The jury is out on how successful Gap-owned Athleta, an athletic brand for women, will be as it enters the Canadian market and competes against long-standing retail giant lululemon for market share in this retail category.
Recently, Gap announced it will enter Canada later this year with Athleta, marking the performance lifestyle brand’s first company-owned expansion outside the United States. Athleta plans to launch e-commerce late this summer followed by opening retail stores at Yorkdale Shopping Centre in Toronto and Park Royal Shopping Centre in West Vancouver in the fall of 2021.
The brand plans to open between 20 and 30 stores a year, adding to its existing profitable fleet of over 200 stores across the United States. In 2020, Athleta surpassed $1 billion in net sales and had 16 percent annual sales growth.
“I think Athleta has a limited chance of success in Canada. Although they are smart enough to start small with e-commerce and only two stores, they face stiff competition,” said Bruce Winder, author of RETAIL Before, During & After COVID-19 and President of Bruce Winder Retail.
“I do like their cause positioning as this has become a table stake for many categories including apparel — but it may lack the differentiating effect they are looking for. Obviously, the athleisure category has been strong during the pandemic as more people work from home and this trend will probably carry over to some degree through 2022 and 2023 when white collar workers split time between the office and home.
“Will they be the next lululemon? No, I don’t think so. lululemon has such a strong brand and has enjoyed numerous first mover advantages in Canada and globally. How will Athleta really differentiate themselves? I feel like there are many similar brands out there — albeit not with the backing of a large company like Gap. There could be room for another brand in the premium segment, but they may be relegated to niche status.”
Winder said Amazon and other discounters are tough to compete against in the value segment of the market with their low price points, wide assortment, and convenience.
“A final consideration involves the Gap. If Gap can survive then Athleta may survive in Canada but if Gap falls on hard times Athleta could be sold off or closed down in Canada,” he said.
Mary Beth Laughton, President and CEO, Athleta, said in a news release that international expansion is a key component of the retailer’s growth strategy to reach $2 billion in net sales by 2023.
“As a purpose-driven brand, we are excited to expand our community of empowered and confident women and girls to Canada and bring them a differentiated and inclusive offering in the performance lifestyle category,” she said.
Christine Cowan, a retail expert based in Portland, Oregon, who has worked with global brands such as Nike and Adidas, said the Athleta brand could find success in Canada because it also reaches out to perhaps a different customer than lululemon. And while the two brands are playing in a similar field, that could definitely be the way the new player makes some inroads on the veteran retailer’s home turf.
Cowan, who runs a consultancy called Innovate Strategies, said the Athleta brand has done very well in the United States.
“They have sort of found a success model where they’ve had the Gap, they’ve had Old Navy, and Banana Republic, and I feel like Athleta and Old Navy have sort of risen to the top and Banana and Gap have fallen off. And I think the reason Athleta has been successful at least in the U.S., is yes, they have a bit of a lululemon model, but I think they have gone a little broader base. They’re broader base in terms of swim. They’re broader in that they do this trekkie outdoor product and then they do some office wear type stuff. It’s more fringe on the office side,” she said.
“I think they’ve positioned themselves as a bit more broader based. Lulu obviously has got the mainstay in Canada and I would say lulu’s quality is a little bit more superior to the Athleta brand. I’ve got a number of their products and while they’re good quality, they’re not as high a quality as lulu. Their pricing structure is a little lower than lulu in some areas. From a pricing perspective, consumers will appreciate that.
“The other thing that differentiates them is that lulu’s got their community and they’re really entrenched in their sort of yoga mentality. I think Athleta tries to have a community and they position themselves like that but I don’t feel like they’ve done a deep dive like lulu has done. The one thing I also think is interesting about Athleta versus lulu is I think Athleta has really embraced the diversity piece in terms of sizing. They go up to like a triple XL. I think lulu is trying to get more body inclusive but I really feel Athleta has.”
Cowan made her mark at Nike Canada, opening the first Nike banded store. She then moved on to lead several global categories at the Nike HQ in Portland. She said Athleta has many girls’ products where in the past this area hasn’t been successful for lululemon.
Athleta is a certified B Corp. Over 70 percent of Athleta product is made from sustainable materials.
“The other new thing they’ve got is they’re doing a sleep line. With Athleta, they’ve got their base through Gap and Banana already so to come into the market they’ve got their structure in place, they don’t have to worry about that, and they have a bit of a consumer understanding from that point,” added Cowan.
“I do think they have similarities in their demographic (to lululemon) but then I think Athleta’s demographic is just a little more differentiated than lulu. It’s a little more broad based. They’re trying to appeal to the masses. The consumer you see going in there is not necessarily the same consumer I don’t think you’ll see at lulu.
“And the other thing they do a lot of is they put a lot of product on sale. They’ve got a huge section in their stores of sale items and product. Lulu just has a little section of it. But they’re driving consumers in with a lot of their sale price products as well.”
Cowan said the women’s activewear sector of retail has received a lot of attention recently with leggings and yoga wear becoming a popular clothing of choice for people.
“This market is here to stay. Athleta wants to grow the business and Canada’s a great opportunity to test the waters internationally for them. While it’s got similarities, obviously the Canadian market is a little different but I think as they look to expand beyond the U.S. Canada is a great litmus test for them,” she said. “The Canadian lifestyle is very active. People are out doing things. They’re willing to pay for a quality piece that’s going to survive for a long time. That type of product has the ability to be worn for multiple situations.”