Casey Hall
SHANGHAI (Reuters) – Premium sportswear brands are enjoying strong growth in China as they begin to court their core customers directly, creating another blow for megabrands. Nike (NYSE:) and Adidas (OTC:) as they battle local rivals in the $55 billion sportswear market.
Sportswear is a rare bright spot in China’s sluggish consumer market as health and wellness have become a priority for aspiring middle-class consumers in the wake of the pandemic, with many people taking up activities such as yoga, hiking and running for the first time.
The market, the world’s largest after the United States, is expected to grow 7% this year to $59 billion, according to Euromonitor, beating the 0.8% growth forecast for non-athletic apparel and footwear.
While this should be good news for market leaders Nike, Adidas, Anta and Li Ning, it’s even better news for higher-end brands like Lululemon (NASDAQ:) and niche sneaker makers On and Hoka, which prefer to use social media influencers and communities. – targeted marketing rather than the celebrity-led campaigns that larger brands have traditionally relied on.
“Many Chinese women are new to sports, they feel a little intimidated,” said Ning Zheng, 33, a fitness model with several thousand followers on the Instagram-like platform Xiaohongshu, who said she works with most international sports brands. works in China in some capacity.
“But if other people in their yoga studio or leadership groups, or someone they connect with online, wears the brand, they believe it can be beneficial for them too,” she added.
On and Hoka are relative newcomers to the market, meaning their growth will naturally outpace that of more established competitors. But the more share they take from the market, the less left for everyone else.
It didn’t break out figures for China, but sales growth in the Asia-Pacific region jumped 69% in the first quarter to account for more than 10% of global revenue for the first time. Its co-CEO said during a recent earnings call that the company expects China to account for 10% of total revenue in the near term.
By comparison, Nike’s sales in the Greater China market rose 4.5% in the latest quarter, although significantly lower than its smaller rivals. The company reported footwear and apparel sales of about $7 billion in Greater China in fiscal 2023. Adidas grew its business in China by 8% in the first quarter.
“As the market matures, growth will increasingly favor niche categories and niche brands,” said HSBC consumer analyst Lina Yang.
Compared to other premium brands, Lululemon is a veteran with a decade-long presence in China. The company took a slow and steady approach to expansion, opening its 100th store last year to coincide with its 10th anniversary, but has since stepped up its strategy, saying it aims to open 220 stores by 2026.
The Canadian yoga apparel maker, which relies heavily on targeted marketing, reported 45 percent growth in China, the world’s second-largest, in the first quarter, counteracting weaker demand in the United States, where sales rose just 2 percent. The company’s net sales in China reached nearly $1 billion last year.
‘SOUL SEARCH’
Chinese consumers, especially millennials and the even younger Generation Z, appear to have finally caught on to a global health and fitness trend that has been popular for years and are using sports as a way to discover themselves, analysts say.
Amer Sports’ ambitious outerwear brands Arc’teryx and Lululemon, dubbed the “Hermes of Yoga” by many Chinese consumers, are benefiting as many aspiring sports enthusiasts believe they are the most suitable brand for the specific activity they are looking for. chase.
“I think young people in China are finding themselves through consumption, sports and hobbies, trying frisbee, cycling or yoga and making it part of their identity,” said Yalin Jiang, founder of research and strategy consulting firm ApertureChina.
“These consumers are constantly re-evaluating their values, but this explains why they are willing to pay more for brands that they believe are right for them.”
Premium yoga brand Vuori opened its first store in Shanghai last month. The Authentic Brands group, which recently opened a Reebok flagship store in Shanghai, is also looking to expand its presence to brands that specialize in more niche sports, from surfing and hiking to winter sports.
“We really believe the sky is the limit for these brands,” said Josh Pearlman, Authentic Brands Group’s executive vice president of lifestyle for Greater China.