China: More growth, more competition, more uncertainties

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The sixth edition of the Asia Outdoor trade show held in Nanjing in late July was definitely a success. It came along with two firsts: It was organized in combination with a new bicycle show called Asia Bike, and it had a new venue, the Nanjing International Exhibition Centre. In comparison with 2010, this year’s Asia Outdoor made similar progress to that of the Ispo show in Beijing, where the number of exhibitors and visitors also jumped thanks to a new fairground and a fast-growing domestic market.

Altogether, the number of trade visitors increased at Asia Outdoor from some 16,300 last year to 19,800 last month, excluding Asia Bike. The number of exhibitors went up by 26 percent to 452, according to the organizers. The premiere of the bike show had an additional 11,957 trade visitors welcomed by 138 brands. The public day that was held at the end of the show attracted some 2,800 people.

When we went there, we did not precisely measure the size of the five halls, but we felt that they were more or less the size of the big halls that host the Ispo fair at Messe München. In the very modern building of the fair, three halls were reserved for the outdoor core brands, one for the tent exhibition and one for the bicycle companies. The latter could have been filled with additional exhibitors, though.

The bicycle show itself was a really convincing premiere, featuring important names such as Shimano, Specialized, Skins, Schwalbe, Merida and many more.

Catering to the strong appeal that big and fast cars have on the Chinese, Specialized did not introduce its first line of McLaren bicycles in the U.S. or at the Eurobike show in Friedrichshafen, but it did so in Nanjing.

Then again, there is a discussion going on whether such early dates are appropriate for a cycle show, considering the fact that all the leading fairs in the U.S. and Europe, including the new Bike Expo in Munich, are going to be held later in the year from next year on.

The outdoor and the bike shows in Nanjing are both backed by Messe Friedrichshafen, which hosts the successful OutDoor and Eurobike shows in Europe. Knut Jaeger, the mastermind behind the shows in Nanjing, said he will stick to a doubled-up show at least until 2013. Jaeger is said to have excellent relations with the mayor of Nanjing, who will proudly host the Youth Olympic Games in his city in 2014. On that occasion, the town hall will provide a biking venue of some 10-12 kilometers in one of the municipal parks for trade visitors and the public.

Jessica Li, the woman behind Skins in China, decided to show at Asia Bike literally at the last second. She said she was happy with the results, but she still needs to validate the outcome since there are other bike shows in the country, notably in Shanghai.

The outdoor show itself was excellent, sporting loads of new exhibitors. It was interesting to see that a few well-known European brands that are not necessarily known for their excellence in the outdoor sector presented outdoor-oriented fashion collections for the Chinese market. One of them was Dunlop, another one was Lonsdale. Both of them belong to Sports Direct International, and both had huge stands, and Lonsdale staged fashion shows each day. Apparently, well-established European brands are seeking to give themselves a completely different image in emerging markets.

In addressing the growing outdoor market in China, more and more vendors are aiming to take a slice of a pie that appears to be very promising.

The size and the composition of the market remains a subject of debate. The latest figures, provided by the Asia Outdoor fair in cooperation with market researchers, vary slightly from those previously given by COCA, the national outdoor manufacturers’ association, which we published earlier this year. While COCA has suggested a figure of US$1.1 billion at retail for 2010, the operators of the Nanjing trade show offer an estimate of $1.08 billion. COCA estimates that the market grew by 47 percent at retail and by 20 percent at wholesale. The significant difference between the two figures indicates that there is an ongoing tremendous growth in the brands’ own retail operations.

The figures given by the organizers of the Nanjing trade show are nevertheless interesting because they distinguish between the core outdoor specialty retail market, mass merchants and other distribution channels. One issue is the fact that some general sports brands – and not just Dunlop and Lonsdale – offer some outdoor-related products, too. According to Asia Outdoor, these brands generate a turnover of somewhere between $420 million and $700 million at retail from the outdoor sector, which should be added to the total.

To be honest, these estimates are just that – estimations – and what the operators of the Nanjing trade show call “core market” in China is just a part of the total business. According to the organizers of Asia Outdoor, the total outdoor market may be worth between $2.55 billion and $2.83 billion at retail if we also include the general sports brands, the fashion sector and low- cost retailers.

According to this research, there is quite a difference in the handling of the major product categories between specialty outdoor retailers and the generalist sporting goods retailers: For core retailers, the breakdown is 48 percent apparel, 24 percent shoes, 17 percent backpacks and 11 percent other types of products. In the wider sporting goods retail channel, clothing accounts for 51 percent, shoes for 42 percent and the rest for 7 percent.

The busy outdoor show in Nanjing reflected the dynamics of the market. However, some strong outdoor brands stood away from the event and held sales meetings in hotels in the city. Some 20-30 brands including Arc’teryx and Vasque opted for this way of taking advantage of the event without showing at the venue.

On the other hand, a special sensation was the appearance of two important Japanese companies, Logos Corporation and Shimano, on the show floor. The Western reader should understand that the city of Nanjing symbolizes difficult Chinese-Japanese relations, because it was there that the Japanese committed horrible atrocities among Chinese civilians during World War II. It was, therefore, a historical step that Japanese companies would show up at a trade show in Nanjing.

Another interesting aspect of the event was the appearance of more and more companies from North America. In earlier years, while there was a good number of exhibitors from Europe, Ame- rican companies did not find their way to the banks of the Yangtze River. This year, new exhibitors included the young Obōz footwear brand (see separate article in this issue), or Eagle Creek, the travel brand within the mighty VF realm.

Heng Zhang, the chief of Sanfo, which is the leading outdoor retail chain in China, said that the show was excellent for specialty retailers because of a large offer of smaller brands. He was critical about the absence of some big brands that tend concen- trate on their own retail business.

In fact, as it gets more crowded and more mature, a crucial point in the development of the Chinese market may be the fate of the smaller domestic brands. It is safe to say that there are business opportunities for everybody now that the Chinese market is growing tremendously, but one local observer is betting that some Chinese outdoor brands will no longer exist in three years’ time. Echoing his observation, a representative of a European brand said he felt sorry for those Chinese OEM manufacturers that are now burning the money they made with their expertise in producing gear for Western companies by developing their own brands.

In the end, according to this theory, Chinese shoppers will probably prefer to go for Western brands or for a few domestic brands that have already reached critical mass (beyond €10 million a year, let’s say), such as Toread, Mobi Garden, KingCamp or Kailas.

Not everybody agrees with this theory. Knut Jaeger, the organizer of Asia Outdoor, who knows the market well, strongly opposes the idea that there might be little hope for the smaller local brands. He argues that the future of the Chinese market is going to be connected with the development of retailing in regions other than those of the relatively wealthy eastern pro- vinces. He predicts that retail in the western parts of the country will grow quickly, that the new small and medium-sized retailers in those regions will work more easily with small local brands than with the big brands, which tend to have more exclusive distribution policies, catering to a more affluent segment of the Chinese society.

According to Jaeger, some 325 foreign brands currently make 50-60 percent of the turnover in the outdoor sector, while an estimated 160 Chinese companies make the rest. Within two years, it may all be the other way round, Jaeger estimates.

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