The United States athletic apparel market dominates global market share capture accounting for 41% of total sales internationally (Business Wire. 2010.“The United States Athletic Apparel Market") The industry can be divided into two main groups of players. The first group consists of large, multinational and diversified companies, such as Nike, Adidas and PUMA, which operate globally and offer the full athletic product range from footwear to apparel and accessories. In recent years, these companies have diversified in an attempt to become more fashion oriented and expand the market they address with their products (“The United States Athletic Apparel Market”, 2010). These athletic apparel giants have established a hyper-competitive marketplace whereby the race for apparel innovation is only beaten by ongoing promotional battles. The core competencies of these corporations go beyond their quality and innovative athletic products and span their abilities to recruit the superstar who is best suited to lead consumers aboard their brand bandwagon. These athletic apparel giants have not just waged a war on innovative products but also on brand and sponsorship power which act as major barriers for the new entrants to this industry.
The second group consists of smaller players that either operate in or have emerged from niche markets. Examples include K-Swiss and Under Armour (“UA”). These companies often focus on one product category and attempt to obtain a leading position from which to expand to other product segments. K-Swiss was almost exclusively known as an athletic shoe company and today has exploded on the international scene retailing full athletic apparel lines (OneSource, 2010). Conversely, UA first focused on performance fabrics and the apparel segment and has since expanded into footwear and accessories. While UA may have started as a relatively small player with a differentiated product type, its decision to imitate and implement a similar promotional strategy to the aforementioned group of athletic apparel giants, has resulted in media campaigns featuring NFL players as well as national publications in ESPN and Maxim magazines. UA managed to gain a foothold as a niche market player and subsequently expand as their promotional strategy gained them strong brand recognition in a hyper-competitive market. Consequently, UA’s gross margin has been above the industry average for the past five years (http://investor.underarmour.com/income.cfm, 2010).
The below chart demonstrates that while the two groups of athletic apparel industry players may differ in corporate size and product depth, there is a commonality of strong promotional spending and advertisements relative to their revenues:
Further, a significant number of athletic apparel companies, while maintaining some specialty or flagship stores, have branched into other areas of distribution and sales to maximize their exposure and expansion efforts, hence the recent surge of e-commerce websites. Illustrated in the proceeding chart are the common retail channels of athletic apparel companies in both the US and Canada. Moreover, to support their expansion efforts, the main players of the industry have invested heavily in IT systems, such as e-commerce, product lifecycle management (PLM) systems, ERP and supply chain management (SCM) systems. These systems increase efficiency and adaptability and thus accommodate the design of innovative products, strengthen the product line management and improve data integration. Implementation of such systems is primariliy for the purposes of increasing the speed to market of a product and therefore effectively meeting the demands of their customers regardless of their preferred retail channel or product unit choice (Kusterbeck, 2006, “ Lululemon closes the Loop”).
