The Athleisure Boom: Understanding Trends and Market Potential

Foreign.

Hey, welcome back to another episode of E Commerce on Tap brought to you by Sourceify and Isba. I'm your host Nathan Resnick, joined by my co host, Aaron Alper. Aaron, you just got back from Shop Talk. So before we dive into E Commerce on Tap, I really want to hear how was Las Vegas?

You know, it was Vegas, right? So it was loud, it was busy. There are tons of people. I ended up getting whatever virus was going around there, but it was, it was a great time.

Awesome. Any key takeaways? I mean, I know Shop Talk does a lot of kind of curation around meetings and different subject matter experts. I mean, it's a turn into a huge event for the E commerce world.

Yeah, there are about 15,000 people that were there. I didn't do too many of the track sessions. I kind of spent time just walking the floor and having meetings and talking to folks. You know, I wouldn't say that there were any takeaways that were different from, say, what I got at Manifest or any of the other conferences. But obviously people are concerned about tariffs. They're concerned about, you know, what the immediate future is going to look like. Three, two, one, going away, things like that. But it was a good connections, good conversation.

That's awesome. That's good to hear. So for those that are joining us on E Commerce on Tap for the first time, this is kind of Aaron and I's just time to do deep dives on different categories and tell brand stories. So, you know, last season we did jewelry. We had some, you know, just pretty incredible brand stories that we shared. And to see the growth of, you know, Pura Vita and some of the other brands we covered was, was pretty remarkable. And this season we're doing Athleisure. So this episode is going to be a deep dive on Athleisure. If you've ever considered starting an Athleisure brand, you want to compete with, you know, Lululemon or Viori, you should tune into this for sure because we're going to do a deep dive on the history, the supply chain, the unit, economics, you name it. But before we dive into that, were there any kind of tidbits in the industry that caught your eye the past week? Aaron?

Yeah, there was an article I read about the chicken tax. Have you heard of the chicken tax?

No, I haven't.

So apparently it's a tariff that's been in place since 1964. So I think this is a really interesting story of kind of how tariffs can have unintended consequences. And so 1964. President Johnson put a tariff on imported light trucks because the European Union didn't like all the hormones and stuff that was going into American poultry. So they, they put a tariff on American poultry. They retaliate with, with trucks. And this tariff has been in place for a long time, right. Over 50 years. And it basically provided this domestic tax shield for manufacturers in the light truck market. So you think about how pickup trucks are quintessentially American. You don't see pickup trucks from other countries. And the reason is because of this tariff. And despite this tariff being in place, it's generated relatively little revenue and it's basically just gone to deter imports or has prompted people to circumnavigate the tariff. But it's actually collected very little revenue as a result. Yeah. One of the interesting things about the circumnavigation of the tariffs or tariff engineering is that there were examples where Ford would import passenger versions of their vans before reconfiguring them into cargo trucks once they arrived. Subaru famously put two rear facing seats in the back of the bed of the truck. They could tolerate a passenger vehicle. And so there were like all these little things like that that people have been doing. But basically it was a really interesting potential look forward of what the future could look like if these tariffs stick around for a long time. It may not be that that the federal government raises a bunch of money. It may just be that it deters foreign imports and kind of makes a new industry that way.

That's super interesting. I mean, I feel like there's going to be different ways that people are trying to get around these tariffs. And maybe they should look up the chicken tariff to see if there's any notes that they can derive from that. I mean, I know there was just, I think a 25% tariff raised on European vehicles that are being imported in the US So for anyone looking at a Porsche, you know, it's going to get pretty, even more expensive pretty soon.

Yeah, used cars are going to become more popular, so.

Yeah, that's for sure. Well, to start with Athleisure, I'm curious. I mean, when I think of athleisure, I think of kind of this blend of athletic wear that could be used as leisure apparel that now some people wear out to a nice dinner or a nice kind of social club. And I think Athleisure has kind of blended the lines between workout clothing and more formal clothing. I personally love it. I love Athleisure. I think it's just pretty insane and amazing. To see how big Lululemon has gotten, how big Viori has gotten. And I mean, to be honest, like, if you look at the history of Lululemon, it didn't necessarily start as an Athleisure brand. Right. They're really focused on yoga. Whereas I think Vuori, you know, more so has leaned in almost from the get go into Athleisure, where they, you know, started with those board shorts that many people would wear to, you know, restaurants after surfing or doing something active. And so I think it's this kind of dynamic of crossing the, the chasm between, you know, athletic gear and, and something a bit more luxury. But I'm curious, I mean, how would you describe Athleisure? Right. It's not just stretchy pants.

