49.6 49.3 $78 Bil. in “Lost” Spending
48.0 48.7
48.4 48.3
48.0
47.5 47.3 47.4 47.2
46.0 46.9 46.9 46.9
46.3
45.8
45.4 45.3
44.0 45.0
44.6
44.3
44.0 43.6 43.3
42.0
E
E
E
E
E
E
00
01
02
03
04
05
06
07
08
09
10
11
12
13
14
15
16
17
18
19
20
21
22
23
20
20
20
20
20
20
20
20
20
20
20
20
20
20
20
20
20
20
20
20
20
20
20
20
Source: US Bureau of Economic Analysis/Coresight Research
In absolute terms, this means that discretionary retailers have lost out on
billions of dollars in sales that they would have made had the goods-versus-
services balance remained consistent. We estimate that US consumers
spent $139 billion less on discretionary goods in 2017 than they would have
if the goods/services split had remained at the level seen in 2000.
Looking ahead to 2023, we expect We also expect that consumers will redirect an additional $78 billion in
that consumers will redirect an spending to discretionary services at the expense of discretionary goods by
additional $78 billion in spending 2023. This is the difference between the forecast share of discretionary
to discretionary services at the spending on goods in 2023 and the share seen in 2017, which was 45.3%—
expense of discretionary goods. and it is over and above the $139 billion that consumers have already
redirected away from discretionary goods.
However, given athleisurewear’s popularity in sports and other everyday
activities, and the way many consumers use it to signal their participation in
a lifestyle focused on wellness, we think that the category is protected from
the spending trend toward services and may, in fact, benefit from the shift.
Looking Ahead
As consumers increasingly adopt sportswear for daily wear, existing apparel
brands will innovate and add functionality to trendy products. We expect to
see more new companies enter the athleisure category and more
traditional apparel and footwear brands extend their product offerings into
athleisure, attracted by the category’s strong growth opportunities. The
blurred line between activewear and daywear will provide additional
opportunities as well.
Over the next three years, the combined sports apparel and footwear
category is likely to continue to grow at a mid-single-digit pace, considerably
Deborah Weinswig, CEO and Founder, Coresight Research
deborahweinswig@coresight.com US: 917.655.6790 HK: 852.6119.1779 CN: 86.186.1420.3016
14
Copyright © 2018 Coresight Research. All rights reserved.August 13, 2018
faster than the apparel and footwear market generally, with sports
footwear growth modestly outpacing sports apparel growth. Cultural
trends, favorable demographics and innovation will drive superior category
performance as the industry approaches $130 billion by 2020. Celebrity
participation and attention from designer and luxury brands will also help
drive continued consumer interest in athleisure.
Deborah Weinswig, CEO and Founder, Coresight Research
deborahweinswig@coresight.com US: 917.655.6790 HK: 852.6119.1779 CN: 86.186.1420.3016
15
Copyright © 2018 Coresight Research. All rights reserved.August 13, 2018
Deborah Weinswig, CPA
CEO and Founder
Coresight Research
New York: 917.655.6790
Hong Kong: 852.6119.1779
China: 86.186.1420.3016
deborahweinswig@coresight.com
Marie Driscoll, CFA
Consultant
Hong Kong:
6/F, LiFung Tower
888 Cheung Sha Wan Road, Kowloon
Hong Kong
London:
242-246 Marylebone Road
London, NW1 6JQ
United Kingdom
New York:
1359 Broadway, 18th Floor
New York, NY 10018
Coresight.com
Deborah Weinswig, CEO and Founder, Coresight Research
deborahweinswig@coresight.com US: 917.655.6790 HK: 852.6119.1779 CN: 86.186.1420.3016
16
Copyright © 2018 Coresight Research. All rights reserved.You can also read
