2016: when China´s consumers went crazy for sports - 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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Li Ning falling from favor - Shaun Rein

Shaun Rein

Chinese sports wear brand Li Ning not only saw its shares tumble, but has lost its position as erstwhile favorite. Business analyst Shaun Rein is not very hopeful for its recovery in the short term, and expects an upsurge not before 2015 for the sport apparel sector as a whole, he tells Reuters. 

Reuters:

China's economic slowdown has resulted in inflated stock levels and depressed earnings for retailers including local and foreign sportswear players - a sharp reversal of fortune after an expansion blitz that followed the 2008 Beijing Olympics.

"I am very bearish and very gloomy on the sports apparel sector in 2013 in China," said Shaun Rein, managing director at China Market Research Group. "It's going to be 2015 before we can see any kind of recovery."... 

"[Li Ning's] market share is collapsing in China," China Market Research Group's Rein said, adding that Li Ning was losing out to Nike Inc and would also cede market share to 361 and Xtep. "They no longer look (likely) to become a global player because if they don't make changes, in a year or two they won't even be a player in China." 

The Li family currently holds 25.23 percent of the company, while TPG and GIC each own about 5 percent with the ability to raise that to a combined holding of about 20 percent over the next five years by converting bonds into shares. " 

After TPG invested in it, I said they have a 3 to 6-month time frame to show the market they are changing things, and they haven't changed it," Rein said. "I don't think TPG is as good as they think they are at managing consumer brands."

More in Reuters

Shaun Rein 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.

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Tough times for sport apparels - Shaun Rein

Shaun Rein

The world might still be watching the exciting London 2012 Olympic games, in China sports apparels, winners four years ago have a hard time, compared to the rest of the world, explains business analyst Shaun Rein in CNBC. CNBC:

“I’m very negative on sports apparels over the next six to 12 months. The sector is going to get hard hit as Chinese consumers cut back on apparels and spend more on food and beverage,” said Shaun Rein, Managing Director at China Market Research Group and author of “The End of Cheap China.” 

“People are still a bit worn out from the Olympics in China four years ago. Chinese sportswear companies expanded too fast and then discounted heavily,” he added.

Li Ning is especially hard hit:

“Local brands such as Li Ning are mid-level brands that people tend to cut back on when the economy slows,” Rein said. 

In order to get back into the game over the long-term, a strategy change is required from China’s sportswear makers, analysts said... 

Li Ning, which is backed by U.S. private equity fund TPG, last month replaced its CEO and said it plans to cut back on new store openings. 

“The Li Ning brand does have resonance but the company needs to fix its inventory management, supply chain and stores - it has too many stores,” said Rein at China Market Research Group. 

Li Ning had 8,255 stores at the end of 2011, compared with about Nike's 7,500 outlets in China.

More in CNBC. Shaun Rein 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.

Li Ning: a winner in sports apparel - Shaun Rein

Image by cafemama via Flickr

Despite disappointing sales figures in the short term, Shaun Rein explains at CNBC why China's sport apparel firm Li Ning is going to be a winner - together with Nike - in this industry. Li Ning is all set for a long-term success, he claims.

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Shaun Rein is a speaker at the China Speakers Bureau. When you need his insights at your meeting or conference, do get in touch.

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