Yeah. I mean, it's basically when I want other people to think that I worked out, but I don't want to smell like I worked out. That's how I think about Athleisure.

That's a good way to put it. And I think if you look at the history too, prominent figures like Princess Diana have been seen wearing sports bras and sports apparel in public since the 1990s. And so I think over time, more and more people have started to incorporate Athleisure into what they wear out. They don't just wear it to the gym and most of the time it's more comfortable. Right. So it goes a long way.

I think, like the thing that's interesting about the Athleisure is it's really a play on comfort. And I can't think of anything else maybe other than pajamas that someone wears all the time but wouldn't wear out. Right. So it used to be one of these taboos, which is like, if I'm going to go out in public, I'm going to go on a date. I need to look a certain way. And like you talked about those celebrities for the ones that started to break the mold a little bit so that it was socially acceptable to be seen out in public in workout clothes even when you weren't working out. And you know, the, the Athleisure market today is, is pretty big. So it's estimated in 2024 it was between 389 to $402 billion in USD. And it's got a CAGR compound annual growth rate of between 7 and almost 10%. And so with, with that, you look forward, they're expecting that by the early 2000-30s this could be a trillion dollar market. And so that's, it's a huge, huge growth vector, it makes sense to be exposed that sector in general, and most of this growth is in North America. So it's about 40% market share. And despite, you know, that 40% and the 1 trillion dollar number, there's the rest of the world that could be adopting this pretty quickly. And so particularly Asia Pacific is an area that they've identified as a place that they're going to continue to grow.

Yeah, I mean, what stood out to me too, as I did more research on the market in particular, was that I would have thought E commerce revenue would equate to 60% of the market in terms of where the purchasing happens, but it's actually only around 30%. Right. And that grew tremendously during COVID So before COVID they say about 20% of athletes repurchase happened online. Now it's grown to 30%. I'm sure it's grown a bit since then as well. But, you know, physical stores still play a crucial role here in terms of distribution channels for Athleisure brands. Right. And I think that's partially why Lululemon has such a big physical store footprint. Biore has been growing their physical store footprint so much. I think part of it is people want to touch and feel and try on these clothes before making a purchase. And I mean, if you look at the price points of some of these, you know, shirts and pants, they are very expensive, in my opinion, for what they are. But I mean, what's, what's interesting too, is that, you know, for thousands of years, clothes were primarily made from what we could get nearby in nature. Right. So plant fibers like cotton, hemp and flax, or animal fibers like wool, silk, and cashmere. And Athleisure has really, you know, manufactured these kind of synthetic fibers versus kind of traditional fibers. So they have materials like nylon and polyester that are produced through this chemical synthesis, which involves a pretty, pretty, pretty deep polymerization process to create long chain polymers. I am not a scientist, but, you know, I think if you looked at some of these, these clothing under, under a microscope, you would, you would really be able to see a lot different than, you know, your classic type of clothing.

Yeah, it's pretty interesting. The, the nylon, for example, if you look at it, it's, it's very curly. Right. That's what gives it its elasticity. And the modern athleisure industry was really shaped by this chemistry and the science behind these synthetic fibers. And so if we just look at how this happened, uh, it's, it's really a phenomena from the last Hundred years. So in 1938, Dupont introduced nylon, which was the first fully synthetic fiber. And its goal was to replace silk. Right. Which obviously comes from silkworms. Think of silk road, China, all sorts of things. And they initially wanted to use it in products like stockings. And they pretty quickly learned that nylon was extremely durable. And the elasticity made it suitable for lots of other applications, including sportswear. Get through World War II, 50s and 60s, you start to see a surge in synthetic fibers which were catering to people's desires for. For new types of clothing. Right. So you remember the depression and just kind of the post war rationing. People were interested in something that was new. And so you start to see things like wrinkle resistance or really durable shirts or pants. And so you see this explosion where polyesters, created in 1941, acrylic orlon was a wool substitute, was created in 1953. And then spandex, which is made of Lycra, was made in 1959. And most of these, in fact all of them, were invented by a company called dupont, which is a chemical company that makes lots of other stuff. And it really became these special materials started to come into vogue in the 1970s when polyester became really prominent in sportswear due to its resilience and its ability to hold its shape. And this made it really ideal for tracksuits, other sorts of athletic gear. And in the 70s and 80s, there was an enormous amount of investment by DuPont in addition to regional governments in Southeast Asia, that led to an explosion in just manufacturing capacity. So the cost came down dramatically. Where these used to be designer materials that maybe you'd have on a sports team or in the Olympics, you know, when you really need that edge. And now they became available to everybody.

