Global Athletic Wear Geared for Growth Research by Morgan Stanley

The high-flying sportswear sector seems due for a fall, but prospects for growth are getting stronger, not weaker, as the health and fitness trend goes global.

What do yoga moms, high school athletes and Chinese school kids have in common? They’re all helping to power global sales of athletic wear.

Sports apparel and footwear sales have jumped 42% to $270 billion over the past seven years. It’s the kind of winning streak that raises eyebrows—and investor skepticism. Is the sportswear sector due for a fall? In fact, prospects for growth are getting stronger, not weaker, as health and fitness trend for adults and sports participation for youths goes global, according to a recent report from Morgan Stanley Research, “Global Athletic Wear: Very Bullish Five-Year Outlook.”

“We think the market will be surprised to learn how broad-based the cultural factors driving athletic apparel and footwear sales are,” says Jay Sole, who covers branded footwear and apparel for Morgan Stanley. “US investors may not grasp how big the China and emerging market opportunities are, and Asian investors may be similarly surprised at US strength,” he adds. Just how strong? The report estimates that the industry could add $83 billion in sales by 2020, or more than 30% growth.

Asia Could Be Biggest Contributor to Athletic-Wear Sales Growth

Source: Euromonitor, Morgan Stanley Research Estimates

State of Play

The sports we play (or watch) can shape what we wear—and buy. A focus on fitness and healthy living has translated in more active lifestyles, especially among youth. In North America, for example, sports participation among high-schoolers overall has jumped from 25% to more than 35% over the past 35 years, led by a near doubling among girls, from 17% to 32% over that period. Studies by US professional sports leagues show that consumers’ interest in sports is highly influenced by whether they played when younger.

“As these consumers mature and move into prime apparel and footwear buying years, we imagine they will stay active,” says Sole.

More and more boys and girls are playing sports in high school

Source: Euromonitor, National Federation of State High School Associations, Morgan Stanley Research

It isn’t just the US, which is the world’s biggest market for active wear, currently accounting for $97 billion, or 36%, of all sportswear sales. Morgan Stanley forecasts 5% average annual sales growth in Europe over the next five years, driven by growth in Eastern Europe, the Middle East and Africa. Meanwhile, markets in Asia and Latin America—where athletic-wear penetration is low, relative to the US—have the most room to grow and could deliver the best gains, Sole says.

China, in particular, will be a key market to watch. The government has emphasized the need to support youth athletic participation, develop sports infrastructure and business overall, with plans to build 60% more sports facilities by 2025 and get 500 million of its citizens to exercise and play sports regularly, says Edward Lui, who covers China’s consumer industry for Morgan Stanley. Key to growth: The government aims to integrate soccer into primary and high school curriculums to develop future talent.

The message is already resonating with China’s urban residents—more than a million of whom are expected to run marathons in 2015, up 88% from 2014. Sports pastimes, such as skiing and hiking, which a generation ago were unheard of leisure pursuits, have become more common and accessible. People who enjoy such activities also tend to have the means to buy the clothes and gear that go with them.

Rise of the Ath-Leisure Consumer

Other larger consumer market trends also are at play. Today’s “ath-leisure” wear is a long ways from the notorious track suits of the 1970s. The sportswear industry designs clothes, shoes and gear that are high performance, comfortable and fashionable. You don’t have to be a track star to prefer the comfort of running shoes; if you’re into yoga, chances are you already appreciate the look and feel of form-fitting stretch-wear. The upgrade cycle of new designs and improved materials—a page torn from tech—also keeps consumers engaged and coming back for more.

The generational and societal shift toward less formal fashion styles over the past few decades hasn’t hurt. Wearing sneakers and jeans to work was once frowned upon, but many professionals now arrive at the office in flashy, multihued trainers and exercise gear—perhaps along with a wearable device that counts everything from steps and stairs to heartrates and calories, all of which reaffirm their dedication to an active lifestyle.

Healthy living can create a positive feedback loop. “We think this is one of the most under-discussed aspects of the trend, likely because it is hard to prove with scientific data,” Sole says, though he cites Gallup survey data that indicates individuals who exercise more frequently enjoy appreciably more emotional health and well-being. People buying clothes, shoes and gear that helps them stay healthy, fitter and feeling good? Why would that ever go out of style?

Source: Euromonitor, National Federation of State High School Associations, Morgan Stanley Research

 

Cambodia ‘Invited to Join TPP’

Cambodia has been invited to join the Washington-brokered Transpacific Trade Partnership (TPP), which has been described as a deal that will create the largest free-trade zone in the world if it is implemented, a senior official from the Ministry of Economy and Finance said.


Ros Seilava, under-secretary of state at the ministry, said the invitation was made during a recent visit by Cambodian officials to Washington. He also said that the TPP might see changes after the next election in the United States and that these could include its expansion to include more countries. 


The government has established a study group to prepare for inclusion in the TPP, he added. 


Mr. Seilava made the comments on the sidelines of the “Cambodia in 2016: What to Expect” gala dinner on Saturday night. The event was organized by the Enrich Institute and sponsored by Khmer Times. 


