China has caught onto the 'athleisure' trend, and US companies are profiting
REUTERS/Siu ChiuChina's luxury market is in transition.
In 2015, Chinese shoppers accounted for almost half of the global luxury market. But recently, luxury goods have become less accessible to the growing Chinese middle class, due in part to last year's anti-extravagance campaign led by president Xi Jinping.
Meanwhile, the tastes of the elite have shifted away from visibly branded goods in favor of quality, newness, and lifestyle.
So what are Chinese consumers spending their money on instead? Sportswear - high-quality athletic clothes, mirroring the "athleisure" trend that has taken the US by storm, with an emphasis on wellness and a healthy lifestyle. Now it's taking over China, and it's presented a huge opportunity that US companies have been profiting from.
A recent report from Macquarie Research gives a specific example - VF Corp, an apparel company that has brands in categories like sportswear and outdoor sports. The company has grown its Asian market from $20 million to $1.2 billion in the past decade, including over $600 million in China alone:
The entire Chinese sportswear market has been growing quickly in the past few years, eating into the luxury goods market that exploded years earlier. Reuters reported earlier this year that "GPS sport watches, compression leggings and hydration packs are the new must-haves for wealthy Chinese, pumping up the multi-billion dollar sportswear industry at a time when China's elite are reining in spending on more traditional luxury brands."
Euromonitor International, a market research firm, reported that the sportswear market in China grew to $25.3 billion in 2015, and is expected to grow to $43.1 billion by 2020, surpassing the luxury goods market.
And US companies have been moving fast to take advantage of the growing demand for athletic apparel and goods. Adidas announced it's planning to open 3,000 more stores in China in the next five years, expanding from 9,000 to 12,000, after its 2015 sales in the region increased 18%. According to Reuters, Under Armour expects its sales in China to increase 25 percent per year until 2018, and Lululemon claims its first Hong Kong store is on track to make $8 million in sales in 2016.
As US companies are becoming bigger and bigger, they've been edging out Chinese sportswear sellers. The South China Morning Post reported in May that some domestic Chinese companies are seeing profit growth slow down. The main drivers of the sportswear boom - including the promotion of sports ahead of the 2022 Winter Olympics in Beijing and the potential boost from the end of China's one-child policy - have disproportionately strengthened international athletic-wear companies, leaving Chinese companies to decelerate.