Yeah, I mean, and dupont obviously is known as a chemical company, not an apparel company, but there's kind of three major players that really, I think, made Athleisure what it is today. Right. So Adidas, of course, in 1963, that's when Adidas originally introduced their sport to street track shoots, which, you know, really became a staple in athletic fashion and were widely adopted by street culture in the 70s and 80s. Nike, of course, emerged with their performance and style early on with a ton of innovation around athletic footwear and apparel. And they had technology driven designs like air cushioning or flyknit materials for their shoes, and obviously extensive athletic endorsements that kind of brought sports performance to everyday fashion. And then Lululemon, which we've talked about in an episode of e Commerce on Tap was founded in 1998 by Chip Wilson. And it really kind of emerged as this transformation in athletic apparel. And the company originally focused on high quality, stylish yoga wear that resonated with consumers that were both seeking performance as well as fashion. And I think their kind of introduction of yoga pants would really spark that transition from just the studio to casual settings. And I think Chip, the founder of Lululemon, really emerged as this pioneering figure in the athleisure phenomenon that I think has gained prominence throughout the 2010s and through our generation. So it's been pretty amazing to see. But I think lately, despite growing popularity of these brands and Athleisure as a whole, a lot of these fibers that, you know, you describe that are used to produce these, these articles of clothing have come under fire for some of the major criticisms in terms of how they're made.

Yeah. So if, if we walk through them, I think that the first main complaint that exists in this industry is around synth, the actual synthetic materials and the microplastics that that they shed. And so you think about Athleisure, you know, think of those classic blue, lemon stretchy pants. They are typically made from polyester, nylon and spandex, all of which are petroleum based. And so if there's concerns about using oil for lots of things for fossil fuels, obviously this is another use of those sorts of things. But the biggest concern is when these products are washed, they tend to shed microplastics, which can end up in oceans, harming marine life, end up with the food chain, end up inside your body. And there's all sorts of early studies about kind of how microplastics are causing a lot of health issues, whether it be early onset puberty, cancers, things like that that are impacting people. The second kind of criticism that you'll hear is around water usage. And because these synthetic fibers have lots of dyeing and finishing processes, they take up a lot of water and energy to create them. And then if you wanted to do something where it was moisture wicking or some other property, maybe anti odor, you typically have to use toxic or persistent chemicals to treat the fabric in such a way. And you add that to the fact that these are synthetic fibers, they're not biodegradable. And so when a piece of clothing is discarded, they end up just going straight to landfill. And they could be there for hundreds or thousands of years. And you think about if you had an all cotton shirt, since it's natural, it would decay and say 100 years. So there's Some concern like that. And then just in general, the, the carbon footprint of these sorts of things is, is pretty high. And so, you know, athleisure is, is one of those things that is very popular, but as people start to look in deeper, they start to understand that, oh, maybe this isn't the right sort of thing and maybe it doesn't align with their values completely.

Yeah. And I feel like there's a huge trend right now against microplastics and so to kind of unravel that a lot of these, these articles of clothing have microplastics within them and are made with petroleum based, you know, oil. It's, it's alarming for many people. And so, you know, people are asking, is athleisure inherently worse than other apparel products? I think it's kind of in between, yes and no. It really depends how you look at it. I think on the side that it is worse is that it's heavier, it's more reliant on synthetics. Right. And so, you know, athleisure almost exclusively uses these polyester, spandex and nylon materials, whereas other apparel, you know, might mostly include natural fibers like cotton wool or linen. And so that leads to greater microplastic shedding, which, you know, I think there's been now a lot of studies on how microplastics can affect our body. In addition, they have specialized chemical treatments. Right. And so, you know, whether they stretch in a certain way or they're sweat wicketing or over control, like you mentioned, they, you know, use, use materials that could be harmful to our bodies. And then the durability versus disposability paradox that you just described, I think for anyone that, you know, really cares about the environment, when you discard a piece of clothing, you know, what, what happens to it? Right? That's, that's really question that not many.

