The Key To Ding Shuibo'S Three Years Of XTEP'S Pformation Is "Seeing Is Believing."

"(some figures) seem to be down, but it is a superficial and short-term situation. After the action is completed, we think it is the last battle of pformation."

In March 2018, Ding Shuibo, chairman and chief executive officer of XTEP's board of directors, said at the office of the president of the 21 floor of XTEP building.

After a year, we saw Ding Shui Bo again in the same office.

XTEP just released its 2018 earnings report just a few days ago, and its revenue grew by 25% to 6 billion 383 million. This is the biggest growth rate of XTEP since 2011. The net profit of 657 million is the highest since 2013. The gross profit margin of 44.3% has reached a record high, with 6230 stores, compared with 2017's net growth of about 200 stores.

On the second day after the announcement, XTEP's shares rose 19.81%, hitting 6.45 Hong Kong dollars at the time, the highest price in history, and refreshing the highest historical price to 6.74 HK dollars for two consecutive days in March 22nd and 23.

In the past 3 months, XTEP's share price has risen by nearly 60%.

A year ago, we asked him, "what is the most painful part of pformation for you?"

"The key is the pformation of market awareness.

Hearing is false and seeing is believing. When they are seen by the outside world, they will understand and accept it.

A lot of things have to be done successfully to convince others, but the middle time period will be longer. "

Three years of decoration, retail Molding

Referring to the driving force for the obvious improvement in 2018, Ding Shuibo first mentioned the "three year pformation".

This is a reform plan which originated in 2015. It aims to preserve the fashion attributes while returning to sports and to pform the retail mode.

He likened the process to "home decoration".

If "return to the sports meet from the concert" is to create new faces and new signboards for XTEP, then the retail pformation is the process of practicing the inner strength.

The former focuses on the scenery at the stage, and the latter really tests the determination, assurance and ability of an enterprise to the market trend.

"Decoration" is simple, but from the past ten years of the inherent sales mode into a more consistent mode of consumption trends, it is by no means an overnight move. It is more realistic to face the pain and pressure.

2017 - the last year of three years of pformation, XTEP's revenue decreased by 5.2% to 5 billion 113 million 400 thousand yuan compared with the same period last year, net profit fell 22.7%, to 408 million 100 thousand yuan, net profit margin decreased 1.8 percentage points to 8%, and accounts receivable turnover days rose all the way, from 98 days in 2015 to 130 days at the end of 2017.

Inventory turnover days increased by 24 days to 75 days compared with the same period. The average turnover days of the average trade payables increased by 15 days to 122 days, the two were the highest since 2014, and the proportion of liabilities increased by 2.3 percentage points to 20.7%.

In order to maintain the new product style and brand image, XTEP spent 150 million at the end of 2017 to buy all the stock before 2015, which had no small impact on net profit in that year.

"When the pition is completely clear, there must be trade-offs."

In a 2018 interview with Ding Shuibo, he said to lazy bear sports, "we think a little less order will be more helpful to the back, and a slight decline is not the most important thing.

There are still some old goods in the shop, which are dragging our legs for our image and targets. As a whole, we can afford to buy over a hundred million stock. "

A year later, XTEP rebounded with its earnings growth of up to 25% in 2018.

XTEP's three year pformation idea stems from the major stock crisis that spread the sporting goods industry in 2012 and 2013.

In the past, when the goods were sold to the agent dealers, the business was completed and the dealers were busy opening up new stores. This mode was no longer able to adapt to the fast changing era of consumer demand.

"We find the whole model has problems, after all, it was the agent system."

Ding Shuibo said.

XTEP has been reducing its channel for five consecutive years since its 7510 peak in 2012.

The 500 reduction in 2017 was the largest in the past five years, which Ding Shuibo called "massive rectification".

The pformation from distribution to retail mode is the change of agent structure and proportion of direct business. It is also the process that the brand side goes directly to the front desk to communicate directly with consumers. They can clearly grasp the sales situation of goods and the purchase of consumers, monitor commodity and price to find the best sales combination, which makes single store sales figures and growth become an important index.

"As long as there are only a few agents, we need to target more than 6000 stores now.

Although their sales data upload coverage increased from 50% to more than 80% at the time, after all, there was a layer of separation between them, so the management and control at the bottom were still incomplete and clear.

