What happened to Arc’teryx?
I’ve gotten a handful of questions about Arc’teryx over the past month. “The product line looks way different. Is it supply chain issues? Change in leadership?” or “They’ve added size XXL, but everything seems to fit smaller? Are they faking size inclusivity?”
You’re not crazy. There’s a big strategy shift going on with the folks at Dead Bird, and no one’s talking about it.
For ~2 decades, Arc’teryx has fallen under the Salomon Group and the greater Amer Sports umbrella. Amer owns Salomon, Atomic, Suunto, and Peak Performance (just to name a few), so they have a strong proficiency across winter and outdoor sports for the western market, on both sides of the Atlantic. In early 2019, all of Salomon group got bought out by Chinese ANTA Sports. The terms of the agreement meant that Amer would continue to be its own entity with no staffing or management changes, but that Amer would still get access to market research from the Chinese market and investments in R&D. However, after just 18 months, the old Amer president was out and replaced by an ANTA executive. The market was very certain that Amer was going to adjust and prioritize the Chinese market.
This impacts Arc’teryx more than other brands in the portfolio.
The Chinese market has shown marked growth in 3 categories: outdoor, luxury, and apparel. So it’s no surprise that Arc’teryx is seeing a lot of growth there too. They check all the boxes, and the brand seems to resonate since they launched their first forays into the Chinese market in 2003. Now they’re dramatically dialing up their focus, and shifting the experience, for better or worse, for their existing North American customer base. Here’s what to expect:
- Sizing Changes. Size changes have already gone into play starting with the Fall 2022 assortment. They’ve essentially added 1.5 sizes on the small side of the size spectrum and a half size on the larger end. Chinese and North American women have very different body sizes and shapes. And this isn’t something you can brush off as “oh Americans are so fat.” Even at the same height and weight, Chinese women will usually have much narrower calves and a narrower ribcage. Now, it’s important to note that brands can globalize without damaging existing customer relationships. For example, Lululemon made a whole new size run for Asia with shorter inseams, tighter calves, and smaller underbust elastic. And all that Lulu stuff in spandex. It’s so much more accommodating of different body sizes and shapes compared to the rigid woven Gore Tex that makes up Arc’teryx’s bread and butter. For a quick reference, here’s the new and old fits:
- The product range will cater less to the intense outdoor participant. The rich / elite North American outdoor customer has some things in common with the Chinese outdoor consumer. There’s an emphasis on quality, a clean aesthetic, and precise tailoring. If you’ve been paying the upcharge for Arc’teryx because you’d rather buy nice than buy twice, or you feel like their intricate patterning moves well with the body, those things aren’t going anywhere. But the sport interests between China and North America are starkly different. The Chinese outdoor leisure market is very new. Growth of the outdoor gear market has grown triple digits in the past decade, largely driven by young, middle-class adults who have unprecedented education and economic stability compared to prior generations. The hobbies they like tend to be more leisurely and less remote. “Glamping” is a huge craze, with the average camper spending over $1000 last year on their hobby. Hiking, climbing, and snowsports are all growing, but participants are still new and, culturally, there’s high priority on safety influencing their progression curve and speed through it. In snowsports, the 2022 Olympics prompted a huge rise in participation, but most only want to try it out vs. adopting it as a regular hobby (78% are one-time learners). Terrain intensity is also different, with 568 ski resorts, but only 16 with over a 1000ft vertical drop. Similarly, in climbing, there’s small, but growing participation in outdoor climbing clubs, but only 32% are climbing once a month or more. In total, after years of Arc’teryx leadership insisting that they only serve the most dedicated outdoor enthusiasts, their customer is about to become a much more casual user with slightly different needs. They’ve added more regular GoreTex (vs. GoreTex Pro) shells, more insulated ski jackets, more cropped jackets (including for insulated jackets and hardshells). There’s a thigh-length rain jacket marketed as a “mountain shell.” There’s 16 liter daypacks that rival the entry-price-point Osprey DayLite.
- The product is going to see more fashion influences. Remember the whole “Gucci x North Face” collab where every climber asked “WHO IS THIS FOR?!” China. It’s for China. That “glamping” pastime is highly tied in to luxury brands. Fendi makes tents. Prada makes picnic dishes and cutlery. And thus, Arc’teryx makes outdoor gear, but they’re also expanding into the luxury / fashion apparel space. Positioned next to the sun shirts and belay parkas, there are hot pink insulated blazers, lavender culottes, and pleated rain jackets.