That'S kind of the chart. The hard thing is when you create something that is meant to take abuse, right? Think yoga pants or other performance fabrics, then the expectation is that you're going to wear it out. Well, most people, the, the style changes or their body size changes before they're able to wear it out. And so there's, there's kind of a, a catch 22 there where, you know, I guess in some perspective, if you were going to buy one pair of yoga pants and wear it every day for the next 30 years, that that's probably a better net impact on the environment than just buying it and, you know, getting rid of it a year later because you wanted a different Color or style?

Yeah. And I think that's the case in terms of. It's actually better in terms of high wear frequency like you described in terms of, you know, people can wear it more and hopefully it lasts longer and people say they have fewer components. Right. So, you know, Lululemon is very simple in its design. You know, could potentially make them easier to recycle than garments with zippers or buttons. But, you know, I think it's. It can be debated. And, you know, as I. As I researched Athleisure and thought about, you know, kind of the viori shorts that I wear, you know, those obviously are not really natural materials at all. And it kind of makes me question, you know, should I just get cotton shorts and wear that to the gym? Right. You know, I think it's a question that not many of us ask ourselves in today's world because we are so in tuned and marketed to in terms of these Athleisure brands and, you know, how much better their. Their products are.

Yeah, I think that's the key thing there is. You know, you probably wear those shorts pretty regularly, I'd imagine. And so I think that the. The right thing is, whatever your choice is, use the clothes. I didn't just buy them and keep them in a drawer and then throw them away because they don't fit anymore. But I think that's the key thing is be mindful in what you're purchasing. Use as much as you can and then kind of go from there.

Yeah, yeah. But in terms of, I guess different initiatives that are being pursued these days by these brands that kind of now realize, or maybe not now realize, they probably already knew some of the negative sides of what they were producing. I think a lot of them now are focused on recycled materials, closed loop recycling programs. I know. Is it. Is it with Lululemon or Vuori, where you can kind of upcycle or recycle, you know, your.

It may be both. I know Lululemon had a thing where you could bring in duplicates, so. So people that knockoffs of Lululemon. But I think there's a recycling program there too.

Yeah. Yeah. So I think that's, you know, really top of mind for a lot of these companies. As well as biodegradable performance fabrics, they've been looking into local manufacturing. And I think a key, especially, you know, coming from a supply chain background, is reduced packaging. I mean, if you've ever ordered online from one of these stores, the amount of packaging that goes into some of their boxes is just crazy for a Pair of shorts, if you ask me. And you know, I think they're really realizing, okay, how do we cut down on our waste throughout our supply chain here?

For sure. And you know, with this sustainability thread that's there, I think that there are some certifications in, there is some more science that's coming out that is improving the impact. So if, if you're a founder or a, a soon to be founder in Athleisure, Bluesign and Okotex are two certifications that would make a lot of sense. But then there's also a lot of bio based synthetics that are coming online. So a fabric called Sonora from dupont. Again there's dupont. It's a partially plant based alternative to Spin X and nylon, a little bit more expensive, but you can tell that story. And then Econol, which is regenerated nylon from ocean waste and old carpets, which is interesting. There's also some work being done around CO2 based fibers, which is an interesting play if they conceal that. And then you're also starting to see more phase change fibers or self cleaning materials as, as well as like biodegradable synthetics. And so there's, there's a piece here where the industry is recognizing that they should do better here. They're having an impact that probably wasn't intended. And so now they're trying to make the synthetic fibers act more like natural fibers while still maintaining those, those properties, which is very interesting.

Yeah, I love with Econol, you know, you got to have obviously material from recycling ocean waste, which is amazing. And don't forget the old carpets. Right. Yeah.

You know, leave it to capitalism. We've gotten so good at polluting the ocean that's become a harvestable resource is all that plastic.

Yeah. I wonder when it, what went into the decision of having to throw in old carpets into that, that material.

