It is hard to imagine retailers going to such lengths to convince customers to buy denim a decade ago. In the fickle world of fashion, jeans have become a staple of any wardrobe. Synonymous with the rise of the Levi Strauss jeans popularity has barely wavered from functioning as the epitome of youthful rebellion in the 1950s, to the 1990s Calvin Klein ads followed by designer denim from the likes of True Religion and Citizens of Humanity.

But a surge in the popularity of activewear as streetwear has started to wear away the world’s love affair with the blue jean and denim-focused retailers are now scrambling to innovate their products.

The trend is most evident in the US where jean sales fell 6 per cent over the past year (premium denim fared even worse, dropping a dramatic 32.5 per cent from a year ago). In contrast, US sales of women’s activewear alone totalled US$11.5 billion, a 9 per cent jump from the year before according to market research firm NPD Group.

Interim earnings reports for several of the biggest retail names confirmed that shoppers’ taste for denim is wearing thin. Fast Retailing, the parent company of Uniqlo and premium denim label J Brand, cut its annual profit forecast for the second time in the current fiscal year after suffering losses in its J Brand jeans business. It expects to rake in 78 billion yen (HK$98 billion) for the year ending August, below its previous forecast of 88 billion yen and original estimate of 92 billion yen last October.

In an even more telling moment, the chief executives of Gap and Levi Strauss – Glenn Murphy and Chip Bergh respectively – bemoaned at June earnings conferences that they were losing sales to sportswear “soft dressing”.

Levi’s turnover has dropped about US$3 billion since 1995 and now hovers at US$4.6 billion.

Denim’s main woes lay in the fact that traditionally it is a stiff, non-insulating fabric without much stretch and had not seen real innovation since the introduction of bright colours several years ago. According to fashion forecasting and analysis agency WGSN, shoppers are focusing in on keywords like breathable, wicking, seamless, stain-resistant, to fill their wardrobe.

“Over the past ten years, we’ve seen this marriage of fashion and sport in athletic wear into one product where the consumer is chasing taxis, office, going to dinner, running after the bus,” said Vilislava Petrova, WGSN’s Asia Pacific head of content.

Faced with a shrinking market, denim retailers have begun pouring money into research and design. Last year, Levi’s opened its innovation Eureka Lab, while VF Corporation, which owns jeans brands such as 7 For All Mankind, Lee, and Wrangler, announced last month it would be building its own denim innovation centre.

Gap, besides incorporating a line of activewear clothing into its flagship brand called Gap Fit, is rolling out an aggressive expansion of its activewear brand Athleta. Launched in 2011, it had 65 stores last year and Gap plans to open 100 more Athleta locations by the end of this year.

What does the future of jeans look like? Levi’s, for example, experimented to create urban cyclist commuters pants – the water-repellent and odour-preventing features in the fabric have made it one of the company’s best sellers. British brand Christopher Raeburn similarly launched a denim collection for cyclists. Treated so that the colour would not fade in the seat area, it also incorporates high visibility features and reflective trims, and pockets to fit a bicycle lock.

Canadian Silver Jeans has its own take. This summer it rolled out its “joga jeans”, a portmanteau of yoga and jeans. The hybrid weave looks like denim but has a soft inner lining like sweatpants. Or it could be a stylistic-driven statement like the work of Japanese brand Remi Relief which puts bandana prints on denim. The label takes the extra steps to produce and treat the material at their own factory, instead of outsourcing, to create that coveted soft and already worn-in feel.

Invista, the leading global textiles producer known for creating Lycra, is rolling out other innovative fibres to cater to this growing market such as Thermolite which has an insulating effect and Toughmax which protects the wearer from scrapes and falls.

“Today, we are seeing performance fibres, previously used exclusively in activewear, moving into jeans as well as activewear brands integrating denim into their lines,” the firm’s North Asia commercial director of apparel and advanced textiles Steve Steward said. “Take cooling technology like Coolmax, which works through evaporative cooling – getting rid of moisture rather than absorbing it.”

“The successful companies will be ones that find a way to crossover,” he added.

WGSN’s Petrova says she is sure of denim’s resilience. “The mass market is moving away from denim but if you look at high end fashion brands, they’re actually offering a lot of innovation when it comes to denim like reintroducing Japanese traditional quilting techniques, bringing denim into more sophisticated styling as well, mimicking the classic Chanel tweed jacket material so that it has a more fluffy feel to it,” she said.

“I think we’re about to see denim’s potential come to life. The sky is the limit."