Retail Trends

Delivered February 16th, 2018. Contributors: Ramadhani H., Anna G. and

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Retail Trends - Athleisure

The following brief provides a trends forecast for the Athleisure market in the United States through 2020. It begins with an overview of the size of the athleisure market, proceeds to its projected growth and key demographic, then ends with discussions of retail and product trends within the athleisure space. The information is summarized from various industry related reports and studies. 
The athleisure market in the United states Athleisure, also known as Activewear, is now officially defined in the Merriam-Webster dictionary as “casual clothing meant to be worn both for exercising and for general use.” According to Morgan Stanley Research estimates, the size of the athleisure market in the United States was $97 billion in 2015 which constituted 36% of the global activewear market. Their research further projects this market to grow an additional 30% by 2020. Furthermore, research from NPD Group suggests that despite overall apparel sales showing flat year-on-year growth of 2% in 2015, activewear rose 16%. This growth is being driven primarily by Millenials who believe in "relaxed clothing standards" and also happen to be the majority of the US population at 28%.
Retail Trends ForecastThe growth in popularity of athleisure will continue to encourage retailers to transform themselves into "lifestyle brands." As such more retailers will seek collaborations with influencers and celebrities to launch activewear lines as exemplified by partnerships like Kate Spade/Zara, Adidas/Kanye West and Ivy Park/Beyoncé. These celebrities have turned athleisure into a "fashion movement." Another example of this is the Kylie Jenner/Puma collaboration which increased Puma's social media engagement statistics by 25%.

As athleisure continues to become more mainstream, more fashion brands are entering the space and will continue to do so going forward. When Lululemon, an athleisure pioneer expanded from a $149 million company to $9 billion company in just 10 years, fashion brands like Tory Burch, Victoria’s Secret, and Paul Smith that traditionally did not focus on sportswear, launched activewear lines.

Retailers will also increasingly utilize social media as part of their athleisure campaigns. UnderArmour's #iwill campaign, supported by influencers like ballerina Misty Copeland and model Gisele Bundchen, propelled UnderArmour to be the number 2 "most valuable sportswear brand after Nike in 2014." Athleta's #PowerOfShe campaign garnered over 28,000 views and 20,000 influencer social media posts in a span of 3 months.

The athleisure space will see campaigns from high-end retailers that integrate cutting-edge wearable technology, lifestyle and aesthetics. This trend is exemplified by niche brands such as DYNE. The company's athleisure gear has "Near Field Communication" that keeps people "connected on the go."

As competitive pressures in the athleisure sector increase, retailers will continue to utilize more innovative customer engagement models such as in-store workout sections and fitness application demonstrations, to create unique experiences for customers. Brands such as Lululemon have pioneered this approach, offering in-store "complimentary classes." This concept can be also include in-store health food outlets.
Product Trends forecastDemand for "seamless, breathable sports bras" will continue to be strong. Online searches for sports bras averaged 100,000 a week in 2016, which was an increase of 15% from a year earlier.

As the trend to spend on "activity-packed" holidays continues, demand for athleisure products like high-altitude activewear for mountain resorts will in turn continue to drive interest. Moncler's Grenoble "high performance sportswear" line, one of the first in this space, is designed for "extreme climates" and targets holiday makers. Other brands like Fendi, Chloé and Hermès have introduced "skiing and cross-fitting capsule collections."

Athleisure beauty products are poised to grow as beauty companies target the growing market fitness market. These products are marketed as "breathable natural makeup" that can cope with exercising sweat. Firms like Rae Cosmetics, Sweat Cosmetics and Tarte are at the forefront of this movement having launched their respective lines of athleisure makeup.

 Research indicates that the premium denim jeans market will continue to benefit from the growing athleisure sector. Athleisure yoga-like jeans are in demand and will drive growth into 2020. Levi has taken note of this trend and has already made investments to pursue the opportunity. 

Other products that will continue to be in demand include tracksuits, hoodies and leggings. People increasingly searched for these products online in 2016.

Fashion runways have popularized "femleisure" mesh athleisure products which saw a surge in online searches of 63% in 2015. The athleisure space will experience continued demand for femleisure products. Other activewear products popularized by fashion runways that will see continued interest include "oversized hoodies," dad hats and "bow slides."

Finally, the trend to emblazon products with logos and slogans is set to carry on. Brands such as Gucci and Ivy Park are successfully using this strategy.
ConclusionThe $97 billion US athleisure market is projected to grow 30% by 2020 driven by Millenials. Athleisure retail trends through 2020 include retailers transforming into lifestyle brands, more fashion brands introducing athleisure lines and innovative in-store customer engagements. Athleisure products that will drive demand into 2020 include sports bras, extreme climate activewear, athleisure beauty products, premium denim jeans, "femleisure" products and athleisure products emblazoned with logos and slogans.

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Retail Trends - Sneakers

In the near future, sneaker brands are expected to invest in faster supply chains, which may force them to bring manufacturing back to the U.S. Experts predict that the use of automation will increase. Between now and 2020, key product trends will include customization, innovations in sole technology, choosing environmentally friendly materials, and focusing on premium lines. Additionally, retailers will focus on delivering unique retail experiences, using tech innovations in the coming years. 