Well, the big part of it is you set to have a lot of this stuff that's roughly the same that you can process. Right. Because if the plastics are very different, then it's, it's difficult. So. So yeah, it's an interesting piece.

Yeah. I'm sure there's some scientific reason behind that in terms of how those fibers work together. And I think as we looked into this, we saw quite a few brands that are trying to separate themselves when it comes to sustainability. And so when I think of this category, really I think what comes top of mind is prioritizing sustainability and really being ethical around that and having a strategic play around that to kind of boost consumer demand. I mean I think if you think about Athleisure and outdoors and sustainability, you have to mention Patagonia. I mean, I feel like they're just such a key player in this market and have done so much to use recycled polyesters, organic cotton and hemp. And they also have been operating this long standing program of worn wear that is really around repair and resale. They've been very transparent about their supply chain and environmental footprint. I also saw Girlfriend Collective uses recycled materials from our pet, from water bottles and fishing nets. And they're also transparent about their factory and sourcing network. And they offer a take back program for old garments, outdoor voices as well, which was, you know, a darling of the DDC industry. They use recycled polyester, merino wool and organic cotton blends for their most their products. And they really, I think strive for a low impact production that was, you know, less aggressive to Girlfriend or Patagonia. And so I think a lot of these brands in general today have really tried to lean into recycling programs or worn wear programs that are top of mind for I think a lot of consumers.

Yeah, what about the, the kind of majors that are out there? Do you find that it's only the challengers that are doing the assembly stuff or.

Yeah, I mean, I think Lululemon has always over time invested in sustainable materials like plant based nylon. But I think they're still behind on kind of full transparency and microplastic mitigation, which is, it's kind of crazy to think about it because they are, you know, market leader when you think of Athleisure. And I mean, I think it would be fascinating to look at the research behind the microplastics that are in Lululemon pants versus, you know, one of these other brands and kind of just do a whole comparison chart to understand, you know, what kind of level of microplastics are, are in these, these articles of clothing. And then Nike and Adidas, of course, you know, they've always had major R and D arms to focus on recycled materials as well as closed loop systems. And I think all of that, you know, is top of mind. I think all of. Well, at least Lululemon, Nike and Adidas at times have come under scrutiny for their manufacturing practices. You know, if you just Google, you know, Nike factory, you know, you're going to see some horrific images from the past. But I think they've, you know, done a good job now trying to, trying to ensure they have sustainable and ethical manufacturing practices.

Yeah, I think you're, you're right. You know, when when you are a Lululemon and you're doing so well and getting so big, you're going to have a lot more scrutiny. And so I don't think that, that any of these companies went out to do, to have any of these negative impacts. I think they just never asked the question. And so people hadn't asked the question as well. And so that's kind of why they're under scrutiny, I guess, is how I call it. But, you know, it seems like this pretty clear trend where it's always the incumbents of the laggards, or at least aren't the leaders in these sorts of things when it comes to sustainability. Why do you think that is? Why is it always the upstart that is pushing the envelope?

Yeah, I mean, I think they have to find a unique way to compete. Right. So if I'm a new founder in this industry and evaluating getting in, I think, number one, I understand, I want to understand what are the existing brands doing wrong, that I want to do better, both from a sustainability standpoint, from a material standpoint, and I think from a marketing standpoint. Right. And I think that's kind of a pretty fun question to play on in terms of, you know, if you're listening to this with a founder's lens, how would you get into the industry? Right. I think, number one, you've got to be aware of the risks in terms of the market is very saturated and competitive. So I think it's extremely challenging for new entrants to gain market share and maintain profitability. I think the market in general is very trend driven and seasonality leads to a lot of fluctuations. There's also counterfeiting risk, especially as your brand grows. And the dependency of a lot of these brands on celebrity endorsements can be risky and challenging to Inc. But I think as a founder, if I were to really think about starting a brand in this category, I would try to lean into a niche. You know, what comes to mind to me is like Noble and how they've leaned into CrossFit and that whole kind of really hardcore athletic category. You know, Noble started as shoes, but they now do a lot of apparel and athleisure wear as well. And I think they've done a good job pulling that off and leaning into that, that category. So I think you have to be very niche specific. You know, what, what, you know, activity is your clothing going to be best suited for? Right. Is it powerlifting? Is it, you know, ultra marathons? You know, what is it? And can you kind of blend and make this kind of a hybrid type of wear that, you know, maybe someone doesn't wear during their, their powerlifting routine, but right after, you know, they can put it on or put it on over what they were wearing and feel comfortable to wear that out, you know, to lunch or dinner after.

