Why Athleisure Will Boom in Tier-2 & Tier-3 Cities

Key Takeaways:

  • The athleisure market has exhibited strong growth in China, with people becoming more health-conscious and looking for more outdoor activities post-COVID.
  • As the athleisure industry matures in big cities, the next market opportunity lies in Tier-2 and Tier-3 cities, which will offer robust growth channels for brands.
  • As a vital part of this fitness trend, sports and pastimes like yoga and boxing have grown in popularity and will soon trickle down to lower-tier cities.

According to the country’s data report and consulting agency iiMedia Research, China’s fitness industry is expected to reach $5.9 billion by the end of 2021. The trend has been bubbling up for over 20 years. But now, a growing number of Chinese who want a more active lifestyle are driving new growth, thanks to the impact of COVID-19 and an increase in income among wealthier segments.

The Chinese government has simultaneously been a strong advocate of promoting exercise and has utilized it as one of its strategic plans for improving health. This August, China’s state council published a national fitness plan for 2021-2025, which outlines a goal to increase the percentage of people who regularly exercise from 37.2 to 38.5 percent. This rise would, in turn, push the size of the sports industry to $782 billion by 2025.

As a result, China’s athleisure market has seen steady growth that started long before the COVID-19 outbreak. However, during the lockdown, demand skyrocketed, especially new Tier-1 cities like Chengdu, Chongqing, and Hangzhou. According to the market research firm Qianzhan.com, the size of China’s activewear market within its overall apparel industry has grown from 8.8 percent in 2016 to 13.3 percent in 2020.

And now, a few years into its expansion into China’s major cities, it is time for athleisure brands to target lower-tier cities. Here, Jing Daily explains why.

Market saturation in the athleisure market in big cities

Lululemon, one of the leading athleisure brands globally, entered the Mainland China market in 2016 with locations in Shanghai and Beijing. The total number of Lululemon shops in China has now reached 59, and more than half its locations are in Tier-1 cities. However, in recent months, it has begun expanding into lower-tier cities, launching new stores in Lanzhou, Sanya, and Naning and increasingly shifting its focus away from Tier-1 cities.

While traditional global sportswear brands such as Nike and adidas are still maintaining their momentum, the athleisure market in Tier-1 cities has become saturated, particularly with local brands joining the mix. Homegrown fashion labels such as Maia Active, Sylphlike Loli, and Particle Fever have also successfully captured the hearts of the country’s young people with their dynamic campaigns.

Maia Active, in particular, has expanded its footprint to ten stores, with eight of them in Tier-1 cities. Earlier this Fall, it also co-branded with the Shanghai-based womenswear independent label YINGPEI STUDIO a collection of fresh and cutting-edge designs that debuted on the runway of Shanghai Fashion Week.

Maia Active teamed up with YINGPEI STUDIO to continue providing women with better quality sportswear. Photo: Maia Active

These brands are also more attuned to the social media needs of these new shoppers. And with active lifestyles becoming the new cool, thanks to a rise in health consciousness, posting photos in sports bras and yoga pants is an emerging internet trend.

From Tier-1 to Tier-2 opportunities

Lower-tier cities in China are increasingly taking the place of Tier-1 cities as a core source for growth in the fitness industry. With China’s surge in income levels, fitness habits have expanded from Tier-1 cities to Tier-2 and lower-tier ones — and the fitness market in those areas has shown compelling growth.

Moreover, a Deloitte report from 2010 on Chinese consumers confirmed that, noting how “retail consumers in the lower tiers take signals from what Tier-1 city consumers are buying. This behavior would seem to support the entrance strategy described as ‘be seen in first-tier cities, make money in Tier-2, 3, and 4 cities,’ which is being followed by more and more retailers and brand owners in China.”

Allison Malmsten, marketing director at the strategy consulting firm Daxue Consulting, says the disposable income of rural and low-tier city residents has risen faster than the disposable income of urbanites. “Therefore, consumer purchasing power is increasing on quite a large scale in lower-tier cities,” she added, “and if it isn’t already, understanding lower-tier city consumer needs should be on the radars of athletic apparel brands.”

Key fitness trends to tap

As a vital part of this fitness trend, sports and pastimes like yoga and boxing have grown in popularity and will soon trickle down to lower-tier cities, according to a Daxue Consulting report on the China wellness market. Yoga, in particular, as a major inspirational source for athleisure apparel, is expected to thrive. China’s Yoga Industry Research Report, published by the market research company iResearch, states that the Tier-2 and Tier-3 cities will become a ripe market for yoga.

On the other hand, “connected” fitness has played a transformative role in the home gym industry since 2020. Since smart-gym players like Keep app, smart mirrors Mirror, and FITURE are already winning in Tier-1 cities (and with tech giants like Baidu and Huawei eyeing this space), it is only a matter of time before interactive fitness becomes a popular trend in lower-tier cities.

Chinese smart fitness company Fiture has developed a mirror-like workout screen that offers workout classes ranging from yoga to strength training. Photo: Fiture

Additionally, consumers in these regions are now more interested in the personal equipment that accompanies these trends, said Nick Herbert, BD Manager of CSPEConsulting, a strategy consulting firm focused on Sports Performance Equipment, to Jing Daily. “We have seen a notable 30-percent uptick in direct sales growth of fitness cardio equipment, including rowing machines to individual customers, in Tier-2 or Tier-3 cities since COVID-19, on top of its continuous growth before the pandemic,” he said. “But on the other hand, smaller cities have been the major driver for sales to personal training studios.”

And even though athleisure brands had already earned booming growth in Beijing, Shanghai, Shenzhen, and Guangzhou, now it seems as if the market has opened up again, this time in Tier-2 and Tier-3 cities.