Please note that since most reports and articles in the industry media only give forecasts for 2018, I was able to identify seven trends that will be relevant until 2020. Also, while I focused on manufacturing and retail, some trends are a direct result of the consumer demand.
FASTER SUPPLY CHAINSAccording to the report by Morgan Stanley, which provides a forecast for athletic footwear until 2021, faster supply chains will be the key to sneaker brands' success in the coming years. The concept of "fast fashion" is particularly relevant for athletic footwear, with sneaker enthusiasts (including collectors, runners, and other groups) expecting to be able to buy new models instantly. However, speeding up the process is also especially challenging for them, as it typically requires 28 manual steps. Therefore, experts from Morgan Stanley expect that they will rely heavily on new technologies and make big investments in R&D, eventually bringing the process down to just three steps. 

While the forecast is global, I determined that it's applicable to the U.S. market with the article by Business Insider. It notes that American brands will bring manufacturing back to the U.S., looking to speed up their supply chain. It's possible that only a small part of their production in Asia will be moved. However, it will still be notable, as currently 99% of shoes sold in the U.S. are made elsewhere. Adidas is a pioneer of this trend, with their "speedfactory" in Atlanta, which opened in 2017. 
digitalized DESIGN AND automated MANUFACTURINGAs a result of the above trend, sneaker brands will try to digitalize the design and automate manufacturing of their shoes. According to Morgan Stanley, it can allow them to decrease the time-to-market by 66%, cutting it from 12-18 months to 4-6. For example, most brands still use physical prototypes and have to construct multiple versions. The process is extremely time-consuming compared to virtual prototyping, which is already used by Nike and may soon be utilized by other brands. 

Please note that I concluded that this trend applies to the U.S. because it was mentioned by Business Insider. Additionally, an article by Quartz provided examples of major U.S. brands that are increasingly investing in digitalization and automation. Also, I determined that it's relevant for the years 2018-2020 because it was covered by Morgan Stanley. Quartz predicts that major brands could automate 20% of their manufacturing by 2023. We can assume that a big part of this change will happen between now and 2020.  
Environmentally FRIENDLY MATERIALSAccording to the report by Technavio, which covers major trends that will impact the U.S. athletic footwear until 2020, an increasing number of sneaker brands will use environmentally friendly materials, such as organic cotton, recycled rubber and plastic, and water-based adhesives. They may slowly replace leather, synthetic rubber, nylon, and polyurethane. As consumers become more environmentally conscious, brands have to respond to their demand. 

Please note that the report is paywalled. However, the press release provides a solid overview of the three key trends. 
INNOVATIONS IN SOLE TECHNOLOGYAs noted by Morgan Stanley, sneaker brands have already made notable investments in R&D. According to Technavio, the trend is likely to continue until 2020 since the market is highly competitive. As a result, we will see an increasing number of models that use innovative technologies. Those that will be especially popular include using polyurethane capsules that allow runners to save energy and shoes with built-in sensors that track calories burnt, distance, and speed.  
CUSTOMIZATIONThe report by Technavio notes that most athletic footwear manufacturers already focus on customization and they are likely to become increasingly invested in it due to the rising demand for customized sneakers. Offering customized products helps brands increase customer loyalty and engagement while catering to their constantly changing preferences and needs. 

The "Consumer 2020" report by Cisco, which provides innovative retail strategies for the coming years, confirms that customization will be a major trend. They give the example of Adidas' Futurecraft 4D, their "first mass-scale sneaker line that offers customized designs and midsoles for each consumer" as a strategy that will become more prevalent in the near future. 
PREMIUM PRODUCTSAccording to Technavio, the U.S. consumer demand for premium products will continue to rise through 2020, as they are perceived as higher-quality and more comfortable. I confirmed that this trend will have its reflection in pricing strategies with the article by Digital Trends. Their analysis shows that the consumer demand will force retailers to use innovative technologies, such as 3D printing, in the manufacturing process. Consumers, influenced by social media, will continue to want trendy and unique products. It will push sneaker brands to use expensive technologies and focus on limited editions, which will affect the prices of new models. 
EXPERIENCE-FOCUSED RETAILI didn't locate any trends related to retail experiences that were specific to the 2018-2020 period in the industry reports or media articles. However, according to the articles by Fortune and Quartz, the future of the sneaker shopping experience is likely to be similar to the recent retail experiments by Nike and Adidas. Adidas' Manhattan store, launched in 2016, features four customization stations and areas to watch live games. Nike's store in the same area provides personalized shoe recommendations based on the analysis of the person's running stride. It's also integrated with a mobile app. Both brands use tech innovations and focus on delivering unique experiences to their customers. 

Experts from Fortune and Quartz think that it will become a common practice in the future. However, even though it's increasingly popular among footwear and apparel brands, there's no confirmation that it will be a major trend in the next two years. I decided to include it since there are no trend forecasts for this period that are related specifically to the retail experience.
CONCLUSIONIn conclusion, key trends that will shape the U.S. sneaker market through 2020 include rapid supply chain, automated manufacturing and digitalized design, using environmentally friendly materials, offering customized products and models with innovative sole technology, and focusing on premium lines. Additionally, brands will try to provide customers with unique retail experiences in the coming years.  

