Look east

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China is set to overtake the US this year to become the world's largest retail market.

While this growing economy has been a focus for international brands for some time, the changing dynamics of the sports and outdoors sector in particular will lead to new opportunities and challenges for Western brands in the future.

Opportunity
China's 13th Five-Year Plan, released in 2016, outlines the government's aims to develop a domestic sports industry worth 5 trillion yuan ($780 billion) by 2025. Traditional outdoor activities such as hiking and camping are still nascent, but international travel enabled by rising disposable income is opening the door for more people to experience these activities. Running and winter sports are exciting growth areas in the region, and 400 marathons will be held this year up from 22 six years ago.

The 2022 Winter Olympics in Beijing is also driving a winter sports boom: Hebei province (population of 75 million) has set a target of involving 30 million people in winter sports by 2022 and a new indoor ski project Wintastar Shanghai will offer over 900,000 square feet of slopes.

Challenge
Western brands are certainly strong in China. The CEO of Skechers Asia recently declared that China was its fastest growing market globally, with an average annual increase of 73% over the last 10 years. Expanding Chinese sports and outdoor retailer Sanfo has 39 stores in 16 cities and estimates that international brands (including The North Face, Arc'teryx, Crispi, Salomon, Garmin and Osprey) account for around 70% of its sales. It is too easy, however, to assume that roads will be paved with gold for western brands: strong domestic players must not be ignored and present a challenge for market entry. Nike and Adidas dominate the sports footwear market, but third place player Anta recently took over European firm Amer Sports for €4.6 billion, which could mark an important shift in dynamics. In the outdoor space, brands such as Camel and Toread are breaking through and their shares are growing.

Outdoor retailers and brands should carefully watch the success of western brands and the significant opportunity this presents in the Chinese market, but also consider the challenge in competing with growing domestic players. The key to success will lie in identifying and focusing on growth activities and using heritage, quality and brand ambassadors to carve out expert status and a firm footing in the market.

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Dan Stolarski
Managing Director
Pragma Consulting