Chinese consumers are on a health kick — and Lululemon is reaping the rewards

Lululemon is thriving in China but struggling in North America.

China is in its health and wellness era, offering Lululemon a ray of hope as the brand struggles to engage consumers back in the US and Canada, where it was founded.

In its most recent earnings release in August, Lululemon reported that same-store sales in North America fell by 3% during the second quarter versus the year before. The region’s share of the company’s net revenue during the quarter also dropped to 73% from 78% in 2023.

The results came a month after the company saw its shares slide following its decision to pause sales of its new leggings line after the products were criticized by some shoppers for being poorly designed and unflattering.

Yet, over in China, Lululemon is on the up and up.

Lululemon is resonating with Chinese consumers who are in their health and wellness era.

The brand, known for selling $100 yoga pants, reported that same-store sales in mainland China increased by 21% in the second quarter, generating a net revenue of $314.2 million — up from 34% from Q2 in 2023. The brand is due to release Q3 earnings later this week.

Lululemon, a premium activewear brand founded in Canada in 1998, seemingly found respite in a Chinese retail ecosystem that has, for the most part, been sluggish as the real estate crisis and rising youth unemployment dampen consumer spending this year.

While China’s economic slowdown is throwing many brands off their game — particularly those in the luxury sector — the conditions are ripe for a brand like Lululemon to thrive.

As luxury takes a hit, health and wellness is taking priority in China

Martin Roll, a global business strategist and senior advisor at consulting giant McKinsey said Luluemon’s success in China speaks to a trend of consumers focusing on health and wellness in tough economic times.

Roll said it’s natural for consumers to realign their focus on their well-being when the economy takes a hit. And while health as a concept is nothing new in China, modern industries built around it are, he added.

Tough economic conditions can encourage consumers to focus on their health and wellbeing.

“China is kind of waking up in terms of health,” Roll said, adding that Chinese consumers are catching up with health habits like yoga, gym, and physical welfare that North American consumers have followed for the last 20 years.

Moreover, in the US and Canada, the company faces increased competition from lower-cost rivals such as Athleta and Fabletics but competition is less steep in China.

Lululemon might also be hitting the spot for Chinese consumers who are shying away from luxury spending but still want to indulge themselves occasionally.

“It’s a premium brand, but it’s accessible; it’s not a Birkin bag,” Roll said.

Hooking Chinese Gen Zers and millennials

Olivia Plotnick, founder of Wai Social, an advertising and social media firm in Shanghai, said Lululemon’s strategy and positioning in China are yielding positive results as younger generations redefine their spending habits.

As B-17 previously reported, trend forecaster WGSN said an emerging “rural revival” trend among young people in the Asia Pacific region, predominantly China, placing greater value on a slower-paced lifestyle, sustainability, and health and wellness.

The trend might present a challenge for some companies, but Lululemon has put in the work to be in a prime position, Plotnick said.

“Lululemon entered China with a long-term goal and has invested in a strategic approach to innovation, lifestyle resonance, brand ambassadorship, social media engagement, and global resource integration,” she said.

Through in-store activities and nationwide events promoted by influencers, the brand focused on “community building” in China, she added.

The efforts are now paying off, she said, as the health and wellness industry continues to grow — despite the economic slowdown.

“They have done an excellent job at making wellness aspirational yet approachable for younger consumers who tend to consider brand story, quality, craftsmanship, and environmental impact in their purchase decision,” she said.