Tuesday, October 04, 2016

2016: when China´s consumers went crazy for sports - Jeffrey Towson

Jeffrey Towson
Jeffrey Towson
Peking University business professor Jeffrey Towson notes at his LinkedIn page that many consumers at the Beijing subway have started to wear sports wear. Adidas is one of the winners in a convincing trend towards a healthier lifestyle, he argues. Although he expects this catches on among women more than smoking men.

Jeffrey Towson:
First: This is a sportswear fashion fad and it is great for companies like Adidas. 
The best symbol of this fad is Adidas AG, which is opening China stores at a frantic pace. The German sportswear company has about 9,000 China stores now. And they booked China revenue of $2.5 billion last year, up 18% from the previous year. 
In March 2016, Adidas announced plans to open 3,000 more China stores in the next five years. And they will double the number of China cities in which they operate. This makes them one of the most aggressive retailers in China right now. Nike and Under Amour are also popular foreign brands and are benefiting from this fad. 
However, it is worth remembering that just 2-3 years ago sportswear companies, particularly Li Ning and Anta, were struggling. Many were booking losses and accumulating inventory. Li Ning has now reported revenue up 13% year-on-year and their previous losses have turned to a profit (albeit a small one). 
Overall, this fad is good news. But one should be careful not to mistake it for a longer-term trend. Chinese consumers can be pretty fickle. Uniqlo (my favorite store in China) is currently selling some type of "sweat pants-meets-jeans" hybrid, which you're supposed to wear as regular clothes. It's weird. 
Second: The movement towards healthier living by Chinese consumers is a real long-term trend. But right now this could just be Chinese moms. 
The McKinsey 2016 China Consumer report had some nice numbers on the increasing focus on "healthy living" across China. Having interviewed +10,000 consumers in 44 cities, they found the middle class is focusing more on eating healthier and safer food, practicing preventive medicine and participating in sports. 
In the near-term, this trend is showing up as a decreased preference for Western fast food (bad for KFC), less drinking of soda (bad for Coke) and more foreign vitamins and milk powder (good for Nestle). Longer-term this should also lead to more exercise, more healthcare and premiums for quality goods. 
However, I suspect this trend today is still mostly about Chinese wives and moms. This is the group that cares most about health and safety - and they also control most of the household spending. It is worth keeping in mind that while only 2-3% of Chinese women smoke, +66% of Chinese men will still start smoking. Healthy living is probably more a female phenomenon overall.
More at Jeffrew Towson´s LinkedIn page.

Jeffrey Towson is a speaker at the China Speakers Bureau. Do you need him at your meeting or conference? Do get in touch or fill in our speakers´request form.

Are you looking for more strategy experts at the China Speakers Bureau? Do check out this list.
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