Yeah, that'd be interesting. If someone had like the, the spandex suit on, that would be a little different. But you're right. You know, when you're starting a company, there's a couple of angles you can take. You can try to make something that's technically more superior, which is going to require a lot of R and D, and that's probably something that may be difficult to do. So you leave those to the incumbents. You can make something that is cheaper. Right. So the knockoff, which is what I'd say most startups end up doing, is to say, hey, we're like lululemon, but we're 30% of the cost. That kind of limits your ability because if you are known as a discount retailer, the only way you're going to really grow is by getting mass distribution. Your margins will be smaller. And the third part is, is you've got some, some sort of following or, or there's an aesthetic, you know, some sort of celebrity you're tied to or a particular lifestyle that you're trying to sell. And so that's, those are kind of three things that are there. But investors themselves are pretty bullish on the, on the, the space as well. So in 2022 alone, there was about $5 billion that was invested in that leisure. Granted, the already took a huge chunk of that, but there's a strong appetite among investors for the sector.

Yeah, yeah. I mean, the amount of capital that's gone into this industry is pretty mind blowing. But, you know, it goes to show the scale and the growth rate, I think matches that in terms of go to market strategies. You know, there's a few examples that, you know, caught my eye. Number one, you know, I think strong social media presence and working with influencers. You look at Gymshark and Aloy Yoga, they've just done such a incredible job with their kind of influencer and creative programs for each brand. I mean, gymshark's story is just incredible. I mean, we're definitely going to be covering them on this season and you know, it's incredible to see the brand identity that they've created in the authentic storytelling that they've had that has resonated with so many consumers and then collaborations among celebrities. Right. So for Example, Beyonce's Ivy park did a collaboration with Adidas that significantly boosted the brand's visibility in sales. And focusing on niche markets with specialized product offerings like 2xu's emphasis on high compression athletic gear can also be a really unique and successful strategy. And so I think overall, most people or most brands in this category right now really lean into either kind of celebrity driven marketing or influencer creator driven marketing and really focus on brand storytelling. And so I think if you are to explore this space, you've got to figure out what is your story and how is that going to resonate with the consumer. And most of the time, that's touching them when they're doing what your brand is supposed to help them achieve. Whether it be gymshark and helping you lift and feel good, or whether it be alloy yogurt yoga that's helping you stretch and get through a yoga class and feel comfortable wearing that to lunch after.

Absolutely. If you are a aspiring athleisure founder, what sorts of margin profile should you be expecting?

Yeah, I mean, so the profit margins for activewear brands can vary quite a bit. I think some brands report gross profit margins as low as 20%, while I think if you want to really be ambitious in this industry, you've got to push for at least 50% or higher. It depends if you're going direct to consumer or not and what fabrics you're using. So wholesale markups typically range from 2 to 2.5x the production cost, whereas retail markets can be as high as three or four times. So you're going to buy $100 Lululemon pants. They're probably spending, I don't know, around 20 bucks or so to produce. That would be my estimate in terms of their landed cost net to the store. And I think the primary cost in garment manufacturing in this athleisure industry is typically the fabric, which actually costs about 60 to 70% of the overall expense. Other costs, of course, are labor for cutting and sewing and finishing, as well as the cost of trims and accessories such as labels and zippers. And so packaging and shipping also can add up here quite a bit. But I think inventory costs in general are substantial, typically equating to about 30 to 40% of total sales. And so it is a very obviously inventory heavy category with so many different SKUs and sizes. And I think that's one of the dynamics that we saw where when you look at the companies in this industry that are sourcing their products and how they're sourcing them, there's so much that goes into the supply chain that I think is often overlooked to the everyday consumer.

