The cotton incident continues to ferment. After H&M was exposed and issued a statement to boycott Xinjiang cotton products, many well-known foreign brands such as Nike, Adidas, GAP, and Uniqlo have also into it. The public opinion field is highly emotional, and so is the capital market.
Take sports brands as an example. On March 25, Li Ning’s stock price rose by more than 10%, and Anta Sports rose by nearly 9%. The gains of both companies are still continuing; while the stock prices of Nike and Adidas, which were deeply involved in the cotton incident, all fell. Domestic Nike supplier Shenzhou International Hong Kong stocks once fell by more than 5%, and Nike’s main cooperative distributor Taobao even fell by nearly 15%.
The sense of capital is always keen, but not all domestic sports brands are as enthusiastically sought after as Li Ning and Anta. Once upon a time, the domestic sports shoes and apparel market had set off a fierce wave of “domestic substitution”. “Jinjiang series” brands Anta, Guirenniao, Xtep, Xidelong, 361°, Delhui, etc. were all brand representatives in the wave, and they were prominent for a while.
Times have changed and after 20 years of dynamic competition, domestic sports brands have become increasingly polarized. Anta’s breakout and Guirenniao’s sinking together constitute a history of the ups and downs of the “Jinjiang style” sports brands.
The Ups and Downs of Jinjiang System
In 1979, Lin Tuqiu of Chendai Town, Jinjiang founded The Yangdai Shoe and Hat Factory (the predecessor of Crocodile Light) was established, which was the first shot at starting a business in the future “China’s Shoe Capital”. Since then, the operating model of “family joint production and handicraft workshops” has also become popular in Jinjiang. At that time, more than 80% of the world’s brand shoe production and trade were concentrated in Taiwan. Jinjiang and Putian took advantage of the east wind of industrial relocation of the shoemaking industry by virtue of their geographical location and labor force advantages.
Anta, Xtep, Hongxing Erke, 361°, Delhui and other well-known domestic sporting goods companies are all from Jinjiang, Fujian, so they are also collectively referred to as the Jinjiang system by the outside world. According to the official website of Jinjiang Municipal Government, the output value of Jinjiang City’s sports manufacturing industry in 2019 was 215.3 billion yuan, accounting for approximately 40% of the total output value of the domestic industry. The status of Jinjiang Group among domestic sports brands is evident.
In 1987, Ding Shizhong (currently chairman and CEO of Anta Group) came to Beijing with 10,000 yuan and 600 pairs of shoes. Successfully tested the waters with Xidan Shopping Mall. But when he saw that the shoes he brought could only sell for 20 yuan, while the same shoes could be sold for 100 yuan after being rebranded, Ding Shizhong realized the importance of establishing his own brand and returned to his hometown to start the business four years later. Got Anta. Xu Jingnan’s foundry also followed the same path. After being abandoned by Nike, Xu Jingnan recruited skilled workers and established “Fengdeng”, the predecessor of Peak.
In the 1990s, with the imitation and replication of product design and business models, the number of family-owned workshops in Chendai Village has reached four to five hundred. , mainly doing door-to-door orders for OEM processing and export. But at this time, the Jinjiang brand was still unable to compete with Li Ning, the leading domestic sports shoes and apparel company, until Anta signed Kong Linghui to build brand awareness and stand out from the crowd. Subsequently, hundreds of sports brands such as Xtep, Xidelong, 361°, and Delhui were born in Jinjiang, and celebrities such as Aaron Kwok, Nicholas Tse, and Jay Chou were invited to endorse them.
The Jinjiang model has given birth to many well-known domestic sports brands through celebrity endorsements, event sponsorships and advertising. Therefore, Jinjiang County was once known as the “Shoe Capital of China” “, CCTV5 was also nicknamed the “Jinjiang Channel” because of the large number of advertisements broadcast by Jinjiang-related companies. Around the 2008 Olympic Games, Chinese people’s demand for sporting goods reached its peak, and Jinjiang-based shoe companies were fortunate to reap early industry dividends. In 2005, Hongxing Erke was the first to be listed in Singapore. In 2007, Anta landed on the Hong Kong stock market. Sports brands such as Xtep, Peak, 361°, and Xidelong also followed suit and went public. The myth of the Jinjiang series was at its peak.
Under prosperity, crisis lurks. In 2012, Li Ning lost nearly 1.8 billion yuan, which kicked off the industry liquidation. As the big brother in the industry, Li-Ning took the lead in establishing a franchise marketing system across the country, focusing on the dealer model. This allowed the number of Li-Ning stores to grow rapidly from 2004 to 2010, reaching a peak of 8,000. Jinjiang-based shoe companies mostly imitate Li-Ning’s business model.
