On the Move

One retail category that’s been fascinating to watch evolve over the last several years is the women’s athletic apparel segment. Judging by the number of times reporters have asked me about women’s athletic apparel retailers in the last few months, I’m not the only one who thinks so.

This is a category that has simply exploded over the last several years, with brands like Vancouver-based Lululemon and California-based Lucy establishing themselves as market leaders relatively early in that process. While Lucy has slowed its expansion dramatically after being sold to VF Corporation, Lululemon has expanded both rapidly and explosively. Until recently, that is. Lululemon’s growth is slowing down significantly — for a number of reasons. The challenges that Lululemon has faced in the last six-12 months are just one small part of the ways that the foundation of the women’s athletic apparel segment has begun to shift. The industry is changing in some profound and interesting ways.

Today, Lululemon is still the number one brand in the category, but sales have been slowing noticeably. While the brand has dealt with everything from PR problems (the tactless and offensive comments of CEO Chip Wilson) to embarrassing and high-profile quality and manufacturing issues (such as the infamous “see-through yoga pants” debacle in 2013), I think a bigger issue might be something more basic: competition. In most cases, that competition is coming from brands and concepts that haven’t really been in the category for all that long. I suppose that’s par for the course when a retail segment is experiencing exponential growth.

Big-time players like Athleta, which has emerged as Gap’s number one growth vehicle at the moment, have established a national foothold. Some smaller specialty chains like Australian brand Lorna Jane, which has opened nearly two-dozen stores on the West coast, are looking to go national. Lorna Jane seems poised for very big things in the not-too-distant future, as big names like Urban Outfitters and Foot Locker have reportedly expressed serious interest in an ongoing auction for the chain. The price tag so far is said to be north of half a billion dollars.

At the same time, department stores from Macy’s to Neiman Marcus have begun carrying their own brands of women’s athletic apparel and/or establishing exclusive partnerships with activewear brands. At the other end of the spectrum, even the discounters are starting to get more seriously invested into athletic apparel — especially women’s athletic apparel. Walmart and Target are planning their own lines, and Biggest Loser celebrity Jillian Michaels is putting her own line together for Kmart.

To my mind, the big question is this: just how large is this category — or maybe more importantly, how large can it be?

One thing that’s interesting to note here is that Lululemon is so far the only specialty athletic apparel retailer carrying apparel for men. Men’s athletic wear has traditionally been dominated by brands like Nike and Puma and has been sold largely at sporting goods and department stores. Can the women’s athletic apparel boom change that dynamic? I am a bit skeptical. Men are generally less likely to spend big dollars for high-end athletic apparel. One of the most important developments (and it’s one that Lululemon has been a big contributor to) is the relatively new notion that athletic and workout gear can not just feel good, but also look good. More and more women are wearing these clothes not just to the gym, but as everyday active wear.

While gender limitations may incur some inherent structural limitations on segment growth, the emergence of more affordable options can’t help but expand the market. More moderate demographic groups haven’t really had access to this kind of higher end product, so there would seem to be some real room to grow there. It seems clear that other brands are competing on the same terrain — just at a lower price point.

As the competition shakes out between different brands and different sub-categories within the women’s athletic apparel segment, there are potential implications for the entire retail industry. Brick-and-mortar impact has been and will likely continue to be significant — this is a category that has resulted in lot of stores. I will be watching closely to see how the different market niches get filled in (especially on the lower end of the price scale) and how segment behemoths like Lululemon can weather the turbulence and continue their dominance.

I’m sure you’ll agree that there is no way they can keep up the explosive expansion and comp store growth they have seen thus far, but I’d love to hear your thoughts on what is next for Lululemon and this fast-growing and influential retail category. Leave a comment below or send your thoughts to Jeff@JeffGreenPartners.com to continue the conversation.


Click here for past columns by Jeff Green

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