Back in 2000, Erke was a little known mainland label attempting to establish a name in China’s sportswear market alongside heavyweights like Nike and Adidas.
Almost a decade on, and it is achieving wider brand recognition in China thanks to the help of an unlikely ally – North Korea.
The hermit kingdom has just qualified for its first World Cup since 1966 and Erke will be kitting the Koreans out.
“We chose the team because they play with real guts,” says a marketing chief at Hongxing, the parent company of Erke. He is more keen to focus on the North Korean sporting spirit. “Our move should not be tied up with politics,” he adds.
Since its sponsorship of North Korean teams began – it kitted out their Olympians too – Hongxing’s domestic presence has grown to nearly 3,800 retail outlets across China from about 100 in 2000.
With sportswear sales in China growing at 30% per year, there’s plenty of room for Erke to expand.
Benefitting from China’s growing middle class, the country’s sportswear industry is thriving. From 2002 to 2006, sales of athletic shoes and clothing in China doubled, according to market-research firm Euromonitor. The sportswear market is expected to grow to $7.2 billion this year, says Shanghai-based brand strategist ZOU Marketing.
Nike and Adidas are the top two sportswear retailers in the mainland with a combined 33.7% market share last year. Moreover, China is Nike’s second-largest market outside the US, with sales exceeding $1 billion last year. Adidas is on track to deliver €1 billion worth of sales in 2010.
Meanwhile, Li Ning, the biggest domestic brand, has won 11% share, followed by Anta with 8.6%. Both Li Ning and Anta are listed on the Hong Kong Stock Exchange.
“In the past decade, the sizzling growth of the mainland sportswear market has been driven by distribution channel development – expansion in the sales network. Now it’s about brand value,” says Zhang Zhiyong, chief executive of Li Ning.
361 Degrees International, one of mainland’s top five domestic retailers, seems to agree. The company this week raised $231 million in its initial public offering – selling stock to investors at HK$3.61, perhaps the first time in capital market history that a company’s stock price has matched its name. The firm, which listed in Hong Kong, is planning to spend about 40% of the proceeds to strengthen brand awareness.
Investors were attracted to the Fujian-based company’s brief but strong record.
Since its foundation in 2003, 361 has grown to become China’s third largest sportswear company in terms of retail stores, with 5,543 outlets as of the end of 2008.
Revenue growth has been particularly strong and for the 2009 fiscal year the company is expected to have profits of Rmb553 million ($80.8 million), increasing to Rmb721 million in 2010. The company hopes to add another 1,500 shops by the end of next year.
But competition for apparel sales is growing from retailers like Uniqlo, Zara and H&M in the biggest cities. So the sportswear specialists are already eyeing the less-developed second and third-tier cities for growth. Xtep, another local label, is planning to open 800 to 1,000 new stores in such cities. It will also sign up another 2,000 workers to man a new factory.
All told, it would seem China’s sportswear industry is enjoying an an aerobic era of growth.
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