Lululemon, Arc’teryx lead niche apparel brands battling China spending slump

Lululemon’s best-selling pair of yoga pants costs nearly 1,000 yuan ($141) in China—three to six times more than similar products from local brands. Still, the Canadian sportswear company has stood out as a bright spot in China’s sluggish consumer market, posting strong sales on the mainland in its latest results.

Lululemon’s performance has been remarkable, but not exceptional. While many international brands have struggled in China amid declining consumer spending and intense local competition, a select few premium brands have bucked the trend, posting solid profits in the world’s second-largest economy.

“(Chinese) consumers with real purchasing power still have strong demand for high-end, experiential and relatively niche products,” said Richard Lin, chief consumer analyst at SPDB International, who stressed that all three criteria must be met.

Lululemon Athletica, which reported a 34 percent increase in net revenue in China in the second quarter, doesn’t just sell high-end clothing. It also sells a lifestyle based on personal development and fitness. For example, it hosts community events, such as yoga sessions with local instructors, and partners with inspiring ambassadors – the latest being actress Jia Ling, who lost 100 pounds for her role in a hit boxing movie Yolo.

As CEO Calvin McDonald said during an earnings conference call in August, the brand is “taking a very local approach” that is “based on feeling good” about the mainland China market.