Will China’s “new retail” change sports apparel? It turns out it’s a really interesting question.
Sports apparel retail is people buying running shoes, Nike gear, yoga pants, sweatshirts and so on. At first glance it looks like pretty standard retail. Lots of stores, inventory management and marketing. So lots of opportunities for digitizing operations. But nothing terribly sexy.
But sports retail is also closely tied to sports entertainment. And this is where much of the branding and marketing activity happens. There is a reason why Adidas advertises on everything from weekly NBA games to the Olympics. And that’s interesting because entertainment is something digital does very well.
Sports apparel is also tied with activities. While it is just fashion for most customers, many customers are running, playing basketball, going to the gym and such. There is a natural tie between the activities and the products. There is a reason why sports apparel stores in China will have well-known runners working as sales people.
And there actually even a community and social networking aspect to this business. There are local running clubs. There are online discussion forums. People share updates of their marathon run in real-time. There are lots of local sports teams.
The more I think about sports retail the more I think there are a lot of interesting dynamics – and in areas where digital is particularly powerful.
So I was really pleased to get a call to visit the new Intersport and Tmall retail store in Beijing. It is new retail attempting to digitize and re-imagine sports retail. Very cool. What I learned from my visit in in these three articles.
This is my second article in a series on what I think is coming next in new retail. Some much of new retail turns into a conversation about supermarkets and convenience stores. That’s cool but is a lot more coming. And I am trying to get ahead of the curve a bit. My first article on this was on JD’s new project with Qumei Home Furnishings. That’s a pretty fascinating project. It turns out furniture retail also has lots of interesting dynamics as well (that article is here).
Ok. First some background on what has been happening with sports in China.
Basically Sports in China Has Been Evolving From Health and Fashion to Actual Exercise.
For the past 2-3 years, every big consumer survey in China (McKinsey, Mintel) has shown an increasing focus on healthier living. It is one of the biggest trends that cuts across virtually all China. And “healthier” means eating better and being more active. It also means an increased interest in sports and exercise. So there is a big, broad consumer tailwind in this area.
At the same time, there has also been a big top-down government push to develop the domestic sports industry. In 2014, the State Council issued a statement that sports should be a 1 trillion RMB industry by 2025. And in China, this sort of high-level announcement is basically like flashing the bat signal. It resulted in a stampede into sports and its related infrastructure. Note: anytime a big government objective enables real estate and infrastructure spending, things happen really fast. So we have seeing a ton of basketball courts and soccer pitches getting built in recent years.
And then around 2016, sports apparel started to become really popular with Chinese consumers. Billboards went up all over China, usually with sweaty and attractive models boxing and running. It was a real fashion fad for about 1-2 years. On the subway, I used to count how many people were wearing sneakers and/or sweatpants. It was typically 50% sneakers and 20-30% sweat pants.
This fashion fad led to big growth in the retail stores of Adidas and Nike. Everyone talks about Starbucks and Walmart but it was Adidas that surged to 9,000 stores in Greater China in 2018 – with plans to reach 12,000 by 2020. It was during this period that my favorite advertisement for consumer China came out. I just love his ad by Nike (Youtube video here).
So that was a really great situation for sports in China. Lots of bottoms up consumer enthusiasm. And some big top-down government support.
But there was a problem. Chinese consumers weren’t actually exercising.
Despite all the fashion and watching of sports online (China is the NBA’s #2 market), there were actually very few gyms in China. There wasn’t a lot of participation or exercise happening. And “healthy eating” didn’t actually mean eating less salt and fat – and losing weight. It actually meant eating safe food (i.e., foods that won’t make you or your family sick). Chinese consumers typically regard McDonalds and KFC as healthy food for this reason.
This situation finally started to change around 2017- 2018. Marathon running took off in China. There were suddenly +1,100 running races in China and more than five million runners. Gym memberships also began to grow rapidly. Although this is not quite what it seems. McKinsey & Co retail guru (and all-around cool guy) Daniel Zipser has fascinating data on how gym memberships in China tend to track social media usage. Going to the gym actually has a lot to do with posting photos of yourself at the gym (note: tourism has a similar phenomenon).
But it looks like sports are finally becoming a big thing in China. It went from a focus on health to fashion to actual participation.
Entering into this situation is Intersport GmbH, a Switzerland-based sports apparel retailer with approximately 5,500 stores (mostly in Europe). They sell sports apparel and equipment for men, women and children. And carry pretty great stuff for running, training, boxing, fitness, basketball and so on. And they carry most of the major brands, including Nike and Adidas.
This raises the question: How can such a company enter the China market today? Especially given the big lead by Nike, Adidas, Inta and Lining? That’s a great strategy question.
And to their credit, Intersport did something original. They partnered with Tmall-Alibaba to re-imagine sports retail and to (maybe) leapfrog the sports retail experience forward with new retail. That’s a good strategy. Their first initiative within this was the launch of a flagship new retail store in Beijing. In Part 2, I’ll detail my visit to the store.
That’s it for Part 1. Part 2 is here.
Thanks for reading. Cheers, jeff
- What’s Next in New Retail: My Visit to the Tmall – Intersport Store in China (Pt 1 of 3)
- How Intersport and Alibaba Are Digitizing Sports Apparel Retail in China (Pt 2 of 3)
- Alibaba and Intersport: Why New Retail Is a Big Deal in Sports Apparel in China (Pt 3 of 3)
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