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Activewear Brands Limber Up in China

Changing cultural attitudes to sport, fitness and body image have opened up a huge activewear opportunity in China. Which international brands are poised to pounce?
Lululemon's "Unroll China" yoga event in Beijing's Forbidden City | Source: Courtesy
  • Kate Abnett

LONDON, United Kingdom — In August, the ground around Beijing's Forbidden City was carpeted with hundreds of people doing outdoor yoga on brightly coloured mats, as Lululemon kicked off "Unroll China," its first series of fitness events in the country.

“The event sold out overnight for the simultaneous yoga events in three key markets in China,” says Ken Lee, senior vice president, Asia Pacific, at Lululemon, which also hosted grassroots yoga sessions in Shanghai and Chengdu. “It’s hard to overstate the potential for Lululemon in Asia over the next five years.”

Indeed, China’s activewear market is booming. From 2014 to 2015, China's sportswear market grew from $23.9 billion to $26.6 billion, according to Euromonitor. Mintel estimates that the country’s sportswear and outdoor wear market is valued at RMB 124.5 billion (about $18.57 billion), or 6 percent of total apparel sales in the country. In 2015, the market grew at an 18 percent clip. “It is reasonable to forecast the market growing to about RMB 220 billion (about $32.81 billion) by 2020,” says Matthew Crabbe, Mintel’s director of research for Asia Pacific.

Activewear brands stand to benefit from a cultural shift as China opens up to fitness. Sports participation in the country is rising fast. Gym and health club revenue in China has nearly doubled over the past five years, and Shanghai alone is now home to over 1,000 gyms.

The government is actively promoting sports participation, motivated by concerns that urbanisation and industrialisation were resulting in a decrease in the health and fitness of the overall population. Earlier this year, China's State Council unveiled a national health improvement plan including new public sports facilities and fitness centres, to boost the population’s fitness through 2020. There is also the hangover from the 2008 Beijing Olympics, which helped boost interest in sport, particularly athletics.

Meanwhile, many Chinese people are travelling or studying overseas, in countries where sports participation is encouraged and athleisure is already an established fashion trend. “This exposure has contributed to a more open-minded Chinese woman, willing to stretch her long established definition of beauty,” says Brian Buchwald, co-founder and chief executive officer of consumer intelligence firm Bomoda. “In past years, most Chinese women had little interest in sport or fitness. Their perception was the equation of beauty and a skinny body to the point where they feared muscle development. But in recent years, their attitudes have been markedly changed.”

Physical and mental well-being are equally important to Chinese consumers.

Celebrities such as Kendall Jenner and Gigi Hadid — who are often photographed in "athleisure" looks and share their food and fitness regimes on social media — are frequently featured on Chinese fashion blogs and social media, helping to drive fitness-friendly fashion and beauty trends.

More generally speaking, China’s rapid economic development has led to rising incomes and increased leisure time among the country’s middle class. “They have more spending power, and more choice. Their spending power has attracted more sportswear companies to fulfil a growing market for many types of sports participation,” says Crabbe.

International sportswear giants are already doubling down on the opportunity. Adidas and Nike both posted double-digit revenue growth in Greater China in 2015, which Adidas attributed partly to "rising sports participation, strongly supported by the Chinese government." Nike is the market leader with a 20 percent market share, and sales in Greater China of $3.8 billion for fiscal year 2016. The company is riding the wave of government investment in sports and has teamed up with the Chinese Ministry of Education on a three-year schools sports plan.

However, Adidas is catching up: Mintel estimates its 2016 market share will be about 18.8 percent. In fiscal year 2015, the company posted sales of €2.47 billion ($2.75 billion) and earlier this year announced plans to open 3,000 new stores in China by 2020. The company is also investing in the market, hiring actress Zhang Jun Ning as an ambassador. “Zhang was well known prior to her appointment as a workout warrior and relatable to the large population,” says Buchwald. “For brands, hiring popular and on-trend KOLs is a great way to attract the Chinese consumer.”

But there’s still everything to play for. China's per capita consumption of sportswear is low — lower than Malaysia, Brazil, Germany and the UK — leaving a lot of untapped potential, and according to Brian Buchwald, “the Chinese people’s attitudes toward fitness are still in transition.”

To tap the opportunity, sportswear brands need a sharp focus on product design, as many Chinese consumers prioritise form over function in fashion products. “Their challenge is convincing the Chinese consumer they are on-trend and fashionable. Hiring fashion key opinion leaders and partnering with fashion designers are great paths to bridging that gap,” says Buchwald, pointing to Adidas Originals as successfully using “hero products” like Stan Smiths and NMD trainers to create social media and marketing buzz in China.

Indeed, paying attention to cultural attitudes is also a good way to connect with Chinese consumers, particularly through sports like Tai Chi, which prioritise mental balance as well as physical fitness, in the traditional holistic approach to health in Chinese society. Indeed, a 2010 martial arts clothing collaboration between Adidas and martial arts film star Jet Li eventually led to Li launching a lifestyle brand of his own, Taiji Zen, alongside Alibaba founder Jack Ma. "Physical and mental well-being are equally important to Chinese consumers," says Crabbe, pointing to this as one of "main reasons that there has been a recent resurgence in people doing yoga."

Lululemon has put particular emphasis on tailoring stores to local markets within China. The company has stores in Hong Kong but currently only operates showrooms in Shanghai and Beijing, and sells online in China via Tmall. "We start with our showroom model, where our team can build brand awareness, test product, create authentic relationships and learn what is important to a community before we open a permanent store," says Ken Lee. "We don't push ourselves on a community, we open stores when they pull us in."

However, Crabbe warns that an internationally-renowned brand name is not a guarantee of success in China’s activewear market. “Foreign brands should not underestimate the significance of Chinese cultural influences and Chinese brands’ understanding of their local markets and consumers. Companies cannot assume strong market growth will mean strong growth for them — there is a lot of competition going on out there.”

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