The TPP so far includes 12 Pacific rim countries – Australia, Brunei Darussalam, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, the United States and Vietnam – that its proponents say account for 40 percent of global gross domestic product. It faces challenges in ratification in some of these countries, including Japan and the United States.


The TPP has been described by US officials as “the cornerstone of the Obama administration’s economic policy in the Asia Pacific.” 


Concerns have been raised by exporters in Cambodia, particularly those in the garment and footwear industry, that Vietnam’s inclusion in the TPP could make their good less competitive in the US market. The TPP would give garment and footwear exports from Vietnam duty free access to the US market, which could erode the competitiveness of Cambodian garment and footwear exports to the US. 

Apparel Manufacturing has Potential to Create 1.2 Million New Jobs, says World Bank Report

1 percent increase in wages could increase women entering labor force by over 18 percent

NEW DELHI, April 28, 2016 – At a time when nearly one million people are expected to enter the workforce every month for the next three decades, export-oriented apparel production in India and other South Asian countries has the potential to create more and better jobs, says a new World Bank report.

The Stitches to Riches? Apparel Employment, Trade and Economic Development,launched in New Delhi today is aimed at demystifying the global and South Asian apparel markets, estimating the potential gains in exports and jobs, and identifying policies that can unleash South Asia’s export and job potential compared with those of their closest competitors in the Southeast Asia region (Vietnam, Cambodia, and Indonesia).

As wages increase, China, the largest apparel manufacturer for the last 10 years, is expected to slowly relinquish its lead position in the global apparel market, opening the door to other competitors. This could be a huge opportunity for India and other South Asian countries. Even a 10 percent increase in Chinese apparel prices could create at least 1.2 million new jobs in the Indian apparel industry, the report estimates.

Women are expected to benefit the most as their share in the total apparel employment is much higher than their share in other industries. A one percent increase in expected wages in the textiles and apparel industry could raise the probability of women entering the labor force by 18.9 percent, says the report.

“Apparel manufacturing not only has a huge potential for creating jobs, particularly for the poor but also has a unique ability to attract female workers. Employed women are more likely to create positive social impacts as they tend to spend their income on the health and education of children,” said Onno Ruhl, World Bank Country Director, India. “Rising costs of apparel manufacturing in China provides a window of opportunity for India to focus on apparel in productively employing its huge working-age population.”

The top four apparel producers in South Asia – Bangladesh, India, Pakistan, and Sri Lanka – have made big investments in world apparel trade and account for 12 percent of global apparel exports. India also has a more diversified export structure and has a well-developed fiber (cotton), textile and apparel manufacturing base.

Though India is gaining market share, Southeast Asian countries (Cambodia, Indonesia, and Vietnam) are outperforming all South Asian countries in overall apparel export performance, product diversity, and other non-cost related factors. For it to take advantage, India needs to move quickly to ease barriers to the import of manmade fibers, facilitate market access and encourage foreign investment to reach more end markets, which would also yield dividends for other light manufacturers like footwear and toy, the new World Bank report Stitches to Riches suggests.

“South Asia has taken many steps in recent years to support the textile and apparel sector, but it now needs to step up its game by tackling inefficiencies that are undercutting its competitiveness. Greater access to manmade fiber and integration between textile and apparel among other measures can help Indian companies take advantage of the emerging global opportunities and encourage good jobs for development,” said Gladys C. Lopez-Acevedo, one of the authors of the report and a Lead Economist for the World Bank. 

Policy Actions

The report recommends removing trade restrictions to allow easy access to manmade fibers as inputs; increasing efficiency along the value chain such as integration between textile and apparel; and improving social and environmental compliance by introducing better human resource practices.

It suggests the following policy measures to help increase apparel exports in India:

  • Increase product diversity by reducing tariffs and import barriers to ease access to manmade fibers (such as more transparency for duty drawback schemes and bonded warehouses, and removing anti-dumping duties on manmade fibers). Also lower excise taxes or provide other incentives to develop a domestic manmade fiber industry.
  • Improve productivity by helping firms enter the formal sector and take advantage of economies of scale with less complex labor policies. Also promote FDI for apparel by adopting clear and transparent policies on foreign ownership (already in place for textiles) and within export processing zones. This in turn will help reach more end markets.
  • Improve market diversity by taking advantage of access to emerging markets.
  • Shorten lead times by using industrial parks to provide better infrastructure in a concentrated way.

Japan’s Uniqlo targets global stature with fashion identity

Japanese clothing chain Uniqlo has leveraged its prowess in mass production to build a fashion empire filled with shelves upon shelves of affordable, good quality items like down jackets, underwear and T-shirts.

Now the 17-nation, 1,734-store retailer is on a quest to beat Western giants like Gap, H&M and Zara to become the world’s biggest apparel maker.

In the overcrowded, highly competitive casual fashion market, size is important but no guarantee of success: analysts say Uniqlo’s challenge is to carve out a brand identity of its own, going beyond its formula of delivering no-nonsense quality at good prices.