Ding Shuibo said, "we looked at the sales revenue, the money back, the number of stores opened three big indicators, now become the new product sales rate, the new product sold out rate, the old and new product structure, discount."

At headquarters level, XTEP set up a new retail operation center and a big data center in 2017.

"Management can understand the daily running and stock of stores on mobile phones," Yang Lubin, chief financial officer of XTEP, said in his performance briefing in 2017. "We help agents to make orders, discount plans and design the most popular products."

This is a process from extensive to intensive farming.

In 2018, XTEP's same store sales grew at a double-digit rate, to some extent, demonstrating the effect of retail pformation.

In 2018, XTEP stores achieved a net growth of about 200, reaching 6230.

Although it is more prudent to open a store, there are more brands invested in a landmark store.

"The stores we open now are mainly in shopping centers and shoppingmall.

The area of the new shop must be increased by at least 50% than that of the closed shop. "

Ding Shuibo further explained, "the shop that might have been turned off is 80 square meters, and now it is 160 square meters.

Not only in terms of area, can the store efficiency of new stores be doubled. "

Renovation of existing stores is also a way to enhance customer experience.

According to figures released by Ding Shuibo, more than 70% of XTEP's stores have been renovated to match brand new brand and retail image.

According to the 2017 earnings report, XTEP's new or newly decorated 6S shop in the past 2 years has an average sales profit of more than 10% per square meter.

Speaking of retail, Ding Shuibo began to become excited. He sighed the mystery of retail, and could not help sharing many details with us, such as the difference between the ceiling of shopping mall and street shop.

More importantly, the flat pformation of the channel, which means better control and higher profit margins, is also the "darling of the industry" in the retail era.

In 2018, 60% of XTEP shops were directly run by exclusive distributor, which was less than 20% before 2015.

Compared with the more mainstream brands who are directly engaged in their own business, XTEP has put forward the concept of "exclusive distributor of direct agents". The former involves personnel, funds, and a drastic effort to mobilize the whole body to put forward higher requirements for the comprehensive strength and governance capability of the enterprise.

XTEP is seeking a balance between its historical legacy and the new market trend.

"I have been in this industry for 30 years, so there are many good agents in the industry and have very good cooperation with us.

We can strengthen the union, use our retail model to help them achieve the goal, while we are completely controlled by these stores, all the stores in the system control.

"They have their advantages, especially the local knowledge of market resources, such as they may be more familiar with the landlord, and their salesmen know the local customs, dialects, and so on," Ding Shuibo said.

In 2018, the days of accounts receivable and accounts payable days of XTEP were shortened by 25 days and 24 days respectively.

Running closed loop

Turning the first page of XTEP's earnings report, the first sentence is "XTEP will become the preferred brand of Chinese runners".

In the 11 floor of XTEP building, Guanyin Mountain, Xiamen, there is a closed runway encircling the whole layer. This is the location of XTEP running science laboratory. The runners from all over the country come here to take part in the laboratory data collection and test.

As Ding Shuibo said, XTEP needs to build a closed loop around running.

From the fashion movement, XTEP has been the main competition for differentiation, avoiding direct confrontation with Anta and 361 degree Jinjiang brand in sports field.

Along with running, comprehensive training and other sports in China's mass market, XTEP announced in 2015 the high-profile movement from fashion to professional sports, "from the concert back to the sports meet."

Running is considered to be the top priority of this "sports meet". "Running is too hot, and XTEP must seize this opportunity. We are willing to tie up with Chinese runners."

Under the strategic change, it is the overall adjustment and follow-up of running research and development, design, products, channels and marketing.

In 2015, XTEP established the shoe research and development innovation center, and invited the industry expert Zhang Dewen to lead nearly 40 XTEP research and development teams.

Running science laboratory is their most important work.

In the entire runway of the laboratory, it divided into five different runways, including professional track and field runway, ordinary plastic runway and cement runway, to simulate the running environment, and use advanced detection equipment to test the impact of different running shoes on runners, collect data and test running shoes performance.

In terms of marketing, XTEP has won the largest number of sports marathon sponsorships in China for many years. In 2018, it sponsored 43 marathons and running events.

On the day of the XTEP Running Strategy Conference held in March this year, "XTEP has become the most popular sports brand in China sponsoring the marathon" has appeared more than five times.

