Lululemon sees untapped opportunity in China’s smaller cities

Lululemon Athletica Inc. is looking beyond China’s big urban centers for growth, as the athleisure brand bets on the country’s growing middle class to counter a slowdown in the US.

“There is still a lot of untapped opportunity in China,” Lululemon’s country Managing Director San Yan Ng said at the Future China Business Forum in Singapore Friday. “If you go to second-tier and third-tier cities, it’s vastly different,” she said.

Her comments come as China is struggling to rebound economically, with gross domestic product expansion in the first nine months of the year coming in at 4.8% — the lower end of China’s annual growth goal. Ng’s optimism about smaller cities shows Lululemon is joining a growing cohort of Chinese and global consumer brands that are looking for growth from lower-tier cities, whose residents aspire for a lifestyle comparable to their peers in megacities like Beijing and Shanghai.

“I don’t think you should actually look at broad numbers,” she said. There’s a need “to actually focus on where the growth opportunities are and where we can actually expand.”

Lululemon, the brand which gained traction during the stay-at-home era of the Covid-19 pandemic, has benefited from demand in China as more middle-class consumers embrace an active lifestyle.

“Chinese customers care more about experience,” said Ng, adding that it’s no longer about buying a t-shirt for the sake of the t-shirt. There’s a “shift from material goods to experience.”