Sportswear Is Driving Apparel Consumption

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The global sportswear market is expected to more than double by 2020 to US$ 184.6 billion, from US$ 78 billion in 2016.

1. Revenue in the "Sports & Outdoor" segment amounts to US$ 53,024 million in 2017

2. Revenue is expected to show an annual growth rate (CAGR 2017-2022) of 11% resulting in a market volume of US$ 89,428 million in 2022

3. User penetration is at 8.2 % in 2017 and is expected to hit 10.4% in 2022

4. The average revenue per user (ARPU) currently amounts to US$ 126.00

5. From a global comparison perspective it is shown that most revenue is generated in the United States (US$ 21,046 million in 2017).

6. Sports industry is the second fastest growing sector for brands

7. China, Latin America and Central and Eastern Europe are prime markets

Nike, Inc. fosters a culture of invention, the company creates products, services and experiences for today's athlete while solving problems for the next generation. On June 29th, Nike reported fiscal 2017 financial results for its fourth quarter and full year ended May 31, 2017. International geographies and the Direct-to-Consumer businesses globally led strong revenue growth in the fourth quarter and full year.

Under Armour, Inc. is the originator of performance footwear, apparel and equipment. On August 1st, Under Armour announced financial results for the second quarter ended June 30, 2017.  "We are utilizing 2017 to ensure that operations across our diverse portfolio of sport categories, distribution channels and geographies are optimised as we are building a stronger, faster & smarter company," said Under Armour Chairman and CEO Kevin Plank.

Puma India clocked in around Rs 921 crores in revenue last year, making it the largest sports lifestyle brand in India. This is surely pushing India ahead of markets like Germany and France to climb into the top five markets in the near future. US, China, Japan and Korea are among the brand's big markets based on sales. Puma is pushing athleisure in India, taking a cue from the success the concept received internationally.

Reebok India has become the first global sportswear brand in India to cross Rs 1,000 crore mark, Reebok has managed to come out of the red – though accumulated losses persist. Amazon India found that sportswear drove apparel and fashion sales during the Great Indian Festival some months ago. Amazon witnessed a growth of close to five times in the segment with top brands like Reebok, Adidas, & Puma performing exceptionally well.

"Amazon Fashion exclusive brands – Under Armour and New Balance – also saw close to 10X jump as compared to normal business days in terms of units sold," inform Amazon officials. Amazon's sportswear store has over 200 brands and offers 12,000 styles.

RYU Apparel Inc. is a creator of urban athletic apparel. The company's revenue in the second quarter of 2017 was US$ 641,231, 113% higher than revenue of US$ 300,773 during the same period in 2016. Now into its second year of operations, the RYU team is encouraged with its sales record to date and a 46% gross profit for the quarter.

RYU continues to show a balanced ratio of apparel sales between men and women at 46% and 54% respectively. By identifying an underserved gap in the industry for men, and developing the Beautiful Tough™ brand positioning that's resonating with women, RYU has achieved an enviable gender balance that is rare in the industry. As an omni-channel retailer, RYU currently has 17% of revenue from e-commerce with a target of reaching 30% by the end of 2018. RYU's retail store expansion plan is on target to have five stores open by the end of 2017.

Six month revenue of US$ 1,108,234 compared with US$ 560,500 in the same period in fiscal 2016. Revenue increased by 98% as it included sales from three versus one retail store and growth in e-commerce sales from its improved website that had higher visitor traffic than in early 2016.

Lululemon Athletica Inc. is a healthy lifestyle inspired athletic apparel company for yoga, running, training, and most other sweaty pursuits. Lululemon Athletica and 7mesh Industries Inc., an emerging global brand in high performance cycling apparel, announced on June 19th, a strategic partnership to co-create and push the boundaries in advanced technical apparel. 

Sportswear drives global apparel sales

According to a research report published by Global Industry Analysts Inc., the global market for Sports and Fitness Clothing is projected to reach US$ 231.7 billion by 2024. Growth in the market is driven by a growing portion of the population living healthier lifestyles and stronger participation in sports and fitness activities. The research also indicates that technological developments designed to improve comfort and performance has also led to the growth in sales of sports apparel. The report points out that the Asia-Pacific region is expected to be fastest growing region, with a CAGR of 6.9% over the forecast period.

