Dive Brief:

• Fabletics is hitting its five-year anniversary with big expansion plans for brick-and-mortar and international sales — and a new executive team. In September, the online activewear brand will also unveil a new store concept in Bellevue, Washington, and is planning new and more frequent fashion collections, according to a press release emailed to Retail Dive. 

• That store will be one of more than 75 new locations, bringing its U.S. brick-and-mortar fleet to 100, according to the statement. The brand has inked its first international distribution partnership to sell in the Philippines through free-standing stores, shops-in-shop and online, adding to sales in 10 European markets that the company says are experiencing 25% year-over-year revenue growth.

• And the brand has recruited a new executive team, which includes Karen Pornillos (who led design for Free People’s Movement brand and was Lululemon Athletica vice president of women’s design) as VP of design and fashion director and Shefali Shah, who has more than 10 years of experience at Victoria’s Secret, as vice president of merchandising.

Dive Insight:

With a largely subscription sales model and now stores, Fabletics is benefitting from the booming athletic and athleisure segment. But the competition is heating up.

Performance and sports-inspired revenue grew 10% over the past 10 years, compared to just 4% growth in apparel and footwear, according to a report from Gartner L2 emailed to Retail Dive. Despite that, growth in the sector has been constrained by weak wholesale gains, so most brands have shifted to growing sales through their direct-to-consumer e-commerce channel, according to that report.

Fabletics began as a pure-play e-commerce retailer in 2013 with spokesperson and co-founder Kate Hudson (who started the business along with Adam Goldenberg and Don Ressler, co-CEOs of owner TechStyle Fashion Group). But the brand is now moving in the other direction, building up its physical store fleet to boost marketing and sales. The brand says it has 1.4 million "VIP" members, with more than 25% joining the subscription program through a friend’s referral. Its U.S. stores, meanwhile, are seeing a more than 20% increase in same-store sales year-over-year, according to the release.

The company’s new hires join Pornillos’s former Lululemon colleague Felix del Toro, who also had executive roles at Gap Inc. and Ann Inc. and joined as senior vice president, chief merchandise and design officer last year. The team will boost the brand’s introductions of new collections, with new capsules dropping as often as weekly, along with "enhanced products across all categories," the company said.

The company had much to share, but it doesn’t sound like much is changing in regards to its subscription model, which has garnered controversy over the years. Some customers feel duped by the agreement they’ve entered into through its VIP program, complaining about how difficult it is to cancel membership or stop their payments once they’ve opted out. 

That may be even more important than merchandising changes, considering that subscription sales have expanded at several companies, including Nike and Stitch Fix, with easier terms and smoother opportunities to avoid charges and manage frequency of deliveries. TechStyle is among the subscription companies enjoying longer-term rates, along with Amazon Subscribe & Save, Dollar Shave Club, Ipsy and Loot Crate, according to a study from McKinsey and Co. emailed to Retail Dive earlier this year. 

But it's a challenging category: Nearly 40% of subscribers of any service type​ cancel, according to that report. More than a third cancel in less than three months, and over half cancel within six, including between 60% and 70% of meal-kit subscribers. Some 45% of replenishment subscribers stay for at least a year.

Consumers are quick to cancel services that don’t deliver a superior experience — because of poor product quality, dissatisfaction with the assortment or a lack of perceived value, according to the McKinsey report. "A key challenge for all subscription e-commerce providers is matching supply and demand," it said.