Springboard to success

With people's soaring interest in outdoor activities, China is set to become a major market for outdoor products. Provided to China Daily

Growing popularity for outdoor activities gives global outdoor equipment makers a window of opportunity in China

Climbing snow-covered mountains, canoeing down rapids or trekking across deserts are not the kind of activities normally associated with China. But outdoor equipment makers reckon these sports are not only gaining in popularity but also providing rich pickings for domestic and foreign companies in many areas.

The resurgence of the outdoor sports industry in China also comes as the traditional sports goods industry faces tough going amid flagging sales and weak demand. The annual turnover of China's outdoor product market soared to 14.52 billion yuan ($2.33 billion; 1.82 billion euros) last year, a 35 percent growth over 2011, according to data provided by the China Outdoor Commerce Alliance.

It is estimated that there were 823 outdoor product brands in China last year, with more than 418 of them being foreign companies, 12 percent more than the year before.

Though the growth in foreign brands was more on expected lines, considering the emergence of China as the No 1 consumption market for global firms, domestic companies are also catching up in a market ripe for intense competition and strong growth in the next few years. But for the moment it is global brands like Mammut of Switzerland and Haglofs of Sweden that have a headstart in China, though traditional sports brands such as Adidas of Germany and the local firm Li-Ning are fast catching up.

Nordic challenge

"I am not sure whether this is the most opportune time to be in China, but from a strategic perspective it seems to be in line with our Asian expansion plans," says Magnus Nerve, the Asia-Pacific area manager of Haglofs Scandinavia AB.

In the last 15 years, the Swedish company has seen an annual business growth of about 15 percent on average, with most of it coming from Europe. But conditions in Europe are hard, growth is largely being driven by the company's Asian operations, in China, South Korea and Japan, Nerve says.

Haglofs has firmed up on its China strategy by appointing Beijing Yuechengjunda Trade Co Ltd as its main distributor in China. "Our main priority is to consolidate and build market share rather than volume growth."

According to Nerve the company is working closely with its local distributor to find the right channels to promote its products and is not averse to introducing Asia-specific products, including specific fits and colorings in the long run. "We anticipate Asia to account for 15 percent of our total turnover this year, compared with just 5 percent last year."

The company's three-layer jackets, which cost 6,000 yuan a piece, have been highly popular since they were introduced. Most products are sold through department and multi-brand stores in China.

Nerve, however, feels that the number of outdoor product users in China is still low, and companies need to focus more on creating market awareness and encouraging people to participate in more outdoor activities.

Swiss precision

Unlike Haglofs, which wants to have a China unit in the near future, the Swiss firm Mammut, is looking ahead with confidence with its new Beijing-based China unit.

"We are planning to ship products to China from this summer, and start sales by autumn," says Rolf Schmid, chief executive of Mammut Sports Group SG.

Schmid says his company is keen on finding its own niche in China, rather than relying on the mass market. "We are not just a fancy brand. Most of our customers are those who really want to climb mountains, and hence put immense faith in the exceptional quality and standard of our products.

"We are largely a mountain brand, and we make products for real mountaineers. The Chinese market for this has just started, with growing interest among customers to try out our products," Schmid says. He says that though China is a promising market, the Swiss company is not in a hurry to expand rapidly. "We want to be the best, not the biggest," he says.

Being a global brand, Mammut has no plans intend to have a separate marketing strategy for China. The only exception that the company will make is to provide some products in a wider range of sizes. There will also be very few China-specific products.

The brand, 150 years old, had a turnover of $260 million (202 million euros) last year, but its fortunes have waned in its mainstay European market. "The outdoor product market has reached a certain level in Europe, and the growth is almost flat," Schmid says.

"Although we are a Swiss brand, we anticipate strong growth in Asia, especially from China in the next six or seven years."

Although a newcomer, Mammut is not unfazed by the challenges it is encountering in China.

"We are really surprised that many customers know about our brand, and directly come to us despite our recent entry. This is indeed positive and something that I have not seen in any other market," Schmid says.

Evidence of this was visible in the crowds that thronged the company's booth at the International Tradeshow for Sports Equipment and Fashion in Asia held last month in Beijing.

Different paths

Unlike these two well-known outdoor sports gear brands, Italian mountaineering products, maker Salewa, and Protest, a design-led boardwear brand from the Netherlands, have decided to take a different path.