The global apparel industry has been going strong on sales of sports apparel for the last three years, according to a report by Euromonitor International. Sales of sportswear, which includes items such as yoga pants and activewear, outpaced all other categories for the third year in a row, increasing just under 7% in 2016 and "causing growth in other categories to look rather tame in comparison," Euromonitor noted. While performance sportswear is still the biggest part of that market, "sports-inspired is the category driving growth," said Bernadette Kissane, Euromonitor's apparel and footwear analyst, in the report. Indeed, activewear has become a huge part of everyday fashion over the past few years, and eaten into sales of regular clothes.

Sports-inspired apparel grew 6%, above the average seen across all categories, while footwear clocked in at 10%, reflecting the continued dominance of casual sneakers. Sales came from emerging markets, such as India and Thailand, as well as the US, the world's largest sportswear market.

Bernadette explained, "Although performance sportswear takes the lead in terms of market size, valued at US$ 78 billion in 2016, sports-inspired is the category driving growth."

A market dominated by two brands

Nike and Adidas control the majority of the market share, although Under Armour has demonstrated impressive growth. Adidas may have struggled in recent years in the face of Nike's dominance & Under Armour's rapid expansion, but in 2016 it revitalised its brand image with its 'creating the new' business plan and managed to reclaim its title as the second biggest selling sports brand from Under Armour. It also had the top-selling sneaker in the United States in 2016 – the first time in over ten years that the title didn't go to Nike.

The market share control of Adidas and Nike is due, in large part, to the fact that both brands extend their reach beyond sports: they are also entwined with fashion, music and lifestyle, and have consequently become entrenched in pop culture more widely. They operate at the cutting edge of technology. Nike's new NBA Connected Jersey is a prime example of how the brand has become intimately linked with celebrities & technology.

Emerging markets – China, Latin America and Central and Eastern Europe

The next three Olympic Games will be held in Asia, while Russia and Qatar are next in line to host the FIFA World Cup. South America is another region that brand owners should bear in mind; while Brazil's turn at hosting the Olympic Games has passed, the area is still rife with opportunity. Mexico continues to be a substantial and growing market for an array of sports-related goods and events. Indeed, Brazil, Mexico, Colombia and Peru feature prominently among Adidas and Nike's trademark filings over the last few years, stressing the importance of Latin America as a target market.

However, Asia – and China in particular – continues to be a core focus. China is the second largest sportswear market after the United States and harbours arguably the greatest potential for new and established sporting brands. China has a large and booming middle class with a growing appreciation for health and fitness, and in turn a strong demand for foreign sportswear brands. The country will also  host the 2022 Winter Olympic Games and its government is aiming to establish a US$ 813 billion sports industry by 2025, in addition to investments to promote fitness across the country. The goal is to boost domestic consumption in this new economy. In Europe, while many countries already have a mature sports market, the majority of countries on the continent still show demonstrable growth in the trade of sporting goods both within and without Europe.

Of particular note is the impressive growth of Central and Eastern European countries: Hungary, Latvia, Croatia, Slovakia, Bulgaria and Poland were the only countries to record annual growth rates for exports above 10%. Poland and Slovakia are also the only countries to record annual growth rates above 10% between 2005 and 2015 for both imports and exports. Malta takes the lead for imports though; its 51% annual growth rate can be attributed to its significant trade of boats and water sports equipment.

It is worth pointing out that Greece, Spain and France have suffered from a decreasing annual rate of growth in both categories, with France showing some of the largest drops. Despite this, Europe's sporting market is in good shape.

Sportswear markets in the US and China continue to thrive

1. 11% growth of Chinese sportswear market in 2016

2. 30,000 running events held annually in the United States

North America currently dominates the market, accounting for over 30% of the market share, largely thanks to the US being the global leader for sportswear products. However, North America, as well as Europe, will see their market share decline in the coming years as the Asia-Pacific is primed for large growth in this space. Emerging markets in Asia such as China, India, Japan and Thailand are expected to experience significant demand for sports and fitness apparel over the next few years.