In the dealer model, the brand only needs to advertise well, and then sell the goods to dealers in batches. As long as dealers have demand, they will produce as much as they can. Domestic sports The brand’s inventory-to-sales ratio (that is, the ratio of inventory to sales) has reached a maximum of 10:1. As market demand decreased after the Olympics and distribution model feedback lagged behind, domestic sporting goods companies were still expanding blindly, causing the entire industry to be impacted by overcapacity, inventory backlogs and store closures. Among them, Li Ning’s performance has declined the most. Although it has survived and made a comeback based on its former size and brand reputation, other Jinjiang-based companies are not so lucky.
“The industry collapsed in 2012, and Jinjiang shoes can still be sold for three years after production was stopped.”
Facing the industry’s cold winter, Xidelong, Jinlaike and Delhui chose to directly transform into fashion. As a result, due to the failure of brand positioning, they were unable to compete with fast fashion brands such as ZARA and H&M. , aggravating the inventory crisis, but dragging itself down. In 2011, Hongxing Erke was suspended due to financial fraud, and Peak was delisted in 2016. Guirenniao and 361° were severely damaged, and Xtep did not complete inventory clearance until 2017.
In 2015, based on the acquisition of FILA, Anta proposed a “single focus, multi-brand, omni-channel” strategy, which not only improved The brand image also focuses on opening up the international market. In 2018, Anta acquired Amer Sports, a Finnish sports brand management company. At this time, Anta’s brands have formed three major brand business groups: professional sports, fashion sports and outdoor sports, and the multi-brand international pattern has begun to take shape.
However, not every brand can complete the transformation. Take Guirenniao as an example. It also adopted a diversified strategy and tried to build a sports empire. However, the results were very different from Anta.
After Guirenniao went public in 2014, it gradually revealed its ambitions for diversified expansion. In 2015, Guirenniao launched the “all-round sports” strategy, and from 2015 to 2017, it invested in Hupu, football agency BOY, Kangpaisi and Mingshoe Library, and acquired the license of AND1 brand in mainland China. While Guirenniao is busy with cross-border investments and acquisitions, the high-end and second- and third-tier markets have been completely divided by leading international and domestic sports brands. Guirenniao’s main sports shoes and apparel business is increasingly unsustainable.
Starting in 2017, Guirenniao’s performance turned from positive to negative, offline stores ushered in a wave of closures, and debts left over from diversified expansion are about to expire. In 2018, Guirenniao sold assets such as Hupu, Kangpaisi and Jie Zhixing, but it had missed the best opportunity to occupy the market, and it was difficult to turn the tide in the face of the decline in its main business.
Similarly choosing a multi-brand strategy, Anta counterattacked and became the number one in the domestic industry, while Guirenniao was heavily in debt and on the verge of restructuring. The reason is that Anta has stabilized the market position of its main brands in second- and third-tier cities, and has successfully entered the high-end market by acquiring international brands; while Guirenniao’s “all-round sports” strategy has not yet established a framework, and is facing a crisis in its main business. Difficult situation.
In March this year, Guirenniao issued an announcement announcing a public recruitment of investors for restructuring. If the recruitment fails, it will face the risk of bankruptcy and delisting. Guirenniao, once the “number one A-share sports brand”, had a market value of more than 40 billion yuan at its peak, but has now shrunk to less than 2 billion yuan.
According to Guireniao’s financial report, the net losses in 2018-2019 were 686 million yuan and 1.018 billion yuan respectively. The expected net loss in 2020 is 379 million yuan, and the net loss at the end of the year Assets are expected to be only about 31 million yuan. According to relevant regulations of the Shanghai Stock Exchange, Guirenniao is on the verge of delisting whether its net profit has failed to meet standards for three consecutive years or its market value has shrunk.
Guirenniao is not an isolated case. Its experience is the epitome of many domestic sports brands. Relying on the early OEM dividends, Jinjiang Group has risen rapidly. However, in the dynamic changes in the consumer market and competition landscape, only by constantly adapting to the trend can we achieve growth in the new stage.
In recent years, Xtep has maintained its brand popularity with entertainment star endorsements and program sponsorships. The consumer markets of 361° and Hongxing Erke are concentrated in third- and fourth-tier cities, while Peak has a strong presence in overseas markets. Outstanding share in the market. But so far, the leading brands in the domestic sports shoes and apparel market are Anta and Li-Ning, and the market value of other brands is less than a fraction of the two. However, new changes have emerged, and the story of “domestic substitution” is waiting to be continued.
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