In Korea's athleisure (functional apparel you can wear not only when exercising but also in everyday life) market, brands are seeing mixed fortunes. Andar and Xexymix increased sales last year, but operating profit fell for both. Mula, the operator of Mula Wear, once cited as a first-generation athleisure brand, received a decision to terminate rehabilitation proceedings.
Analysts say the domestic market has entered a mature phase, and with constant discount wars and rising marketing costs, the structure is shifting so that only brands with a certain scale and investment capacity can survive. The surviving top brands are going all out, using overseas market expansion as a breakthrough.
◇ Sales up but margins down
According to the Financial Supervisory Service's electronic disclosure system on the 8th, Andar posted 298.7 billion won in sales last year, up 26.1% from a year earlier. However, operating profit fell 13% over the same period to 28.5 billion won. Xexymix also recorded 274.1 billion won in sales last year, a slight 0.9% increase from the previous year, but operating profit fell 30.3% to 17.3 billion won.
Industry watchers say this signals that Korea's athleisure market is effectively saturated. As a flood of new value-for-money brands built on Instagram and other social media emerged, major brands likewise found themselves forced to engage in cutthroat tactics such as "1+1 packages" and to run large-scale ad campaigns to maintain market dominance.
Profitability pressures are hitting small and mid-sized brands with weaker capital harder. Mula pursued a merger and acquisition (M&A) before submitting and securing approval of a rehabilitation plan but failed to rebound. The Seoul Bankruptcy Court said on the 25th of last month it decided to terminate corporate rehabilitation proceedings for Mula, the operator of Mula Wear. Immediately after the termination, it also shut down operations of its own online mall. Recently, it fell into a state of complete capital erosion.
Mula Wear is a representative first-generation brand that gained recognition in the early days of Korea's athleisure market. When the leggings market was growing rapidly, it expanded on the back of an online sales system and demand for women's workout wear, but its foothold narrowed between top brands like Andar and Xexymix and global sports labels.
An industry official said, "It shows that without a certain level of sales scale, product planning capability, distribution network, and overseas channels, it has become difficult to survive in the domestic market," adding, "Andar and Xexymix endured the war of attrition with capital injections and marketing support from their parent companies, ECHOMARKETING and BrandX Corporation, respectively, whereas Mula Wear, which had to survive on its own, could not withstand the high-cost marketing race."
◇ Beyond the domestic market to overseas… a strategy for survival over growth
The domestic push by overseas premium athleisure brands is also adding to local brands' burden. Korean brands now face the task of proving differentiation not only in price competitiveness but also in materials, design, and brand experience.
Lululemon, which entered Korea in 2016, has solidified its position as the so-called "Chanel of leggings," backed by unrivaled materials technology. Another U.S. premium yoga and athleisure brand, Alo Yoga, opened its first Asian flagship store near Dosan Park in Seoul's Gangnam District last year. Operated as an experiential store with a yoga studio and lounge in addition to product sales, it is drawing in Korean consumers. U.S. activewear brand Vuori is also expanding its domestic distribution through Shinsegae International, and other overseas brands are targeting the Korean market with high price points and premium images.
Andar and Xexymix are accelerating their overseas expansion in response to these domestic and international market conditions. With additional growth limited by the domestic market alone, their strategy is to broaden new sales bases overseas to restore profitability.
Andar is expanding overseas offline stores, including in Singapore, and has moved to enter the U.S. market. Xexymix is also growing its overseas business, focusing on Asian markets such as Japan, China, and Taiwan.
An industry official said, "Overseas expansion is the process of verifying whether a brand can sell without discounts," adding, "In the domestic market, advertising and promotions can lift sales, but overseas, without strong product quality and repeat purchase rates, it is hard to endure for long."