The US continues to lead the Global Sportswear Market

Recent reports show that the size of the sportswear market in the US is estimated at US$ 44 billion and is expected to grow at a CAGR of 3.1% over the next five years. The US is currently the world's largest sportswear market with the highest sportswear sales in the world, and its leading position is likely to be maintained through 2020. Currently, the men's sports apparel segment is dominating the US sportswear market, while the children's sports apparel segment and women's sports apparel segment are growing rapidly, due to the increasing participation of the population in fitness activities like running or yoga.

Sportswear market in China registering rapid growth

The sportswear market in China is growing at a staggering rate of 11%, outgrowing the United States' rate by nearly four times. Sportswear in China is finding success where other types of apparel are beginning to struggle. For example, while the athletic apparel market in China rose by 11% in 2016, overall apparel sales grew at less than half that rate, with only an increase of 5%. Here's what happens to the athletic wear industry when China starts going to the gym! To athletic wear companies including Nike, Adidas, New Balance, and Under Armour, as well as activewear brands such as Lululemon, what China offers is a perfect mix of factors: 415 million millennials; a booming middle class getting interested in health and fitness; government investment in sports; and a rapidly growing consumer appetite for sportswear-especially foreign brands.

The US will continue to remain the largest market for sportswear for some years, even as the market is mature and competition is severe. In China, too competition is increasing. And brands have been cashing in. Nike, for instance, recorded growth of about 9.5%  last year, in China. Adidas saw its sales jump 22% in the country through 2016. And this is just scratching the surface. Here's a closer look at some of the factors that have sports brands drooling over China:

Demographics

China has 415 million millennials, according to a 2015 report by Goldman Sachs – exceeding the 350 million or so people who make up the entire working populations of the US and Western Europe combined. China already has the world's largest middle class, and it's still growing. Goldman Sachs estimates that the country's aggregate income will grow by around US$ 3 trillion in the next decade.

Sports participation

China's millennial generation is very different from the one that preceded it. It's more globally connected because of technology, and it has a strong consumer appetite, matched by rising purchasing power. Economic development is bringing with it an interest in new activities, especially sports.

Higher incomes, beyond just resulting in more discretionary spending, tend to lead to greater rates of participation in leisure activities and sports, as Morgan Stanley noted in a 2015 note to investors. Already gym membership in China has doubled since 2008, according to figures from China Business Research Academy. And the number of marathons taking place in the country has grown sixfold over the past five years.

Government investment

In a bid to become a global soccer superpower, China's government has vowed to have more than 70,000 soccer pitches ready across the country by 2020, an increase of about 20,000 from its 2013 total. To help accomplish the goal, Chinese president Xi Jinping announced plans to expand the country's "sport economy" to US$ 850 billion by 2025, which would make it the world's largest.

The Chinese government's push for sports isn't just about bragging rights. To counter rising rates of health problems such as obesity and diabetes, it has also urged citizens to be more physically active. The country launched a national fitness plan through 2020 that will involve significant investment in sport and fitness facilities. Together these projects are creating the conditions for a more active society, and active people require activewear.

Appetite for activewear

Sportswear is currently carrying the global apparel industry, and China is no exception. Last year, sales of sportswear jumped 11% in China, according to research firm Euromonitor, while overall apparel sales rose just 5%. Like countless shoppers around the US and Europe, Chinese consumers are developing a taste for activewear as everyday clothing. "They want a versatile piece of footwear, or they want apparel they can do sports in but also go to social occasions in," Colin Currie, Adidas's managing director for Greater China said. As sportswear leans further toward fashion, wealthy Chinese are buying it up, sometimes at the expense of luxury labels. Euromonitor estimates that China's market for sportswear will surpass that for luxury goods by 2020.

Indian market for sports and activewear

In 2016, India was the eighth largest market for Puma and the brand expects India to be among the top five by 2020. Puma CEO Bjorn Gulden, had said recently 'athleisure' trend of combining sportswear with street style was working well in Asia's third largest economy. Puma India clocked in around Rs 921 crores in revenue last year, pushing India ahead of markets like Germany and France. US, China, Japan and Korea are among the brand's big markets based on sales.

