With direct-to-consumer (DTC) brands beating out traditional retailers left and right, athletic brands are taking advantage of this consumer-driven opportunity.
But what makes the athletic space so appealing for DTC sales?
Check out our video now to learn how start ups like Sweaty Betty, Vuori and traditional brands like Nike, Adidas are both looking to jump on the booming “athleisure” trend and capitalize on that popularity through social media.
DTC or direct-to-consumer brands aren’t just doing well these days, they’re beating out traditional retailers left and right.10, 20, or 30 years ago it would have been hard to imagine a landscape without department stores leading the industry, but advancing social platforms and the e-commerce boom brought on by the pandemic have put retailers in a unique situation.
Brands across the spectrum have taken a liking to the higher margins and improved traffic promised by selling directly to the consumer.
Think Nike, whose 2010 DTC sales made up just 15% of the company’s total revenue. By 2021, that percentage had jumped up to 40% as its sales brought in an astonishing $44.5 billion.
Other brands that were once strictly brick-and-mortar are also in the process of capitalizing on direct to consumer, but establishing strong social channels isn’t as easy as some make it out to be. While Ikea and Nordstrom may struggle to reach online audiences, athletic brands at-large are making the most of a consumer-driven opportunity.
Now—what makes the athletics space so appealing for direct to consumer sales?
First and foremost, it’s a bright spot in an otherwise challenged apparel sector. Second, “athleisure” is a booming trend that retailers across the spectrum are looking to jump on. And third, there’s ample opportunity for brands to capitalize on that popularity through their social channels.
There are certainly direct to consumer startups in the athletics space like Sweaty Betty and Vuori, too, but the market is increasingly saturated with traditional brands like Nike and Adidas that are looking to take back some of their profits from wholesalers.
Sonal Gandhi, chief product officer at The Lead, argues sneaker brands across sectors have been pushing towards a DTC model for years—including all of VF Corp’s brands, such as Timberland, Vans, and The North Face, among others.
After operating strictly as a wholesaler for decades, making the transition involved “rewiring the internal structure to cater to that business model,” Gandhi said.
And according to Cristina Fernández, a senior equity analyst at Telsey Advisory Group, athletic brands don’t have the same reliance on wholesale channels that other apparel sectors do. Uniquely, they’ve been able to build connections with customers through social media platforms and their own e-commerce sites.
“I’d say Nike and Adidas are probably a little bit more aggressive, but they’re all moving in the same direction,” she said.
But being aggressive isn’t automatic, as brands must maintain data-driven strategies that digitalize their supply chains while staying clear of the seasonal wholesale calendar.
Imbedded in the athletics sector is athleisure, a concept of clothing that can be worn both casually and for athletic endeavors without sacrificing style. Consumer preferences have shifted significantly towards athleisure in recent years and that’s prompted the athletic brands we know and love to offer more lifestyle-focused streetwear.
Back in January 2020, Target launched its own activewear private label which surpassed over $1 billion in sales in its first year. Kohl’s and J.C. Penney have since followed suit, but there continues to be a long road ahead for these department stores should they pursue DTC further.
Success is also not a given when it comes to making activewear that consumers will be excited about.
According to Matt Powell, a senior industry adviser for sports with the NPD Group“…Athleisure activewear still has a real hold on the consumer’s mind. And that’s why you see more of these brands getting into it,” “[But] many of them didn’t know how to make activewear and the product really wasn’t right, and a lot of those brands have gone by the wayside.”
As it stands, going all-in with DTC means implementing a balanced approach that includes both e-commerce and wholesale solutions, a strategy that also brings down acquisition costs for brands.
DTC’ers have also targeted activewear over traditional streetwear. Take Outdoor Voices, which sells leggings that cost nearly $80 a pair. Of course, these margins could be lowered, but consumers who can afford these products have come to expect a higher price tag.
Many, including Powell, agree that luxury athletic brands will continue increasing their price points.
“We buy activewear because we want to get fit, or we want to lose 10 pounds. And so to be an athletic brand and carry somewhat of an aspirational price point as well—it seems like a logical conclusion,” he said.
Here, conspicuous consumption comes into play as shoppers wearing Lululemon or Outdoor Voices want others to know they spent more than what competitors offer. However, there’s certainly room for smaller athletic brands to jump in the market with more competitive prices—particularly when fast fashion continues to have a stronghold on the industry.
But success in DTC, athletic wear, and the greater retail industry remains a moving target as the market continues to adapt to changing consumer behaviors and evolving social channels.
Digital-first brands undoubtedly have a leg-up when it comes to securing direct to consumer platforms, but the battle for relevance between DTC and traditional retailers won’t be over anytime soon.
At the end of the day, brands will need to prove agile enough to afford online customers with a seamless experience from the point of contact to the point of purchase and across all touchpoints.
And who’s to say there aren’t more evolutions coming to both physical and digital stores in the very near future? These athletic brands have already made a name for themselves, and that’s not going to change, but they’ll need to react quickly and confidently to a consumer landscape driven by youth, not tradition.
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