Why local sportswear brands are taking off in China
Late last year brought a symbolic event in the athletic footwear business in China: it was the return of the Shanghai Marathon, scratched in 2021, which attracted a record 18,000 runners and was won, both in the men’s and women’s divisions, by Chinese athletes. It was a high-profile signal that with the easing of Covid-related outdoor movement restrictions, the market for athletic footwear and apparel in China is set to get a huge shot in the arm. But though the pie is growing, the dom
dominance of global brands such as Nike, Adidas and Puma is clearly under challenge. Domestic companies like Anta and Li-Ning are experiencing rapid growth in popularity and the reason isn’t entirely to do with product superiority. Chinese nationalism is on the rise, with an accompanying disdain among a broad swathe of consumers for foreign products. At one point in 2021, there was even a half-hearted boycott of foreign brands that had announced they would stop using cotton produced in the Xinjiang region.
Sometimes, that nationalism can rebound on the Chinese brands themselves. Li-Ning felt that last October when widespread rage was vented on social media about the brand’s new winter coats, which bore too close a resemblance to Japanese military uniforms. A somewhat grovelling apology from the company ensued, and the offending coats were withdrawn from the market, pronto.
Despite the blip, Li-Ning has recovered and gone from strength to strength. The company’s founder is a Chinese Olympic gymnastics gold medallist. He launched his eponymous brand in 1989, a year after competing in his last Olympic Games, in Seoul. By 1992, the company was making the podium uniforms for the Chinese team in Barcelona, and it continued to do so for the next four Olympiads, ending in 2012 when its rival Anta took over. Li-Ning had plenty of ambition though, and in 2018 it became the first Chinese sportswear brand to exhibit its collection at New York Fashion Week.
Anta was launched in 1991 with athletic footwear, expanded later into apparel, and later still into fashion sportswear, commencing with a collaboration with American fashion brand Opening Ceremony.
But despite their tentative forays into international markets, or at least into the international fashion public eye, neither Li-Ning nor Anta has really gained a beachhead abroad and both are still almost unknown outside of China itself.
Market research firm Mordor Intelligence shows that the Asia-Pacific athletic footwear market is forecast to grow at an annual rate of 7.1 per cent over the next five years. That projection may turn out to be on the conservative side, with others expecting a growth rate even higher, closer to 10 per cent.
Asians generally are becoming increasingly fitness-conscious, and many want to wear bright colours and designs – the flashier the better. It’s not about basic functionality anymore, or even about having the best technology (although that is important), it’s about standing out from the crowd. The biggest players in the athletic footwear business are Nike, Adidas, Puma and Li-Ning.
China is the prize
Although the sportswear mania is a pan-Asian phenomenon, the big prize for brands is China. Sportswear, which includes athletic footwear, apparel and accessories, is already a $50 billion market in China.
Gym memberships in the country have soared in recent years and despite the sometimes dubious air quality, the popularity of outdoor sports has also grown rapidly. Markers of the expansion are everywhere, such as the proliferation of running events (exemplified by the Shanghai Marathon), and the emerging ubiquity of football fields and tennis courts. Covid-19 lockdowns understandably increased the desire to engage in healthy exercise and it is believed the time Chinese consumers spent on fitness and exercise apps ballooned. This may not have immediately boosted spending on athletic apparel and footwear, but it undoubtedly caused pent-up demand that is now being released.
Since the market is so big in terms of middle-class population, there is plenty of scope to specialise. Thus, Lululemon has been able to get traction in yoga and pilates, and hiking specialists have got their hooks into the hiking segment.
Foreign brands still lead – for now
Despite the chaos caused by lockdowns and the nationalistic tide running against them, the foreign sportswear brands are not going anywhere. They are making increasingly strenuous attempts to engage Chinese customers with products and marketing that are differentiated by geography to target local preferences. Nike, for example, is strengthening its relationship with customers through the WeChat app by shifting to one-on-one communications.
Nike is still the market leader in both the athletic footwear and the overall sportswear categories. The Chinese market is hugely important to the company. In 2019, Nike sold US$6.2 billion worth of product in Greater China, accounting for 17 per cent of company revenues. That was a bigger slice of its overall revenue pile than the APAC and Latin America segment. Then followed two years of struggle and only now is the ship being righted. For its latest reporting quarter. ending 30 November, Nike reported sales growth in Greater China of 6 per cent on a constant currency basis, although that was -3 per cent at the current market rate because of the appreciation of the US dollar over the course of the year.
Adidas has had to deal with the same upheavals and would be hoping for a significant turnaround in sales performance in China after a poor third quarter, when its year-on-year sales crashed 26 per cent on a constant currency basis and 19 per cent at market rates. The problems in China caused an inventory buildup that the company has been struggling to clear.
For its part, Puma, like Adidas, was walloped in the second half of 2022 by the situation in China, where its sales fell by the same percentage (26 per cent) on a constant-currency basis and gave rise to similarly swollen inventories.
There’s enough to go around
Although Chinese brands are gaining ground on the global sportswear players in China itself, there is no need for the latter to panic just yet, partly because of their long presence in the market, partly because of their reputation for technological and stylistic excellence, and partly because the pie itself has the potential to become so large. As big an issue, perhaps, is whether the Chinese brands will be able to expand meaningfully outside their own border. After more than 30 years in business, that prospect may be dimming.