The growth of the Chinese outdoor market declined markedly last year and there are signs that a clean-up has started among brands as well as retailers. However, the outdoor market was still on the rise last year and prospects are buoyed by growing participation trends.
The China Outdoor Commerce Alliance (Coca) estimates that outdoor retail sales in the country inflated by nearly 11.3 percent to about 20.08 billion yuan renminbi (€2,831m-$3,208m) in 2014, while wholesale sales jumped by 13.35 percent to RMB 10.97 billion (€1,546.6m-$1,752.8m). This compares with increases of 24.3 percent at retail and 30.9 percent at wholesale in 2013. The numbers were outlined at Ispo Beijing, where the changes and uncertainties in the retail market dominated discussions among outdoor companies.
The organizers reported that the 11th edition of the fair, held from Jan. 28 to 31, saw a slight increase in the number of participants to nearly 30,000. Many exhibitors were under the impression that the visitors included fewer dealers and more end users than in previous years. Others said the quality of the exhibitors was again upgraded, and the organizers reaped praise for the side program.
While most of the exhibitors approached at the fair said they had enjoyed growing sales, they also pointed to apparent difficulties among specialty retailers: Some of them were unable to pay their suppliers and others pleaded for changes in their trading terms, increasingly adding a consignment clause.
Other companies were more strongly impacted by weak sales in department stores. It was said that some of the department stores started setting unreasonable targets and charging outsized commissions due to pressure from rising costs and sometimes flagging traffic. These fees are becoming unaffordable for agents, making it more compelling for the brands to take over this business themselves.
Furthermore, it appears that outdoor garments have lost some of their appeal in the department stores compared with fashion brands. While department store operators had reduced the space allocated to sports stores a few years ago to make way for outdoor brands, some of them have been reducing the outdoor sections again in favor of more fashion brands – and sometimes more sports brands as well.
By some estimates, online sales have been driving much of the outdoor market's expansion last year. This plays in the hands of brands such as Toread, the Chinese outdoor market leader, which has its own online sales platform. Other companies that are dealing well with the trend include Kailas, which has distinct ranges for specialty retailers, malls and online sales.
One of the recurrent topics at the fair was the spread of a new form of online retailing through WeChat (Weixin in Chinese), the instant messaging service of Tencent. The company already invested in online retailing by acquiring a stake in JD.com (the former 360buy), the second-largest online retailer in China, and a few months ago it allowed small dealers to open stores on WeChat. This is being used by several sports companies and could become very significant in mobile retailing as well as marketing, since the instant messaging service has more than 450 million active users.
Coca estimates that there were 945 outdoor brands in the market last year, which was an increase of just over 6 percent. The association said the rise came mostly from domestic brands, which saw their numbers jump by more than 10 percent to 504, while the number of international brands advanced by 1.85 percent to 441. However, some of the most influential market players predicted a painful shakeout, which has apparently started already among the outdoor apparel brands.
The organizers of Ispo Beijing remained upbeat. They hailed the arrival or return of several brands at the fair, such as Swix, Craft, Thule and La Sportiva. The total number of the exhibitors increased by two to 434 companies, representing some 656 brands.
The organizers were also satisfied with the reactions so far to their new Ispo Shanghai project: While some major exhibitors have yet to sign up, more than 300 brands have confirmed their participation, including companies such as Mammut, Fjällräven and Camelbak. Ispo Shanghai will be held for the first time from July 2 to July 4, with a focus on outdoor as well as other categories from running to fitness, action sports and water sports, and a sizable sports style section.
Knut Jaeger, the man behind the Asia Outdoor fair in Nanjing, said that the new competition from Ispo Shanghai had not led any major companies to cancel their participation in that trade show. Sadly, the fair will be held from July 15 to 18 without him, as he passed away over the weekend See the obituary at the end of this issue. A more extensive tribute will be given to this pioneer of the Chinese outdoor market in The Outdoor Industry Compass.
On the other hand, several brands were noticeable by their absence in Beijing. Salewa stayed away as it revised its distribution strategy for China. Two years ago it sealed a joint venture with its former distributor, Outdoor Inspiration Trading. The Italian company stated at the time that it wanted to more rapidly spread its distribution but it was confirmed last week that Salewa was dismantling this joint venture and opting for another setup.
Haglöfs, which had a large stand at the fair last year, abstained this year, too. The Swedish brand has been distributed in China since 2012 by Beijing Yuechengjunda, which focuses on retailing and facilitated the opening of Haglöfs stores in the north of the country. Then again, the brand has yet to expand to any great extent in specialty retailing. The Swedish company owned by Asics may well appoint a separate distributor to cover specialist stores, as The North Face did with Amphilon Trading last year.
The brands that did not turn up this year further included Black Yak, which has yet to finalize the international range it started putting together last year. The company still decided to exhibit at Ispo Munich, as a means to make contacts with potential distributors. Black Yak has appointed Maximilian Nortz, former events and sponsoring manager at Messe München, as its international managing director in charge of Europe. Nortz already switched to Black Yak in May, originally as its global marketing director. Based in Munich, he will start by establishing the brand in the German-speaking countries and Italy. Black Yak is to return to Beijing with its complete international range next year.
For some of the specialized brands, the retail issues were mitigated by the ongoing rise in sports and outdoor participation. This was confirmed by research from Coca: It saw increases in several categories of outdoor sports, estimating that the number of rock climbers even doubled last year. Outdoor participation has been further stimulated by the rise in other categories, led by running.
Sports participation is at the center of a strategic plan adopted by the Chinese government last October and outlined by one of its authors at the Sports Industry Forum. This full-day event held at Ispo Beijing focused on new opportunities for investment in the Chinese sports business.
Bao Mingxiao from the China Institute of Sport Science described wide-reaching measures to expand sports participation from 350 million to 500 million people and to raise the value of the Chinese sports business to RMB 5 trillion (€705,002m-$798,993m) by 2025. He reiterated the government's determination in this matter, underlined by the endorsement of the State Council. The Chinese approach to sports is to be entirely revised, to move from a top-down approach focusing on gold medals to a bottom-up strategy with investments in grassroots development.
The plan, which has come to be known in the Chinese sports industry as “Document 46,” has also raised strong hopes for the liberalization of sports events and broadcasting. This could signify the inflow of large sums of money into Chinese sports, which could be at least partly invested in more grassroots development and infrastructure.
The government appears to be making particularly rapid headways with the reforms of sports events. While they currently require permits and fees (which are perceived by event organizers as somewhat haphazard), Bao Mingxiao said that concrete progress should be made before June.
These potentially game-changing reforms for the Chinese sports industry coincide with the release of our report on the country's sports market, as previously reported. Other topics from Ispo Beijing, such as the rise of the running market and investments in children's brands, will be covered in upcoming issues of SGI Europe, while news from the Chinese outdoor market will appear in more detail in The Outdoor Industry Compass.
