PEAK Strategic Layout Of Rural Encircling The City &Nbsp; PE Institutions Optimistic

How to rush into the first tier cities with the second tier sports brand in the two or three tier cities?

The second tier sports brand, including Anta, 31st, XTEP and PEAK, can also be called "Jinjiang corps" (because its brands are starting and developing Yu Jinjiang). Jinjiang, as a famous sporting goods production base in the country, initially started as an OEM for Nike and Adidas.

Jinjiang Corps starts from the representative factories of Nike and Adidas, and gradually develops a complete industrial chain and develops its own brand. So far, Jinjiang shoe enterprises represented by Anta have landed in the capital market in accordance with the Lining mode, and PEAK has stepped into the Hongkong stock exchange with the support of the international PE institutions such as Sequoia Capital, Lenovo investment and Jiayin international. At the same time, its strategic layout also moved from the second tier cities to the first tier cities.

Rural Encircling Cities

"At the present level of science and technology, there is no difference between the brand name and the sports brand. The NBA players we signed are playing on our shoes, and we are narrowing the gap in the design," Xu Zhihua said.

The difference between domestic sports brand and foreign brands in terms of comfort and quality has been very small. The only difficulty is brand. Xu Zhihua said that domestic consumers still have superstitions about foreign brands, but fortunately this superstition is being gradually broken. "The first quarter of 2009, the domestic brand Lining has surpassed Adidas, and the era of Chinese brands is coming soon." Xu Zhihua said.

Since its inception, PEAK has been positioning itself in the brand strategy of high rising and high hitting, starting from CCTV and Hunan satellite TV, and carrying out comprehensive cooperation with NBA in endorsement. In marketing strategy, PEAK has adopted the strategy of "encircling the city by the countryside", first cut through the two or three line cities, then gradually infiltrated to the first tier cities, and gradually raised the unit price and partial product positioning.

In March 16, 2010, following the successful listing of Hongkong in September last year, Fujian sports PEAK released its 2009 annual report for the first time. The report shows that PEAK achieved sales of 3 billion 95 million yuan in 2009, an increase of 51.6% over the same period last year, and net profit increased by 67.1% to 628 million yuan.

Within a year, how did PEAK achieve a 67.1% increase in net profit? This is due to PEAK's strategy of infiltrating the two or three tier cities into the first tier cities. Unlike most of the moves to reduce profit margins, Xu Zhihua disclosed that the reason for PEAK's profit increase is mainly from the promotion of unit price, but the advantage of cost reduction is not obvious.

"From the current strategy, we still have much room for improvement in gross margin. In 2009, PEAK's gross profit margin increased 4.8% to 37.5% compared to the same period last year. This year, we will raise one to two points on this basis, and the gross profit margin will reach about 40%." Xu Zhihua said.

PEAK has also substantially increased its R & D efforts. Currently, it has three product design centers in the US, Beijing and Guangzhou. It may add another one in Korea, Japan or Italy. "R & D is the soul, and the contribution rate to sales promotion is very important." Xu Zhihua said. PEAK's investment in research and development has reached about 1% of the total investment, which refers to the cost of scientific research personnel.

Advanced city, go abroad again

Nike and Adidas are entrenched in the main cities of the first tier cities because of their brand advantages. PEAK and other Jinjiang Corps can only concentrate on the second tier cities, and then concentrate their strength on the first tier cities. At present, Anta and PEAK have already had some competitive brands competing in the first tier cities and international brands. At the same time, PEAK did not forget to play the marginal effect of sponsoring NBA and other international events, and actively enter the international market.

It is reported that PEAK's current overseas sales account for 1/10 of its total revenue, and there is still room for improvement. However, the domestic market has not yet stabilized, and its pace of overseas expansion can only be in the exploratory stage.

According to market research firm ZOU marketing, the annual compound growth rate of domestic basketball shoes from 2009 to 2013 is 15%. How to stand firmly in the increasingly competitive domestic market is also a challenge for PEAK. Its huge advertising and marketing expenses also bring pressure on its profit growth. In the domestic brand, its popularity is lower than Lining, Anta, KAPPA, XTEP and 331 degrees, ranking sixth. From the brand campaign, PEAK's combat mission is not easy, so the burden of its brand investment will not be eased soon.

According to the analysis of Hongkong Hui Ye securities, because the brand awareness is relatively low, it is necessary to give the distributor a higher discount, which will have an adverse effect on PEAK's profit margin. In addition, the expansion of franchise network will also increase its accounts receivable and constitute unfavorable factors for cash flow.

Despite all these disadvantages, PEAK has worked out a plan for 10000 stores. Xu Zhihua revealed that on the basis of the current more than 6200 stores, PEAK will achieve 10000 stores in three years. Lin Bilian, director of sales, said that in 2010, PEAK will set up about 1000 sales outlets and 100 basketball products stores. In addition, its market coverage has gradually expanded. Besides basketball, it has quietly entered a wider range of sports products, such as running shoes, tennis, football and so on.

To cope with the pressure of distributor discount, PEAK is trying to change its original wholesale sales mode for franchisees and distributors, and strengthen control over the retail terminal. "We need to extend the industrial chain to the retail terminal so that we can have more advantages in terms of bargaining power, risk tolerance, market flexibility and initiative." Xu Zhihua said.

But once the tentacles extend to the marketing line, it is a great challenge for PEAK's operation management and supply chain system. Although it has perfected the ERP system, PEAK's strategy is to gradually acquire and share some distributors to achieve the effect of integrated retail terminal.

But from the perspective of capital market performance, PEAK's strategic expansion has been initially recognized by the market. Compared with the issue price of HK $4.1 per share on the day of listing, PEAK's HK $6.36 share has risen by more than 50%.

However, according to Xu Zhihua, chief executive, "the current stock price does not fully reflect the value of rapid growth of the company". In an interview with our reporter, Xu revealed that the PE investment institutions, including the former ones, were optimistic about PEAK's rapid growth. As for the question of whether the PE organization will take the opportunity to cash in just after the selling period, Xu said, "we have just opened the board of directors, and several directors of Shen Napeng, Wu Zhanghong and Zhu Linan have expressed the value of PEAK, and will not consider quiting in the short term."

But Sequoia Capital and Lenovo investment have a high reputation in the investment sector, but their value-added services to PEAK are no more than that of CDH investment and Lining. Apart from Lining, Ding Hui also invested in and invested in BELLE international, a leisure apparel brand. It has abundant resources and experience in investment and operation in the field of clothing.

While Sequoia Capital and Lenovo investment continue to hold their shares, how much value-added services can be provided to PEAK at the business level, and whether PEAK can continue to help the transformation from Cinderella to princess in PEAK's strategy of "going to town" and "going abroad"?