Hongxing Erke Expansion Speed Increase Secret Behind

"The next two years will be a rapid development period of Hongxing Erke. Our number of stores will expand from 4000 to 6000 now, and sales will also increase from about 2000000000 yuan to 5 billion yuan."

In May 29th, Wu Rongzhao, vice president of Hongxing Erke, said in an interview with reporters.

As China's first overseas listed sports brand, after the pains of "de Stocking" in 2009, Hongxing Erke is rearranging its sales network and developing it in a more prudent manner.

Hongxing Erke has been in business for ten years.

The turnover grew from the initial about 10000000 to 600 million yuan in 2005, and by 2008, the turnover had reached 2 billion 800 million yuan.

But in 2009, the company's sales volume was only 1 billion 999 million yuan, down 30.8% compared to the same period last year. The first quarter of this year continued to decline by 13.5%.

Hongxing Erke said in the earnings report that the decline in performance was due to the weakening of domestic market demand. In addition, the overstocking of dealers led to Hongxing Erke having to reduce the dealer's price of goods so that dealers could digest their inventory.

Wu Rongzhao also explained that in 2008, Hongxing Erke's shipment was expected to be too high, which directly led to a "de Stocking" process in 2009.

"Let's take an example: we sold 10 thousand pairs of sneakers to a dealer in 2008, but in fact the dealer only sold 8000 pairs of shoes, and then 2000 pairs of sneakers were left, but by 2009, the distributor may sell 10000 pairs of shoes, but in fact they only need to enter 8000 pairs of goods, because there were 2000 pairs of stock before."

Wu Rongzhao said.

But Wu believes that the most realistic data of the sales volume should be to see the amount of purchases that consumers should buy, rather than simply counting the shipments of companies, so in fact, sales of Hongxing Erke in 2009 had not been so large.

Slow growth of outlets is also considered an important reason for the decline in performance of Hongxing Erke.

According to the public information of Hongxing Erke, at the end of 2009, the company had about 4003 retail outlets, an increase of 179 compared with the previous year. This year, its shop opening speed has not improved significantly. In the first quarter, only 27 new stores were opened, and less than 2009 of the new stores in the whole year were much slower than other 1/6. outlets.

In response, Wu Rongzhao said that the company improved the existing retail outlets last year, improved its services and decoration, and closed some dissatisfied outlets according to the principle of survival of the fittest.

"The number of outlets increased slowly in terms of quantity, but the quality of single stores was improved."

At present, the domestic sports apparel market is fiercely competitive. Nike and Adidas occupy the first tier cities and are pushing forward to the two or three line market. Lining and Anta are unwilling to stay behind, as well as PEAK, XTEP and many other local brands.

Wu Rongzhao believes that the two or three line market with inherent advantages is the top priority of Hongxing Erke.

Hongxing Erke will continue to focus on the development of the two or three tier cities, and the two or three tier cities still have great room for development. The new more than 2000 outlets are also located in two or three tier cities.

For the two or three tier cities, Hongxing Erke is looking for the target of devouring: the two or three lines of foreign brands that have not yet entered the Chinese market, and the brands that have not yet entered the Chinese market but whose performance is not good enough to match the international market status of the Chinese market.

"We are actively looking for such acquisition opportunities."

Wu Yue.

But he also revealed that Hongxing Erke also needs to set up a large flagship store in Beijing, Shanghai and other big cities to expand and enhance its brand image.

"We have no obvious advantages in the first tier market, but we must see that publicity is more effective in the first tier cities."

Wu Rongzhao said.

Expansion is not just in China, but Wu Rongzhao wants to expand overseas.

At present, Hongxing Erke's overseas market accounts for about 10% of the total sales. This proportion ranks the top among the domestic sports brands. Its main overseas markets are concentrated in the Middle East, South America, Southeast Asia and Europe. Especially in the Middle East, Hongxing Erke ranks the top five in the local market share.