Sports Brands Get Competitive in China

In the year of 2009, the Chinese domestic sports brands have gone through fast development. They have gradually become equal competitors to the foreign giants.

In 2009, Adidas was trapped in trouble in every corner of the world; Nike closed its only self-owned plant in China; Mizuno from Japan also closed its 200 stores suffering deficit in China in July. The sports brands agents represented by Belle and Daphne have coincidentally lost their interests in the international sports brands and abandoned their roles as the agents.

When the international sports brands were depressed in China, the Chinese domestic sports brands were greeted by the peak of development. PEAK, 361° and some other domestic sports companies went public in Hong Kong. Lining replaced Adidas as the champion of sales in China. The Chinese sports industry in 2009 was featured with the domestic brands’ enlargement and the foreign brands’ recession.

UK-based Financial Times published an article, saying that the Chinese domestic consumption brands rose and began to challenge the famous foreign brands in the year of 2009. This trend was clearly reflected in the sports industry in 2009. The article suggested people having doubt go to Jinjiang, Fujian, along one of whose streets more than 34 stores were selling Chinese domestic sports brands.

In November 2009, CCTV, or Chinese official TV station revealed that Xtep spent 15.6 thousand yuan (USD 2.23 thousand) getting the title of “partner of CCTV in live broadcast of sports events in 2010. 361° defeated Lining and became the “designated clothing supplier for the CCTV-5 (the sports channel)”. In addition, ANTA, Jordan signed the contracts to obtain the title sponsor of transmitting the single sports game. For example, the audience can see frequently see Jordan’s name when they are watching the NBA games broadcasted by the CCTV.

Grow by sponsoring international games

In the first half of 2009, Adidas’ net profit fell by 95% to 13 million euros. The stress from the huge inventory forced Adidas into the tough battle of “de-inventory”. In the third quarter of 2009, Adidas operating profit decreased by 29% year on year and the sales amount went down by 7%.

The Chinese market is the last straw for these companies. For example, the authorized sponsors of NBA have 10% of their income from the international market, most of which is from China. China also owns the second largest number of NBA authorized sponsors only with the USA standing ahead. According to the NBA official data, 89% of the Chinese people between the age of 15 and 54 know the sponsors of NBA. In the 2008-2009 season, about 1.6 billion Chinese audiences watched NBA games.

The Chinese domestic sports brands will certainly not neglect this huge market. Their principle is that “a huge amount of money in building brands image comes before the satisfactory market share”. Coincidentally, those brands all chose to sponsor the international games.

361°, which went public in 2009, spent 780 million HK dollars for corporate image, taking 39% of the total amount of raised fund. In March 2009 it became the official supplier of the Asian Olympic Commission. In October 2009 it signed a contract with the Philippines Olympic Commission and became its clothing supplier in 2009 and 2010. On December 3, 2009, the company spent 350 million yuan (USD 51.26 million) getting the title of “senior partner of 2010 Guangzhou Asian Games”. The marketing expense concerning this sports event was estimated at 300 million yuan (USD 43.94 million). These activities showed 361°’s determination to have its brand internationalized and its strength as the paragon of Chinese domestic sports brands. In the first half of 2009, 361°’s profit reached 632 million yuan (USD 92.6 million), 2.5 times of the same period of 2008.

ERKE Group, which went public in Singapore in 2005, shared the common marketing view with 361°. But their marketing patterns were different from each other. It preferred sponsoring one or two kinds of sports games, like tennis and football. In 2009, it signed a contract with a professional football team in Singapore, allowing the company to provide the clothes and sporting facilities for this company in the next three years.

“The consumers only buy the products they have known. Therefore, marketing and image promotion are necessary,” said an expert in consumption products. In his opinion, it is reasonable for the Chinese domestic enterprises to put a lot of money in advertisement.

Foreign sports stars helped improvement

Inviting the sports stars to be the sportsmen or spokeswomen is an efficient way to improve the corporate image. The sportswear company PEAK is the most experienced in China. Different from its peers who were busy engaging the Chinese domestic sports stars, PEAK went overseas to find the foreign sports stars and got fast access to the success.

