By Lin Huocan
No words can be more appropriate than "domestic disturbance and foreign challenge" to describe the status quo of local sportswear brands. Since the transient prosperous marketing during 2008 Olympic Games, especially last year, local sports brands including Lining, Peak, 361°, and Anta are confronted with problems of low demand and large inventory of Post-Olympic Era without exception.
When local enterprises are struggling for "digesting" inventory, world famous sports brands such as Adidas and Nike have quickened their pace in cannibalizing China's sportswear market. According to the survey, till the end of 2012, Nike has occupied 12.1 percent of market shares in China's sportswear market; meanwhile, Adidas has gradually become one of the principal sportswear retailers in China, with steady increase in market shares.
Inventory drop showing no signs of market rebound
Based on 2012 annual report released recently, the inventory of Lining Company in 2012 was RMB0.92 billion yuan, while that of Anta Company was RMB0.678 billion yuan, 11.17 percent up from RMB0.618 billion yuan in 2011; the average days of inventory turnover has increased by13 to 51 days compared with that of previous years. The inventory of Xtep International in 2012 was RMB0.583 billion yuan, the average days of inventory turnover was 70 days, 7 days more than 63 days in 2011. The inventory of 361° Company in 2012 was RMB0.46 billion yuan, with a year-on-year increase of RMB9.5 million yuan; and its average days of inventory turnover increased to 56 days on the basis of that by the end of last year, while the days of turnover at the same period last year was 40 days. In addition, the inventory of Peak Company in 2012 reached RMB0.39 billion yuan.
Since this year, the inventory elimination of local sportswear brands begins to produce effects. Recently, the chairman of Anta Group, Ding Shizhong, disclosed that the inventory of Anta Company is almost empty. And some sources reveal that Lining Company has been out of stock already.
However, relevant experts hold that although Anta and Lining Companies have sent the signal of inventory drop, it cannot prove that local sports brands have got rid of the sluggish market. During dealing with inventories, several giant sports brands have closed stores in succession. According to incomplete statistics, at last year, nearly 1821 Lining branches, 600 Anta branches, 100 Xtep branches were shut down. Such channel shrinkage continues to generate uncertain effects on the enhancement of later corporate performance.
After all, under the condition that various sports brands are shrinking the front in market, the ordering condition in 2014 will not be optimistic unless dealers' inventory continues increasing. But the problems are that since last year, the discount of chain stores of various brands has been increasingly lower, which makes franchised outlets helpless in resisting market decline.
Moreover, it can be seen from corporate announcements that the ordering situation of local sports brands is not ideal. Compared with that in last Winter Order-Placing Fair, order amount of 361°Company in 2013 Winter Order-Placing Fair plummets by 17 percent or so; And the order amount (calculated based on wholesale price) of Xtep in Q4 Order-Placing Fair of 2013 drops 15 percent to 17 percent or so compared with that in the same period of last year, and that of Anta Company decreases by 5 percent to 15 percent year on year.
Therefore, the order decrease and profits drops are still biggest problems faced by local sports brands. In consideration of the weak market rebound, there is still a long way for local sports brands to realize resurgence.
Uncertainty exists in holding together for warmth
Ph.D. Economics of Chinese Academy of Social Sciences, Ma Guangyuan, points that in few years our local sports brands will run into the severest winter. Apart from the influence of international financial crisis and industrial cycle adjustment, such industrial restructuring lies in that the low cost expansion cannot sustain brand development.
The light industry researcher of CIC Industry Research Center, Xiong Xiaokun, also holds that one of key reasons for performance decline of domestic sports brands is blind development. Most giant brands failed to accurately estimate the market capacity, expanded stores and enlarged production capacity blindly and finally fell into the predicament of large inventory and low profits.
Enterprises of local sports brands seem to have realized this problem, and gradually become aware of the competitive mode of blind expansion, which is a double-edged sword to the opponent or himself. In addition to the aggressive marching of international brands such as Nike and Adidas, many sports brands have agreed to "join hands" for development.
Ding Shizhong said that at present the overall scale of domestic enterprises is relatively small, which accounts for less than one tenth of that of Nike. And if each enterprise operates individually, it is difficult for them to contend against international brands. Therefore, their chance to win will be larger only if they join hands to create benevolent competition mechanism and occupy the huge market of 1.3 billion people.
Some experts hold that even though the industry strongly supports the opinion of ‘joining hands", the homogeneous trend of domestic sports brands in products, channel, brand strategies is serious, the fierce competition will be inevitable, so many uncertainties still exist in the collaboration with each other.
Someone holds that a new round of industrial integration exists behind the "joining hands" of leading enterprises. Especially the integration of small and medium sports goods companies will become a vital topic of the entire industry. Based on White Paper on 2012 China Sporting Goods Industry Development, even though there are thousands of sports brands in China, not more than six to seven brands can survive in future China. It means that in future years, the industrial integration will take place more frequently.
