A new playing field Azurium's James Stewart discusses athleisure.
FOR SEVERAL YEARS now, the hottest apparel brands in the world have often been athleisure specialists. Think Nike, Lululemon and even our own Lorna Jane, an Australian pioneer in the category. In fact, the growth in the sector has been so phenomenal that many established brands have started their own athleisure ranges to take advantage of market demand, including mainstream sporting goods retailers such as Rebel Sport and even Kmart.
So while Australian retail conditions remain tough in the face of record low wage growth, mounting household debt and rising costs of living for consumers, many international retailers have flocked to our shores, enticed by high margins and economic stability, each promising a unique value proposition to service gaps in the market.
Among the fleet is the recent arrivals Decathlon and JD Sports, two European athleisure and sporting houses ramping up expansion and shaking up the market as they tap into Australianís love for sport and fashion.
The largest sporting goods retailer in the world, French giant Decathlon, built on its digital presence in Australia to include a physical footprint, opening its first store in Tempe, Sydney in December 2017. The retailer's 1,200 store network extends across 30 countries, with three additional Australian store openings planned for November this year as part of an expansion plan to reach up to 100 stores Down Under.
Often labelled the IKEA of sporting goods and the Aldi of activewear, Decathlon offers customers an extensive product and category range of both private label and well-known brands, with a model built on low margins to deliver attractive price points for consumers, resulting in savings of up to 70%.
Decathlon's seduction extends beyond low prices through its emphasis on interactive customer experiences, of which the store layout and their try before you buy policy plays the lead role.
Decathlon's first Australian store in Tempe, Sydney is 3,800 square meters (roughly two to three times the size of most Rebel Sport stores) and includes basketball courts and football pitches for customers to put the retailer's apparel and equipment to the test.
This unique experience resonates with customers, with half a million shoppers visiting the Tempe store each month since opening their doors and plans to keep these experiences central to its strategy as the retailer continues its rollout across the nation.
JD Sports however offers a different proposition. Smaller stores, roughly 400 to 700 square meters, often with up to half the space dedicated to sneakers, including products not available in competitor stores through partnerships with brands such as Nike and Adidas.
This exclusivity, coupled with JD's concentrated effort in creating a truly seamless shopping experience across all channels through window displays and in store purchasing kiosks, is underpinning its early success in Australia and prompting further expansion.
So how are these retailers opening their doors as others are closing? In addition to creating engaging retail experiences, delivering exclusivity, low price points and seamless shopping experiences, both JD Sports and Decathlon are capitalizing on the continued rise in popularity of athleisure, or activewear apparel.
Shifting consumer attitudes and trends has led to activewear being worn as streetwear, driving demand for these products and building the Australian industry into a $2bn market (IBISWorld, 2017). Australia is not alone, market research firm NPD Group notes that in the US, the athleisure movement and its influence on fashion continues to be a primary growth area for the industry and made up 22% of all US apparel sales in 2017, creating a US$48bn market.
Morgan Stanley predicts the athleisure market to reach US$350bn globally by 2020. Across the nation, sales of activewear are forecast to increase by over 20% between 2015 to 2020 (Australian Sporting Goods Association, 2017), amongst a clothing, footwear, and personal accessories category currently experiencing sluggish growth.
Australian retailers Lorna Jane and Stylerunner are reaping the benefits, as well as athleisure label P.E. Nation, which this year became the recipient of the 2018 National Designer Award, one of the Australian fashion industry's top emerging designer awards. While the industry is experiencing growth, the expansion of international giants JD Sports and Decathlon will shift the landscape and place increased pressure on domestic players. And donít forget the elephant in the room, Amazon.
As Amazon's Australian user base continues to rise, we see more local customers exposed to its private label offering which includes several activewear brands (L2 Inc, 2017). The athleisure market shapes up to be a battle ground in coming years. International retailers will continue to see Australia as a small but lucrative market.
We believe brands like Decathlon and JD Sports will continue to challenge local retailers and play a significant role in changing consumer behavior by reshaping our expectation of value and thoughtful execution of retail experiences reflecting how customers shop, where they purchase and ultimately what shoppers want.
AZURIUM IS A SPECIALIST MANAGEMENT CONSULTING AND ADVISORY FIRM OWNED BY FERRIER HODGSON.