The proliferation of Direct-to-Consumer (DTC) companies focusing on activewear.

The proliferation of Direct-to-Consumer (DTC) companies focusing on activewear.

In the world of fashion, activewear has taken centre stage as a growing sector, outpacing traditional apparel in terms of growth. This shift is not only attracting digital-native brands but also traditional retailers, who are eager to tap into this burgeoning market.

One such brand, Vuori, is making waves by offering products beyond activewear. The company, which has been profitable since 2017, recently raised $400 million and plans for a broad-based expansion. This funding will not only help Vuori expand its activewear line but also venture into new categories such as dress pants and travel-specific items.

The surging popularity of activewear has led many companies to enter the market. Lululemon, a global brand that trades at a $50 billion market cap, almost 10 times its revenue, is still growing 25% to 30% a year. In Q1 2022, Lululemon made $1.5 billion in revenue. Despite its size, Lululemon has not yet been significantly impacted by the law of large numbers.

Another player in the activewear space is Outdoor Voices, a direct-to-consumer (DTC) brand that gained rapid popularity but is still trying to solve operational problems. Sweaty Betty, another DTC brand, has faced challenges and was acquired by Wolverine World Wide.

The traditional athletic brands have failed to cater to the women's business effectively, opening up opportunities for DTC brands. Brands like Beyond Yoga, which was purchased by Levi's, and Alo Yoga, which has increasingly shifted into the athletics space, are capitalising on this gap.

The athletics space still holds big opportunities for DTC brands. Top brands have increasingly adapted their offerings to include more streetwear and lifestyle-focused items. Sports equipment brand Wilson, for instance, opened its first stores and debuted an apparel line.

However, the journey is not without challenges. Many DTC activewear brands have faced operational challenges. Industry expert Kossow warns against DTC brands expanding into new categories too quickly, citing Lululemon as an indicator of growth opportunity in the activewear space.

The consumers' willingness to pay higher prices for versatile, better-looking, and durable athleisure is a trend that Kossow believes will continue. Consumers have become accustomed to paying higher prices for athleisure, with brands like Lululemon, Vuori, and Outdoor Voices offering leggings that cost upwards of $80 a pair.

Even traditional retailers are jumping on the bandwagon. Target launched its own activewear private label in January 2020, and Kohl's followed suit later in the year. J.C. Penney revamped its activewear line in an effort to strengthen its merchandise assortment.

In footwear, the athleisure trend is so strong that the sports side of the business is now much larger than fashion footwear as a category. This trend is also reflected in the IPO filings of Allbirds and On.

In conclusion, the activewear market is a growing landscape for both DTC brands and traditional retailers. With consumers willing to pay higher prices for versatile, better-looking, and durable athleisure, the opportunities for growth are immense. However, it's crucial for brands to navigate this space carefully, ensuring they can meet the operational demands of expanding into new categories.

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