- Prices are also trending towards luxury. Under no circumstances should a 16.5-micron merino wool t-shirt with serged seams and no technical features be prices at $200. The down-insulated ski jackets are priced at $950 (compared to industry norms of $600-700 for similar construction). The 2L insulated rain coat $700 vs. peers around $450. Arc’teryx has always been on the high end of the price scale, but when you look at the fabrics, construction, and intricate patterning that requires more seam work and more / more skilled labor, the pricing felt somewhat justified. But this latest round of price hikes feels more egregious and isn’t explained by garment construction or inflation and supply chain challenges.
- There’s a lot of down. Outdoor brands have always carried a vast array of down garments, but domestic brands are exploring new poly-fill options. They’re vegan, many are recycled, they hold up against moisture, and the R&D is constantly improving their weight and packability. But Arc’teryx will be investing in down. The Chinese customer is incredibly savvy when it comes to puffer jackets. They know how fill power and fill weight work together to give a jacket its warmth. They know the difference between duck down and goose down. Therefore, no surprise that Arc’teryx has added 50% more down products. Now, is it the best insulation for most skiers? No. But for the most part, the North American market will benefit from new styles, color expansions, and ideally some cheaper prices by increasing the sales volume. (I know, I know. That last part’s a long shot, but a girl can dream).
At this point, the question on everyone’s lips is probably something along the lines of “will this work?” My money’s on no. Arc’teryx is not the first brand to pursue a globalization strategy. The first brands that went global looked for the least common denominator – the pieces that worked across many cultures and many body types. But they found that it’s hard to make an impression on customers and win their loyalty with basic, generic products. So brands have gone for a hybrid model: give customers products with cultural meaning and globalize the back-end (sharing fabrics, R&D, tech resources). Arc’teryx isn’t doing that. Their assortment of luxury-high-fashion sitting next to a $700 mountaineering shell makes sense in China. In the US, the Arc’teryx customer isn’t wearing sleek, oversized blazers and culottes for their “in-town” days. They’re usually high-income, coastal outdoor enthusiasts dressed in more minimalist pieces. Think Ministry of Supply for the office, Lululemon for the gym, and Allbirds to carry them from one activity to the next. Nary a pink blazer to be found. Or maybe they’re more of a rural outdoor enthusiast, in which case they’re devastated that the tech flannel has been discontinued. The fashion inspired pieces don’t sell well, but worse, they degrade Arc’teryx’s brand reputation of being the perfect brand for elite outdoor enthusiasts.
Now, there are a few exceptional unicorn brands that have globalized the back-end business stuff and the customer facing stuff, like product lines, advertising, and communication. But I don’t think Arc’teryx is poised to join their ranks either. These brands have a “global myth,” meaning they tell branding stories that make customers feel like you’re a citizen of the world, that you have things in common with the rest of the world, and that we share certain values and ideals. Basically, they’re pedaling something akin to the Olympic Spirit. But the marketing messages at Arc’teryx haven’t changed. It’s still “we’re the most serious, raddest outdoor brand. We just have strange pink blazers mixed in.” And even if they did pursue a tailored global marketing plan, Americans are really hard to get on board. Eastern and South Asian markets have way more consumers who care about and think about society on a global level, and they also have higher affinity for global brands. Americans tend to be apathetic about other countries at best and anti-global at worst. We don’t trust global brands to do the right thing or make the right product. And we especially have an anti-Chinese bias. Apparel production moved overseas in the 1980s and has rapidly improved in all areas (technology, seamstress skills, supply chain lead times, cost, ethical labor, etc.) over four decades and we still insist it’s poor quality. We don’t trust the Chinese market and Chinese focused brands to develop apparel that will appeal to us. Americans only like global brands when they’re quirky Scandinavian brands. Everyone’s white and we don’t see them as an economic threat.
American consumers have also been incredibly harsh to brands that have altered size runs to meet the needs of Asian markets. J. Crew added a size 000 in 2014 and customers lost their minds, insisting that J. Crew was promoting unrealistic body standards. Those customers were mad and their personal sizing wasn’t impacted at all. Meanwhile, every Arc’teryx customer needs to find their new size. If you were a medium in the old size chart, there are high odds you’re now a large, but the size chart doesn’t capture all measurements (like shoulders, wrists, thighs, calves). It behooves you to pop into a retail shop and verify your sizing before your next purchase. That puts all online ordering opportunities on hold. And further, for women, going up a size is not a comfortable or enjoyable feeling, thanks to a fatphobic society. Arc’teryx may lose sales simply because a customer feels a little bit better about themselves when they can fit into a smaller size from Marmot or Patagonia. And existing XL customers might be hard-pressed to find anything that works for them at all. (Technically the new XXL is larger, but rarely stocked).
Overall, Arc’teryx is asking the customer to deal with a huge upheaval in the brand experience and offers nothing of value (market-right products, better prices, warm and fuzzy feelings) in return. It’s a pretty shit deal, and I believe it presents a large opportunity for other brands to capture market share in the high performance, high price point product classes.