Why are talking about this?
The way we dress is changing, and we are all (probably) participating in that trend. Do you wear trainers to work? Do you consider your choice of trainers to be a fashion statement? Is your style becoming more casual? Even if you yourself are still strictly suited-and-booted, this is the general direction of travel. The trend is called athleisure - it’s where sportswear becomes fashion and it’s becoming more widespread. Investors can take advantage of this trend by understanding the market and which brands are best positioned within it.How big is this market today?
The sportswear market was worth $323bn in 2017 and represents about 18% of the global apparel and footwear market. It has seen compound annual growth of 6.5% over the past five years.Isn’t sportswear already established now? How much growth is left?
The market has been growing fast but there is still more to come. We forecast it to grow by 6.8% in 2019. The spend on sportswear is most strongly established in the USA, where the average person spends over $300 per year in this segment. But it’s relatively underpenetrated in emerging markets - China and India represent massive opportunities for the sportswear brands. In China, the average spend per person is less than $25 per person and in India it is only $5 per person. China will be crucial to driving growth in the short-to-medium term, while India is a longer-term opportunity for the market.What do you think will drive growth in these markets?
There are three main growth drivers: 1) households getting richer and an expanding middle class. An annual increase of 60m in the middle-income population theoretically adds 1ppt to growth each year; 2) increased health awareness and sports participation; and 3) fashion merging with sportswear.How can brands take advantage of this attractive market?
The most important factor is marketing. This means engaging with consumers on a personal level, by working with sports personalities and celebrities, and having a strong social media presence and effective story-telling skills. Some brands’ spend on marketing exceeds their operating profit. Product innovation is also crucial. This includes the technology to make products best-suited for their purpose (i.e. running or training), combined with design.It seems fairly straightforward - what are the main industry disruptors today?
The biggest disruptor is the shift towards retail. This means selling directly to the consumer as opposed to selling through a third-party such as JD Sports or Footlocker. Retail is far more complex; it requires investment into people, stores, digital, warehousing and logistics – but it comes with huge rewards. These include better understanding of the consumer, better control over how products are presented to the consumer, and control over pricing and discounting. This can mean better-quality growth and higher profit margins.
This article is an extract from ‘Global Sporting Goods: Portland trailblazer
’. A report co-authored by Jaina Mistry, an analyst on DB’s European Sporting Goods and Paul Trussell, an analyst on the US Apparel & Food Retail team.
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