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Please provide an overview of the US sneaker market in terms of consumer demographics, shopping behaviors, and shopping trends. Please include details on how this market and demographics are expected to evolved through 2020.

The following brief discusses trends in the sneaker market in the United States through 2020 from a consumer perspective. It begins with a look at trends in age, gender, race and education, continues to trends in consumer attitudes and closes with shopping behavior. The data is summarized from relevant research reports and studies.
Age, Gender, Race and Education TrendsMore sneakers will continue to be sold in the United States because a higher proportion of 25-45 year-olds is physically active, taking part in "running, hiking, trailing, aerobics, and training" activities. In addition, an increasing number of these people are women, aged between 20 and 30, who are also the primary force behind the rise of the athleisure sector.

Sneaker sales will continue to be driven by Millenials, and their younger counterparts Generation Z. These two groups made 70% of the sneaker purchases in 2016 and were jointly responsible for 90% of the growth of sneaker sales for that year.

Consumers of sneakers are continuing to become more educated and racially diverse. Thirty-eight percent of Millenials are described as "non-white" which is an increase from the previous generation, Baby Boomers, who were 22% non-white. Millenials are also generally more educated than Baby Boomers, with at least 33% of them possessing a "college degree."

Men's interest in footwear is on the rise. Research from NPD Group indicates that men bought almost as much footwear as women in 2016, spending $26.2 billion compared to women who spent $29.9 billion. Consequently, sneaker consumers are increasing male, especially as the trend of sneakers as "all-occasion footwear" gathers pace.

The single most significant racial trend to continue to impact the sneaker market in the US is a drop in sales to Hispanics. According to NPD Group, retail sales to Hispanics dropped 8% after Donald Trump became president on a campaign of "cracking down on undocumented immigrants, especially from Mexico." Hispanics were primarily behind the growth in athletic footwear sales in 2016 accounting for 23% of sneaker sales. This however changed drastically in 2017 with sneaker sales to this group experiencing a "high-teens decline."
Trends in Consumer AttitudesResearch from Technavio indicates that the increasing popularity of themed sporting activities in the United States will continue to encourage athletic footwear purchases. As such, consumers expect high quality, sustainable products that are cost-effective and enhance performance.

Consumers will continue to prefer "customized products" going forward. This is particularly true among Generation Z and Millenials who not only seek "uniqueness" across products, brands and the retailers behind them. Millenials particularly value brands that offer product co-creation opportunities, for the "personalized, customized experience."

 Being comfortable has become just as important as being stylish. As such consumers are increasingly turning to all-occasion footwear that can be used in professional, leisure and sports settings. This casualization trend in the way people dress will likely continue through 2020.

 Classic/Retro sneakers have been regaining popularity. According to NPD Group, retro sneakers had the highest sales in the athletic footwear category in 2016, growing by 29%, which was a 5% increase from a year earlier. Aside from retro basketball sneakers, retro running and tennis sneakers have also become popular. The popularity in classics is evident across all consumer groups, led by women at 69%, children at 29% and men at 26%.

Consumers are increasingly expecting brands to openly declare their positions on social issues. This is particularly evident with Generation Zers who will not hesitate to drop a brand if they disagree with its values. Millennials even take it a step further by proactively engaging brands, forcing the brands to "prove themselves." Millennials are described as "conscious capitalists," who have taken on the responsibility of holding corporations accountable for being "good citizens."

Finally, as "early adopters" of new products, Millenial consumers will prove to be less loyal going forward. Furthermore, digital shopping has increased available choices making consumers less loyal and instead more interested in "novelty". Millenials, who are generally more frugal, also expect "instant gratification."
Shopping Behavior TrendsThe traction in digital shopping is set to continue. Research by Technavio shows that 25% of customized footwear is bought online. 
Consumers are frequenting online platforms for sports footwear citing better pricing, more range and quicker delivery. In addition, in-store visits are less frequently used by consumers research products. Furthermore, celebrity endorsements, particularly online, will continue to influence consumer purchases decisions.

Millennials and Generation Zers will continue to drive the consumer trend of seeking brands with share values. Consumers will expect "seamless transparent" brand experiences as they continually seek "meaning" across "work, relationships, products, and brands." As such, consumers will seek out brands approved by peers.

Going forward, consumers will want to be more involved in the branding process through social media. Millenials will be eager to partner with brands which will necessitate "feedback loops" for thought sharing.

Nowadays, young people spend more time on their smartphones than in physical malls. As a result, shopping has become a "social experience shared with friends." 

Finally, as dressing habits converge across gender, petite women looking for more sneaker varieties will continue to buy from kid's departments. Tall women with bigger feet will continue to buy men's sneakers.
ConclusionThe US sneaker market is likely to continue growing through 2020 due to increasing participation in fitness activities amongst 25-45 year-olds and continued interest from more educated Millenials and Generation Zers. Increasingly popular themed sporting events will continue to drive interest in sneakers. Digital shopping will continue to gain traction.