Protest, in conjunction with its Chinese agency, BTS International Co Ltd, has opened six specialty stores in department stores and shopping malls since last June. Each store covers about 50 square meters, and the sales volume has been growing steadily at each unit on average of 20 percent each month. The company's main product-ski jackets-cost around 2,599 yuan a piece.

"This year, we are planning to open about 10 specialty stores, mainly in Beijing and Shanghai," says Bai Jingbo, marketing manager of BTS. Though the Dutch brand entered China in 2009, its first store debuted two years later.

"We have crossed the fledgling period and imbibed more knowledge about the market. Later, we will find more distributors to stock and sell our products across more locations," Bai says.

According to Bai, in Europe, the professional performance segment accounts for more than half of the total business, but in China, street-style and lifestyle products account for two-thirds of the total turnover.

"With outdoor products, buyers are more demanding when it comes to safety, fashion and comfort. We tend to concentrate on incoporating fashion elements, even as we keep products functional, " Bai says.

Salewa, for its part, is focusing more on its new joint venture, Salewa Trading (Beijing) Co Ltd for growth in the burgeoning Chinese outdoor sports gear market.

Since 2010, the Italian brand has made inroads into China through its agent, with whom it has now set up its joint venture. The first shop opened in 2011, and sales in China have reached more than 20 million yuan last year.

"We are aiming at doubling our business this year," says Li Yun, general manager of Salewa Trading (Beijing) Co Ltd.

Since mass consumers dominate the Chinese market and outdoor activities are regarded more as a lifestyle, Li says his company will pay more attention to balance the functional needs and fashionable elements.

New niche

But when it comes to fashion, traditional sports brands are still better placed to do better than the bigger names. Faced with overcapacity and the shop closures, many of these companies now regard outdoor products as a lifeline.

German athletic footwear and apparel brand Adidas has taken aim at the outdoor marketplace since 2011 with the acquisition of Five Ten, the US brand known for its rock climbing shoes.

Its inroads in China's outdoor industry began with aggressive expansion plans. During the past year, the Adidas outdoor category has opened 30 stores in China.

Jens Meyer, vice-president of marketing with Adidas Sport Performance in China, says the company began to set up franchise stores in several Chinese cities last year.

"It is a key step for Adidas in fully developing the Chinese outdoor market," says Meyer. "I believe it will further contribute to the company's global business."

Meyer says that he cannot disclose any earnings as the German company plans to issue its full year figures soon. However, earlier reports say Adidas' outdoor business is aiming for a turnover of 500 million euros by 2015.

Chinese sportswear giant Li Ning made a splash in the outdoor sports gear market with its new line of products styled Li-Ning Adventure in 2011.

Though currently the outdoor brand Li-Ning Adventure has only five stores, it plans to have 60 to 70 more franchised stores in different parts of North China, where consumers put more emphasis on quality and function of winter clothes.

Nathan Hu, general manager of Li-Ning Adventure, who has been working with Li Ning for more than 10 years, says that though the outdoor sector is a niche market, consumer trends are increasingly being driven by aspects like quality and practicality in daily use.

"Outdoor products are becoming increasingly popular among professional outdoor enthusiasts and urban white-collar workers," he says. "They give a higher priority to the clothing's practical side rather than style, which is the big difference between sportswear and outdoor sports gear."

Hu says the target group consists mostly of individuals aged 25 to 50, with a high income and keen fashion sense. Many of them also consider outdoor sports gear as equipment to participate in special occasions.

Backed by a global distribution network and an international design team of the US-based Concept 21, Hu says his company has seen a growth of 30 percent in the past year.

However, the outdoor products market in China is still in its early stages of maturity. In 1995, Beijing Sunwind Outdoor and Sporting Goods Company was founded. It is believed to have been the first outdoor products company in China.

As international brands and sports brands flock to China, industry experts are also skeptical about the challenges it poses for domestic companies.

"The outdoor equipment market is a relatively new thing in China," Antonino Laspina, Italian trade commissioner and coordinator of the Italian Trade Commission in China, says. "With economic growth and improving standards of living as a whole, outdoor products and recreation have become general public needs."

He says that is why foreign companies that are keen on tapping the market should come as a consolidated group rather than as single entities.

"The challenge doesn't only come from the competitiveness of other brands, but also from within the company itself."

"China is a very complicated market with huge growth potential. It is hard for a small and medium-sized company to fully understand the market, develop the distribution channels and build up the franchise stores by itself."

Contact the writers at yaojing@chinadaily.com.cn and lvchang@chinadaily.com.cn

(China Daily 03/29/2013 page12)