Rich Chinese splurge on sportswear as luxury's lustre dims (updated)

361 Degrees International

18/02/2016 08:25

* China sportswear market to rival luxury by 2020 - 
Euromonitor 
    * Winter Olympics in Beijing spurs sports craze 
    * Under Armour, Lululemon Athletica poised to reap benefits 
 
 (Adds link to Reuters TV video) 
    By Donny Kwok and Farah Master 
    HONG KONG, Feb 18 (Reuters) - GPS sport watches, compression 
leggings and hydration packs are the new must-haves for wealthy 
Chinese, pumping up the multi-billion dollar sportswear industry 
at a time when China's elite are reining in spending on more 
traditional luxury brands. 
    Extreme sports apparel and expensive active wear is in vogue 
thanks in part to government promotion of sport ahead of the 
2022 Winter Olympics in Beijing, and the purchase of the Ironman 
brand by China's richest tycoon last year. 
    The market is also forecast to grow with the government's 
decision to relax its one-child policy after 36 years, and 
companies like U.S.-listed Under Armour  UA.N  and Canada's 
Lululemon Athletica Inc  LULU.O  are lining up to cash in. 
    "It is huge - that wellness and healthy lifestyle 
opportunity in the whole of China," said Colin Grant, chief 
executive of the Hong Kong-headquartered Pure Group, an operator 
of gyms, yoga, retail and nutrition businesses across Asia. 
    "Luxury has its challenges but active wear is a bright spot 
in the industry. Some people wear it to weddings in China."  
    China will host its first ever Ironman events this year 
after billionaire property developer Wang Jianlin bought World 
Triathlon Corp for $650 million. The deal is set to capitalise 
on a growing fitness craze which saw 134 marathon and 
road-running races held across the country last year, up 160 
percent from 2014, according to the Chinese Athletic 
Association.  
    As part of its promotion of sport and healthier living 
generally, the government says that by 2025, more than 900,000 
stadiums and gyms will have been built across the country. 
    For Under Armour and Lululemon Athletica, two of the Western 
brands already active in China, the country offers an 
opportunity to grow outside the mature markets of the United 
States and Europe.  
    No. 2 U.S. sportswear maker Under Armour expects China sales 
to leap 25 percent a year until 2018, while Vancouver-based 
yogawear giant Lululemon says its first Hong Kong store is on 
track to make $8 million in sales this year. 
    But they face a strong field of Chinese rivals such as ANTA 
 2020.HK , Xtep  1368.HK  and 361 Degrees  1361.HK  whose share 
prices soared between 34 percent and 56 percent last year. 
    That compares with traditional luxury titans like Italy's 
Prada  1913.HK  - a maker of fancy handbags - which sank 45 
percent on the Hong Kong exchange last year as Beijing's 
clampdown on corruption and China's slowest economic growth in 
25 years forced China's elite to change their spending habits.  
    Some of the money once spent on French wine and Italian 
leather now appears to be flowing into high-end heart-rate 
monitors and running shoes. 
    China's sportswear market will surpass the luxury goods 
market by 2020, according to Euromonitor, with double-digit 
growth each year to 280.8 billion yuan ($43.10 billion) compared 
with luxury's single digit growth to 192.4 billion yuan in the 
same period. Europe's sportswear market, by comparison, would be 
worth $64 billion by 2020, it says.  
    And China's market is only just starting to flex its 
muscles. The sports sector contributes 0.67 percent of China's 
total gross domestic product, compared with 2.2 percent in the 
European Union and 3.5 percent in the United States, according 
to Oriental Patron Research. 
 
    GETTING PHYSICAL         
    In Hong Kong, a typical GPS sports watch costs up to HK$2000 
($257) with top brands charging closer to HK$4000, while a pair 
of compression tights averages about HK$900. 
    "I spend mostly on sports shoes and sports watches," said Gu 
Xiaojiang, 36, a keen marathon runner who works in the finance 
industry in Shanghai. 
    "From an expenses point of view, not including transport 
fees ... I spend a few thousand yuan a year. But if I start 
biking, then I suspect I'll start spending a lot." 
     Those who want to look sporty without actually working up a 
sweat are increasingly buying "athleisure", a mix of athletic 
and casual clothing that has grown popular even in formal 
settings like offices in the United States.  
    As Chinese customers become more affluent they are becoming 
more demanding when purchasing, said Shakeel Nawaz, director at 
Escapade Sports which sells sportswear and nutrition products 
mainly to the Hong Kong market. 
    "The mainland customers we get are very, very focused. They 
know exactly what they want in our stores. It hasn't gotten to 
the watershed moment when it becomes a mainstream thing, but 
they are catching up," he said.  
     
($1 = 6.5154 Chinese yuan renminbi) 
 
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Graphic: China's sportswear market leaps ahead    http://reut.rs/1JZAGoe 
Video: Sportswear is the new bling for rich Chinese    http://reut.rs/1mJ8evm 
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 (Reporting by Donny Kwok and Farah Master in Hong Kong; 
additional reporting by Engen Tham in Shanghai; Editing by 
Stephen Coates) 
 ((farah.master@thomsonreuters.com; +852 28431631 , +852 9631 
8262; Reuters Messaging: 
farah.master.thomsonreuters@thomsonreuters.net))