Along with the franchisee route, Puma has started operating its standalone stores looking at the growing demand. The company owns and operates 60 out of the total 350 exclusive brand stores in the country. The company has also built its online presence and is also selling on leading e-tailers like Flipkart and Amazon, among others. Gulden says India's e-commerce potential, about 730 million internet users who will buy products online by 2020, would give them the additional opportunity to launch exclusive products and limited editions.

While India is expected to be among the top five sportswear markets in the world, companies are being cautious. For instance, Adidas' global sales head, Roland Auschel, rues that the country is not an easy place to do business. Adidas has crossed the Rs 1000 crore turnover in India, but believes it is still some way to becoming one of the top markets for sportswear. Auschel blames the discomfort of doing business in the country that could keep growth restricted in India. "The way to bring global products into this country is not easy. For a company that keeps most of its production outside India, to bring products into the market and be competitive in the way it prices them is still a task."

While that may be so, global e-commerce giant Amazon is cashing in on Indian sportswear demand. The company found its sales of sportswear were 5 to 7 times higher during the recent Great Indian Festival with Reebok, Adidas and Puma performing exceptionally well. And Amazon Fashion exclusive brands –  Under Armour and New Balance saw close to 10X jump as compared to normal business days in terms of units sold. Amazon's sportswear store has over 200 brands and offers 12,000 styles.

Footwear remains the dominant category for Amazon in sportswear, followed by men's apparel, women's apparel, and luggage. In apparels, the majority of the sales come from top-wear which is led by T-shirts, polos, sweatshirts, etc. Within shoes, running shoes have the maximum sale share.

According to Bloomberg, Amazon.com Inc. is tapping some of the biggest athletic-apparel suppliers-including Makalot Industrial Co. that produces clothing for Gap Inc.-to make apparel for them. Eclat Textile Co., which makes clothing for Nike Inc., Lululemon Athletica Inc., and Under Armour Inc., is another supplier.

From 2015 to 2016, the Indian sportswear market grew 22%, outpacing the segment's global increase of 7% according to Euro monitor. By 2020, it is expected to grow an additional 12% CAGR with sales expected to reach US$ 8 billion.

Running, cycling and team sports are amongst India's fastest trending exercises. The number of gyms in the country is projected to rise 7% year-on-year till 2020 – and the rise of social media in the country has shifted consumer perception of what is now considered to be 'body-beautiful'.

Surprising social and cultural shifts

Though it has an exceptionally high number of underweight people among its poorest classes, India also has an obesity problem among the more affluent. In 2014, it was the fifth most obese country amongst men and jumped to the third rank for women – with over 20 million of them being obese, as reported by British medical journal The Lancet.

Motivated by this, government backing was one of the catalysts to initiate the fitness movement that started about three years ago. Making use of subsidies, local councils started focusing on fitness accessibility by making public jogging tracks, gyms and swimming pools.

A mainstream interest in yoga has also been reignited, following Indian prime minister Narendra Modi's declaration of June 21 as International Yoga day in 2014 – resulting in millions of people joining collective efforts to practice the country's 5,000 year-old discipline. The buzz around India's two 2016 Rio de Janeiro Olympic medals also helped push fitness onto the public agenda.

"India is set to become the world's youngest country with 64% of its population in the working age group by 2020, and for many of them beauty standards have radically changed from those of past generations, driving interest in sales in health, fitness and thus in sports apparel," say analysts.

Regulatory changes create opportunities

International sportswear brands were among the first to spot an opportunity, with many of them entering India in the mid-1990s. For those that did, franchising was the only viable business model. Over the years, a flood of local franchisees got into business with aspirational sportswear brands, facilitating a rapid expansion of their presence throughout India.

Today, 80% of India's sportswear market is dominated by the "Big Four" global players (Adidas, Reebok, Nike and Puma), with others such as Under Armour, Fila and Lotto, domestic multi-brand sportswear retailers like Planet Sports and Royal Sporting House, and emerging local players, collectively battling for the remaining 20%. Between the "Big Four," Adidas AG – parent company of Adidas and its subsidiary Reebok – currently holds a 45% share of the market, operating all of its 760 stores through the franchise model, and aims to have 1000 stores by 2020.

