Testing Activewear Commentary with Historical Retail Data

Eric Chuk

The next big thing in shopping? Activewear, says a McKinsey report—”athletic wear has grown significantly in response to consumers’ push for casualization, having grown at 10 percent over the past ten years, according to the McKinsey Global Fashion Index, while apparel and footwear overall were growing at 4 percent.” In fact, activewear may already be a bigger deal than most realize.

As echoed by several other sources in the lead-up to 2017, growth in the apparel sector was not as strong as it had been in recent years, but items in the category of activewear boosted sales significantly. In 2016, market watchers noted, activewear sales surpassed all other categories for the third consecutive year, and “athleisure” was officially added to the Merriam-Webster dictionary early last year after being a watchword even before that.

To look into this claim about the profitability of activewear, we leveraged the Quad database to tally the total SKUs per merchant in the past year in comparison to respective apparel SKUs and activewear SKUs. Those numbers were then plotted against each merchant’s stock performance (the average stock price over the past year) and revenue data, as available in public reports. In other words, if there is some truth behind the claim of activewear outshining other categories, our test should show that those merchants carrying higher percentages of activewear products to have performed better than those with lower percentages.

From that analysis, the top dozen merchants by volume of total SKUs were selected. Three merchants were excluded: Amazon (an outlier due to its high stock price, which skewed the data visualization), Zappos (an Amazon subsidiary that does not issue its own shares), and Wayfair (no apparel for sale).

The following charts display percentages of SKU volume by category type along with stock prices and revenue numbers. The percentage of apparel SKUs is out of total SKUs, while the percentage of activewear SKUs is out of apparel SKUs.

If the commentary about activewear is valid, merchant success (in terms of stock prices and change in revenue levels) would be positively correlated with the bars for higher percentage of activewear SKUs. In graphical terms, as the gray/yellow lines representing the former rise or fall (measured by the right-side scale), so should the blue/orange bars for latter (measured by the left-side scale), at least to some degree. Note that there is a missing data point for Belk’s percentage change in revenue, since its annual report for 2016 was not available.

However, the results seem inconclusive. There is no apparent correspondence between either percentage of activewear or apparel SKUs and average stock price over the past year—the price fluctuates too much to track with any of the plots from the two categories of SKU percentages. Additionally, there may be too many other factors affecting stock prices, such as corporate news unrelated to sales. In comparison, revenue does appear to be a limited validation in a few cases. Overstock and Dick’s Sporting Goods, which had the highest percentages of activewear SKUs, also had the highest positive changes in revenue.

Although findings from this investigation did not align clearly with the hypothesis, it was still a useful exercise. The data doesn’t always reflect expectations, reinforcing the importance of making decisions based on historical facts about the market. This should lead to a re-examination of assumptions and more careful thinking about the factors in play. For instance, Quad’s platform only captures the products listed online, without any data about actual sales. Also, there may be a more complex relationship between the variables in this equation, such as a subset of popular or high-margin activewear items that would better correlate with merchant success.

For both brands and retailers, achieving better sales performance through investment in activewear may still be a valid strategy. Our past blog post about assortments of sunglasses did seem to indicate that the boundary between regular apparel and sporting goods is blurring more and more, so don’t count this trend as over just yet.

Eric Chuk

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