China is set to overtake the US this year to become the world's largest retail market.
Whilst 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.
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 although international travel enabled by rising disposable incomes is opening the door for reliving outdoor activity experiences at home. Running and winter sports are the exciting growth areas in the region. 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 90,000m2 of slopes.
Western brands are certainly strong in China. Decathlon has capitalised on the opportunity, with 214 stores in China thriving due to their keenly priced products. Growing Chinese sports and outdoor retailer Sanfo has 39 stores in 16 cities and estimates that international brands (including Arc'teryx, The North Face, Crispi, Salomon, Garmin and Osprey) account for around 70% of their sales. It is too easy though 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 Toread and Camel are breaking through and share is growing.
Outdoor retailers and brands are right to see the success of western brands and the significant opportunity this presents in the Chinese market but the challenge lies 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.