In September 2012, India's Department of Policy and Promotion permitted 100% foreign direct investment across single-brand retail. The shift in regulations has provided brands with opportunities to rethink their distribution strategies.

Last year, Adidas AG shut 100 stores, as part of its move towards a directly owned retail restructuring across India's key cities, including Delhi, Mumbai and Bengaluru. In the next five years, Adidas is set to open between 20 to 40 large format monobrand stores. The way the firm approaches franchising will also evolve. "We'll show our franchise partners what's possible for our brand. In the past it was seen that a smaller store was less rent, which meant more profits. Now the logic is, a bigger store with better products and a better experience for the consumer will drive profits," said Adidas officials.

Demand in smaller towns and cities

Vector X has priced its products below Nike and Adidas. It has over 500 stockists in India, including e-commerce giants Flipkart, Jabong, Snapdeal. Other domestic players such as Wildcraft India, Future Lifestyle and HRX are finding it difficult to penetrate the market. They are trying to play on price in the smaller tier 2 & 3 cities. However, the market penetration of e-commerce, makes this a little difficult. Between 2015 and 2016, sportswear in metro and tier two and three cities grew close to 80%. The footwear category grew 100% for metro and tier two cities and 110% in tier three cities, according to Amazon officials. Realising the pent up demand in smaller towns and citites, international brands are moving fast and offering a range of products to cater to various price points.

BD apparel exporters gear up to make sportswear

Bangladesh's garment makers are gearing up with fresh investment to enter the global sportswear markets, as demand for the items is on the rise with changes in taste and fashion. Although Bangladesh is the second largest garment exporter worldwide after China, it has little presence in the global sportswear market worth US$ 270 billion. China and Vietnam are currently dominate the market. Bangladesh exports a few million jerseys during different occasions, although the country has greater potential in the sportswear segment, for both fashion and sports functional wear. "We are setting up a big factory in Gazipur to produce specialised garment items, including sportswear, wind jackets, denim items and swimwear," said Abdus Salam Murshedy, managing director of Envoy Group, a leading garment exporter. The group is investing Tk 500 crore in the proposed plant, Murshedy added. KM Rezaul Hasanat, chairman of Viyellatex Group, said sportswear has two segments – fashion and functional. Local manufacturers export fashion sportswear items on a limited scale, but they are yet to explore functional wear, said Hasanat who also ships sportswear to a European buyer. Asif Zahir, director of Ananta Apparels, said they have plans to set up a separate factory to produce sportswear in future, as demand for Bangladeshi goods is rising worldwide.

Momin Mondol, managing director of Mondol Group, another leading garment exporter, said they shipped a few million pieces of jerseys during the last football world cup in Brazil in 2014. Bakhtiar Uddin Ahmed, general manager at Fakir Apparels Ltd, a Narayanganj-based garment maker, said his company produces sports t-shirts and trousers on a limited scale. Mohammad Hatem, former vice-president of Bangladesh Knitwear Manufacturers and Exporters Association, said he supplied eight lakh pieces of jerseys to 10 football playing nations, including Brazil, Germany, France, Portugal and Argentina, during the last football world cup. Hatem sold the jerseys between US$ 2 and U$ 2.50 a piece. Hatem said many factories in Bangladesh supply jerseys to different football clubs in Europe, like Barcelona, Real Madrid, Manchester United and FC Bayern Munich. Some factories inside the export processing zones export high-end functional sportswear items to renowned retailers & brands like Adidas & Puma.

India still to explore export markets

While neighbouring Bangladesh is venturing into the sportswear segment, India lags in this area. India's exports of sports and winter apparel amounted to US$ 64.37 million in 2016-17, 20.76% lower than in 2015-16. In 2015-16 too, exports of these items were 17.66% lower than in 2014-15, when exports were at US$ 98.65 million. The lower exports are at a time when global consumption and demand for these items is on the rise. High value performance apparel production as well as exports from India are still  negligible.

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