“To win over consumers and break through the clutter, Uniqlo needs to get even more personal,” says Stuart Green, chief executive of Asia Pacific at Interbrand, which consults and ranks brands.

“It will be critical for Uniqlo to maintain product quality and, most importantly, create a deeper, more emotional connection with its customers to drive brand loyalty,” he said.

Interbrand ranks Uniqlo as Japan’s most valuable retail brand, and eighth among Japan’s global brands, including Toyota, Sony and Nintendo. The company’s founder and chief, Tadashi Yanai, is Japan’s richest man, according to Forbes magazine.

Analysts say that to move it to its next stage of growth, Uniqlo also needs to beef up its digital presence and adapt to non-Asian markets. Winning over the huge market of suburban American shoppers will be crucial.

Consumers these days are picking brands on digital platforms and social networks, as they increasingly shop online. To cope with the mind-boggling volumes of information online, consumers now rely on brands to serve as filters and curators, Green said.

To help drive its global expansion, Uniqlo is tapping outside talent.

It just hired Christophe Lemaire, formerly of Hermes and Lacoste, who started his own Uniqlo line last year, to head its Paris research center.

In 2014, it brought in a global branding expert, John Jay. An American of Chinese origin, he who worked on ad campaigns for Nike, Coca-Cola and Microsoft, and a fleece campaign for Uniqlo, at U.S. marketing company Wieden+Kennedy.

“Whether they’re in Beijing or New York, there is a commonality to young people and what they want in life,” Jay, whose title is president of Global Creative at Uniqlo’s parent company Fast Retailing, said at a recent Tokyo event, centered on Uniqlo’s second fashion show ever.

“We have barely scratched the surface. Our potential is amazing,” he said.

Uniqlo is still relatively small, with 44 stores in the U.S., 449 stores in China and 846 in Japan, its biggest market. Retail giant H&M of Sweden has 4,000 stores around the world, Gap Inc. of the U.S., 3,700 stores, and Inditex of Spain operates 7,000 Zara, Bershka and other brand stores.

H&M and Inditex have posted healthy financial results recently, but Gap, which has the Old Navy and Banana Republic brands, is struggling, slashing prices to draw buyers and closing dozens of stores, including some in Japan. The Standard & Poor’s credit rating agency recently downgraded Gap’s debt to junk status.

Uniqlo’s profits also have slowed recently, hurt by a warm winter that slowed sales of its down jackets, HeatTech underwear and other winter apparel.

Fast Retailing, with 100,000 employees, forecasts a profit of ¥60 billion ($560 million) for the fiscal year through August, down 46 percent from the previous fiscal year, mainly because of falling profits at Uniqlo.

Yanai’s turnaround plan includes sweeping cost cuts, improved efficiency, pricing reviews, and, perhaps most importantly, greater flair in the company’s fashion offerings, building on collaborations with designers.

The company asked Nigo, a Japanese DJ with a reputation for innovation who created The Bathing Ape clothing line, to add more flair and edge to his T-shirts.

Nigo added to the T-shirt line motifs from pop artist Andy Warhol, music producer and singer Pharrell Williams and from traditional Kabuki theater, in addition to old-time favorites like Mickey Mouse.

A partnership with Carine Roitfield, former editor-in-chief of Vogue Paris, has brought into Uniqlo stores chic designs unlike most anything else you’d find.

The company has strengthened its sportswear, signing on tennis stars Kei Nishikori and Novak Djokovic.

Uniqlo also has partnerships with labels like Liberty London, with its colorful flower-pattern fabrics, and Hana Tajima, a designer who specializes in Muslim clothing such as head scarves and long dresses.

“Uniqlo has a smart format, which stands out from most of the mass fashion retailers. Less concerned on fashion trends, and more focused on ‘basics’ or ‘investment pieces’ of good fabric and quality,” said Luca Solca, analyst with BNP Paribas. “They are trying to spice this up with designer collaborations.”

Uniqlo executives believe fashion is globalizing, and people around the world, from China to New York, more or less want the same thing — quality for reasonable prices, and clothes that suit their lives.

On a recent weekday, the company’s 12-story Ginza store was crowded, as tourists milled around snapping selfies in front of what has become a city landmark.

Olga Symonenko, an IT worker from the Ukraine, said she had heard about Uniqlo from friends who had been to the store in the U.S.

“The prices are good, and the quality,” she said, happily clutching two blue dresses. She said she and her husband planned to pick up 20 items.

Gold Status WRAP Certified!

We are proud to announce that our factory is Gold Status WRAP Certified!

What is WRAP?

Worldwide Responsible Accredited Production is an independent, objective, non-profit team of global social compliance experts dedicated to promoting safe, lawful, humane and ethical manufacturing around the world through certification and education. 

WRAP is headquartered in Arlington, Virginia, USA and has branch offices in Hong Kong and Bangladesh and additional full-time staff in India and SE Asia (Thailand & Vietnam).