Yeah, you're right. And the reason that, you know, you mentioned shipping costs can be high is because of the supply chain. So, you know, most textiles come from Asia. Synthetic textiles are no different. So China produces about a fifth of all garments globally, and it's the largest single producer of athleisure garments as well. And this is because it's got massive capacity for both the synthetic fiber production and the garment assembly. So you kind of have to have both in order to make that work. They are kind of the home for a lot of brands like Lemon, Nike, Adidas, and most private label brands start from China as well. Vietnam is another close follower. Nike is the big producer in Vietnam, but, you know, they're. They're kind of a little bit lower cost than China with few tariffs, you know, at least as of the time of this recording. Let's see what happens here in a couple days. But, you know, kind of third, you start to see things like Bangladesh, which is the second largest garment producer globally, but they're typically more known for basics and cotton garments. But they're starting to see more. More production for leggings and tees and some things that require some technical products. In addition to that, you're starting to see places like India, Indonesia, Philippines, Thailand, Turkey, Mexico, Colombia all start to begin to test into this, and you have some production coming from it. But by and large, the bulk of the athleisure product is coming from China today.

Yeah, I mean, China is definitely the main producer here. I think it's interesting to see how Trump tariffs might affect us a bit. But at the same time, we went through these tariffs in 2018 as well, and not much moved. I mean, I think there's always been talk of near shoring. Right. In terms of, can you move some of this production to Mexico? Some of that has definitely happened, but I think not to the scale or scope that most Americans think. The majority of this is still coming from Asia by far. And so, though I think it would be amazing for a lot of these brands to go and be able to have these production capabilities in Mexico. The fact of the matter is a lot of that raw material, even if they have that production capability in Mexico, is still coming from Asia in terms of the materials themselves. And so, you know, I think it's interesting to think about in terms of how do we move potentially more of the athleisure global supply chain to nearshore places around America, which I think really is Mexico, and some parts of South America, potentially. But, you know, at the end of the day, the vast majority of these products are still produced in Asia.

Yeah, I think it's interesting by what the Trump tariffs end up actually being toward the end, because if the Trump tariffs are basically a 25% tariff on everything not made in America, that's going to be different than if there are certain countries or sectors that are given preferential treatment. Right. So clearly, if. If there is a new version of the USMCA and Mexico gets a reduction in tariffs, if not elimination of tariffs coming into the US and there's ways there, then, yeah, a lot of this manufacturing is going to move to Mexico, and that'll work. If the tariffs stay high to everywhere but the US Then the question is, do we see this sort of manufacturing coming back to the US And I would argue that the answer is no, and that this isn't the type of manufacturing that the US Is interested in. I don't think that textiles are going to be a big growth lever for the U.S. economy. I think it's more of a consumption piece. And so I'd imagine that either the Athleisure companies will just accept a lower margin because they have the margin to absorb the tariffs, or prices will go up and the American consumer will pay more. But I personally don't see the Trump tariffs if it means a blanket tariff around the world, resulting in now Lycra being manufactured in Missouri and being assembled in Nebraska.

Yeah, I agree with that. I think as we looked at Athleisure as a whole, one thing that really caught my eye is just the industry is not static. Right. I think through the decades that Athleisure has really come to be a huge part of society. It's always changing, right. Whether it be a new health trend or new, you know, workout trend that people are, you know, really into, there's typically a brand that's going to follow that trend, right? Whether it be the rise of CrossFit and Noble or the rise of, you know, yoga and Lululemon and now Alloy Yoga. And so I think a lot of these brands really try to try to tap into a rising kind of shift in consumer demand for a certain type of workout and have that relate to that type of consumer base. And I think we saw a huge shift during COVID where more people were working from home. They wanted something, you know, a lot more comfortable to wear working from home, but something that was also presentable, you know, on Zoom. And so I think Athleisure really fit that mold for people and further accelerated the adoption of athleisure wear as everyday attire. I mean, that's a huge key. I think probably, you know, 25, 30 years ago, it was very rare that you would go, you know, in New York City and see people at a lunch meeting wearing Lululemon or Viori. Whereas nowadays I think it's a lot more common. And so I think this long term shift in consumer priorities has, you know, suggested that Athleisure is going to continue to grow and, you know, really, I think not just grow more in America, but also world worldwide. Right. I think if you still go to, you know, Hong Kong or other places through Asia, Athleisure is in a very early days. And so I think there's a lot of opportunities for these brands to grow worldwide and not just in the States.

Here's a question for you. You know, Athleisure really grew when remote work and and the pandemic were going. But as we see a retreat from remote work and more toward return to office, do you think that Athleisure will come down as well, or do you think that this is a trend that's going to continue and people will be more comfortable wearing gym clothes in an office?

