Nike has been in China for more than 40 years, and Adidas has been in the Chinese market for 25 years.
The two giants who have enjoyed smooth sailing have been comfortable in the Chinese market for many years, but now they seem to be gradually losing the hearts of young Chinese. In the “Top 5 equipment and sneakers for 2021” list previously released by Hupu, Li Ning occupied three of the top four places, and Nike was rarely squeezed out of the top five. Last August, the Wall Street Journal wrote an article reminding Adidas and Nike that they should be careful when facing rising local Chinese brands.
Nike and Adidas, two giants that have dominated the sportswear market for many years, are seeing their advantages eroded. According to data from British research company Euromonitor, in China’s sportswear market (excluding shoes) in 2020, Adidas and Nike occupy the top two positions with 19.5% and 12.8% respectively. The gap between Anta and them is narrowing, with a market share of 11.9% , while Li Ning was 8.2%.
Last year’s Double Eleven, as of 24:00 on November 11, the total transaction volume of Anta’s merchandise exceeded 4.65 billion yuan, a 61% increase from the previous year. It surpassed Nike for the first time and became the brand with the highest sales among sports products on the entire network. Adidas is far behind. Other domestic brands such as Li Ning and Xtep have also made rapid progress. According to Baidu data, the search attention of the Hongxing Erke brand increased by 367%.
As a listed company, Anta’s net profit exceeded that of Adidas in 2020. In the middle of last year, its market value also exceeded that of the old German sports giant for the first time.
Li-Ning Wade Way sneakers｜Source: Official Weibo
It’s not just Adidas and Nike that need to worry. Overseas fast-moving consumer clothing brands are also showing signs of decline.
Sales directly reflect trends. Uniqlo, which has dominated Tmall’s Double Eleven women’s clothing list for five consecutive years, was pushed to third place last year. There are also many overseas brands that are accelerating their withdrawal from the Chinese market due to acclimatization:
•Old Navy, a brand of Gap Group, has completely withdrawn from China after entering China for nearly 6 years, and Gap is also considering selling its Chinese business;
•Japanese women’s clothing brand Earth music & ecology withdraws from the Chinese market;
•British fashion brand Urban Outfitters and American Internet fashion brand Everlane announced the closure of their Tmall flagship stores;
•Zara parent company Inditex Group has closed all physical stores in China for its three brands: Bershka, Pull & Bear and Stradivarius.
“Off-site factors” have also made it more difficult for overseas brands to survive in China. Public opinion events and social trends of thought seem to be tilted against foreign brands.
Overseas brands and local brands have reached a watershed.
The troubles of Uniqlo and Zara
Not long ago, Fast Retailing Group, the parent company of Uniqlo, released its first quarter performance report for fiscal year 2022. The financial report disclosed that Uniqlo and sister brand GU recorded a collective decline in revenue and operating profits in Japan and Greater China, which they have long relied on. Among them, the performance of the mainland market was not disclosed separately, but the financial report mentioned that the regional markets of Hong Kong, China and Taiwan, China recorded substantial growth in revenue and profits, which means that the mainland market in China is showing the opposite trend.
Uniqlo has accelerated its efforts in the mainland market since 2013. Greater China has gradually grown into the overseas market that Uniqlo relies on most. The sudden decline caught it off guard. Even in the recent fiscal year 2021, Greater China has achieved the best sales volume in history, accounting for 30% of the overall revenue. Uniqlo attributed the decline to strict domestic epidemic prevention policies and a higher performance base in the previous year.
Uniqlo Beijing Sanlitun new store
H&M also suffered a decline in performance. The “Xinjiang cotton” incident directly put the brand on the opposite side of Chinese consumers.
In the second quarter of 2021, H&M’s revenue fell by 28%. In the third quarter, it plummeted by 40%. In that quarter, H&M did not announce specific revenue data in China, but the financial report still clearly mentioned that the Chinese market has fallen out of H&M’s top ten markets. In the third quarter of 2020, China was still H&M’s fourth largest market in the world.
H&M Group CEO Helmersson previously said: “As far as the Chinese market is concerned, the situation is still complicated.”
Although it has annoyed Chinese consumers, H&M has no intention of giving up this market. While the lingering heat of the “Xinjiang Cotton” incident has not subsided, the first Chinese offline stores of H&M Group’s high-end brands ARKET and & Other Stories will open in Beijing and Shanghai respectively. Currently, ARKET’s Tmall official flagship store has 356,000 fans, and & Other Stories has 1.07 million fans. The sales of both brands are average, with more than 200 people paying for the most single product.
ARKET, a high-end brand of H&M Group
Zara, another national fast-moving consumer goods brand, although its business has”” changes have also driven the model innovation of new consumer brands. The efficient C2M model has supported an increasingly fast-paced market, and brands have been able to continue trial and error iterations on a large number of new high-cost-effective products on the front end. After accurately accumulating user demand, we organize the supply chain to achieve accurate scheduling and rapid production using a small-order, quick-response model. Many products are designed and put on the shelves in as short as 7 days.
After years of dominance by foreign brands, new and old domestic brands are narrowing the gap in terms of supply chain, research and development, and branding. In addition, domestic consumers, especially the younger generation, have long ceased to “favor foreign things” and the environment that encourages the consumption of domestic products has given fertile ground for the growth of domestic brands. With the advent of the digital marketing era, domestic brands not only stand on the same starting line as foreign big names, but even have more obvious local advantages.
Rather than relying on “emotions”, domestic brands with increasing hard power have seized the core opportunities of continued rise. With the dual support of internal and external factors, the pattern of the Chinese market will continue to be rewritten.
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