The US basketball star Shane Battier from the Houston Rockets became the first foreign sports star having signed contracts with PEAK. “When we first got to the NBA to find our spokesman, these players didn’t know us and even looked down upon us. We signed Shane and delivered our products in the different media in China. We’ve got fame, which paved the way for us to sign more NBA players,” said Xu Zhihua, CEO of PEAK.

Now, there were ten more NBA stars signing with PEAK, including the captain of the US national basketball team Jason Kidd from the Dallas Mavericks. In the summer of 2009, Shane Battier took a 3-day trip in China, helping to sell a lot of shoes in China as said by the NBA official website. In September 2009, PEAK went public in Hong Kong. On December 16, 2009, PEAK opened a new storefront in Pudong, Shanghai, increasing its total number of stores in China to 6000.

“Brand image comes before the market!” This is the principle of PEAK’s development strategy. According to Xu Zhihua, to choose NBA and Battier is due to the Chinese people’s ardent love for the Houston Rockets in which Yao Ming joined in 2002.

Now, PEAK’s symbol can be seen everywhere in the Toyota Center, which is home for the Houston Rockets. Some peers once doubted whether this would be useful but the truth threw the doubts aside. “The domestic market will not be influenced by the distraction of the corporate attention. Developing the overseas market can promote the development of domestic market, and vice versa,” said Xu Zhihua. From 2005, PEAK’s revenue increased by 80% each year. In the first half of 2009, PEAK’s gross margin saw a 6% year-on-year increase to 38.1%. “Actually, a lot of Chinese people would prefer the international brands. Our cooperation with NBA enabled us to compete with the others as an internationalized brand. The more famous we are among the consumers, the more products we can sell to them.”

The way PEAK adopted has been borrowed by many other sportswear companies in China. Lining was one of them. In June 2009, Lining signed a 5-year contract with the Olympic pole vault gold medal winner Yelena Isinbayeva. The value of the contract was 7.5 million US dollars. Previously, Isinbayeva was the spokeswoman for Adidas.

Domestic market is the key

Though most of the Chinese domestic sportswear companies are following the pattern of internationalization, they still focus on the Chinese market. ANTA was one of them which gained the maximum benefits after the Beijing Olympic Games.

On June 23, 2009, ANTA officially declared that it had replaced Adidas to become the partner of the Chinese Olympic Commission and will provide the garments for the Chinese teams in 2012 London Olympic Games. ANTA refused to give out the detailed amount of sponsorship. Adidas spent 60 million to 80 million US dollars for the Beijing Olympic Games. Therefore, it was believed that ANTA’s sponsor fee was not smaller than that.

ANTA’s present objective is to compete with the international sports brands. However, to compete directly with the colossuses like Nike and Adidas is not the way ANTA has chosen. The unexpected marketing strategy is the key for its success. “Our plan was to sponsor the Chinese national teams attending the international sports events, making our brand to go to the world with the Chinese athletes. This can increase our international fame and exert positive influence upon the domestic market,” said a senior executive of ANTA.

“We are not going to be China’s Nike; instead, we want to be the world’s ANTA,” said Ding Shizhong, board chairman of ANTA. Cooperating with the CBA, which is the first-class basketball league matches in China, has enabled ANTA’s sales amount increase by 50% each year.

In addition, ANTA was bullish on the acquisition of the foreign sportswear brand Fila, whose proprietary, operation and marketing network were acquired by ANTA in August 2009 at the cost of 600 million HK dollars.

To acquire or cooperate with the international brands can help the domestic sportswear brands take bigger market share and more consumers’ recognition. Lining was the one to follow suit. In 2005 it started to cooperate with France-based Aile and in 2008 it acquired Lotto from Italy.

According to the analysts, the Chinese sportswear market volume may increase from 7.2 billion US dollars in 2009 to 12.4 billion US dollars in 2012. Such a huge market will greatly stimulate the development of Chinese domestic sports brands. In the past years, Nike and Adidas could respectively earn 1 billion US dollars every year. Nowadays, the Chinese domestic brands represented by Lining, ANTA, Xtep, 361° and so on united together to challenge the two foreign giants’ dominant places .

After the end of the Beijing Olympic Games, the Chinese sportswear industry entered its own “warring period”. Promoted by Olympics, the Chinese domestic brands reduced the gap between Nike and Adidas. In 2009, these domestic brands’ wonderful performance proved that they were still on the way of achieving success.