I mean, I think it's a trend that's going to continue. Right. I think if you look at how consumers want to feel and how people want to feel in the office, they want to feel comfortable. And Athleisure, I think, ties into that. I bet you if you counted the amount of people that wore a suit and tie in Manhattan over the past, you know, 25 years has dramatically decreased. I think that's a trend that's going to continue worldwide. And so if people are wearing less suits and ties, you know, what are they wearing to the office? What are they wearing to work? Is it something more athleisure driven? Is it just a collared shirt? You know, what is it? But I think, you know, kind of that formal wear category, in my opinion, probably has declined. And Athleisure has in large part taken up that decline in market share from, you know, formal wear.

Interesting. When we think about, we talked a little bit about the fabrics and the innovation materials and things like that, what do you see as the future looking forward?

Yeah, it's a good question. So I think what caught my eye in terms of the technology here was more around sizing and fitting. Right. So there's a lot of AI and AR that's being used to personalize products, to make sure it fits your body in the best Way possible. And I think that also is a key for brands to try to lower their return rates. Right. You know, if you order a Google Lemon T shirt online and it, you know, doesn't fit you, right, you're going to return that. Whereas if you can actually kind of virtually try that on online, you know, before them having to ship it to you, that's going to save you a lot of time and save the company a lot of money. Right. And so I think that, I think, is one of the leading components of technology in this industry that has caught my eye. You know, I think there's been a lot of innovation in fabrics as well, and there will continue to be a lot of innovation, especially with an emphasis on sustainability. Was there anything that kind of caught your eye in terms of, you know, the story around fabrics and these innovative materials?

You know, I think that it's. Yes, I think that the key thing for me is just that the innovation hasn't stopped. It's not something where, you know, they've been to nylon and Lycra and said, oh, we're good, you know, this is what we're going to do forever. But there's been so much more iteration that's going on. And eventually, you know, we'll probably have a synthetic fiber that has all the positive traits from cotton or hemp or flax, but is. Is completely made in a factory. And so I think it'll be interesting to see how this. This sector plays out.

Yeah, no, I agree. I agree. And I guess, you know, to. To sum this up, I mean, is this. This kind of the final question that came to mind for me? Is this an area where you'd consider starting a brand new?

Yes, I think so. And there's a few reasons for that. The first one is that the sector is growing so 10% year over year. If you're just, you know, average, right, you're not even a great brand. You're just an average brand. You're going to grow 10% year over year just by virtue of the market. So that's something that's interesting. I think even though it's very competitive today, I think that there's still room for a lot of other competitors to pop up. I mean, just think about the space. There's probably four or five brands that really stand out doing, you know, hundreds of millions or billions of dollars in revenue. And so there's a lot of room here for someone doing 50 to 100 million, you know, reasons why you may not want to do it is just, okay, we haven't really had any sorts of acquisitions in this space. You know, pretty much everybody who's been funded is self funded. So you're looking at an ipo, in which case you've got to make sure you've got something that is going to be a competitive advantage if you're going to go up against a Lululemon or a Viori. And so that would be one thing you just have to consider and just make sure you get the right type of investor. But you could very easily build a wonderful $100 million brand here that does well, has its own niche and has a, a close following with its, its community.

Yeah, I agree with that. In general, I think the key word that, that you said is niche. Right. I think you really have to hone in on what consumer are you going after. I don't think you can go after every one that buys Athleisure products. I think you really have to hone in on a niche that would resonate and that you would build your, build your brand around and tell your customer story around. But yeah, it's pretty incredible to see the growth of this industry. I think it's going to continue to grow. I think this season on E Commerce on Tap we're going to cover some pretty incredible companies in Athleisure and it's going to be a lot of fun. So tune in to E Commerce on Tap this season. Are there any brands that you're excited to cover specifically, Aaron? I know for me it's definitely gymshark.

Yeah. I think next week's episode, Aloe Yoga is an interesting one for me. I just, I don't know that much about it and I know that they've been growing quite a bit, so looking forward to learning them personally.

That one's going to be awesome. So tune in Ecommerce on Tap. Aaron and I appreciate you giving us a review, sharing your thoughts and thanks again for tuning in to this episode of Ecommerce on Tap, brought to you by Sourceify and Isba.