In 2018, XTEP spent 968 million on advertising and promotion, accounting for 15.2% of its revenue, an increase of 2.3 percentage points over 2017 and an increase of 330 million in absolute terms.

Among them, the promotion of running activities and XTEP running club expenses are two of the reason for this increase.

In this company, the running atmosphere is everywhere: the whole building on the 8 floor is a conference room named after the famous international marathon city and the landmark marathon city of China. The floor of the building is designed with the concept of runway, and the roadmap of the Boston marathon is printed on the table in the conference room of Boston.

What is more interesting and characteristic is that in the entire XTEP building, even the "men" and "women" signs at the front of each bathroom are the image of the runner running with their fist and arm swinging.

Unlike other domestic sports brands, XTEP has maintained a high share of footwear business over the years.

In 2018, XTEP footwear business accounted for 61.5%, which accounted for almost the same in Chinese sports brands. Meanwhile, Anta, Lining and 361 degree footwear accounted for 49%, 43.8% and 42.7% respectively.

Attention and investment brought huge rewards: according to XTEP's earnings report, a XTEP running shoes sales broke 1 million pairs in March 2018, and in 2018, it won the first place in Beijing, Shanghai, Guangzhou and Xiamen marathon domestic brands with 10-20% market share.

The professional sports products represented by running shoes have boosted the overall sales of XTEP.

Play a combined boxing

In the interview, Ding Shuibo often refers to the word "combination", which involves product mix, channel combination and brand combination. These are the main driving forces that he thinks XTEP will grow in the future.

Product mix is the combination of professional sports and fashion sports, and the combination of shoes and clothing products. "A consumer can only buy 1 or 1.5 pieces on average, but now an average person can buy 2 or more items, and they will mix them in the store instead of buying 1 pieces separately."

Ding Shuibo explained the direct effect of this combination, "the joint strength of the product is high, and your customer unit price will be high."

It may be the customer price of 300, and now it may change to 400, which will also affect many factors such as discount and sold out rate.

"Clothing business in the future should be promoted.

In fact, we were the first to make shoes. We used to run shoes factories. At the earliest, we didn't even have any clothes. With the adjustment of the collocation strategy that I just mentioned, the proportion of our clothing has increased a little in recent years.

Ding Shuibo said.

Anta and Lining's clothing revenue rose by 61.4% and 26.8% respectively in 2018 due to the fashion movement. The motive force of the former came from FILA, which benefited from the performance of "China Lining" in fashion week.

And XTEP has Nicholas Tse, Tian Jing, Jiro Wang, lohua seven sons and other resources. They hope to gain higher performance growth through the distribution of resources in fashion, fashion and culture.

In the first half of 2018, XTEP's clothing revenue grew by 24.1%, and its annual growth rate was as high as 44.7%.

At present, the proportion of shoes and garments of XTEP is 61.5% and 36.4% respectively, and the proportion of garments is 5 percentage points higher than that of 2017.

Ding Shuibo added with a smile. "The key is whether the whole can be improved, and the plate is bigger. That's the most important thing.

The ratio is not the most important, the total one hundred points, right? "

In addition to the "combination" of XTEP brand's own product line, Ding Shuibo is also looking outward to get the brand portfolio.

In March 4, 2019, XTEP announced the signing of an agreement with Wolverine, a joint venture partner. The two sides each paid an initial capital of 155 million yuan to develop, sell and distribute the footwear, clothing and accessories of Merrell (MAI LE) and Saucony (St. John's) brand in mainland China, Hongkong and Macao.

Anta owns FILA, Desanto, Kolon Sport and Sprandi, and Lining has Danskin, Lotto and OneWay after 360 degrees. XTEP has also stepped into the "multi brand" strategy.

For XTEP, after the completion of the joint venture, the positioning of high-end Saucony and Merrell, the brand, products, technology, supply chain, globalization and other advantages will be combined with XTEP's existing large retail network, sales channels, and rich sports marketing and advertising resources, not only can further enhance the professional, vertical and technical content of the running ecosystem, further go deep into the field of running shoes, get the world's top runner design technology and high-end sales channels and supply chain.

"We will continue to plough in the field of running and expand consumer groups in the future, so we will introduce high-end multi brands."

Ding Shuibo said, "you can see where we are heading."

He admitted that XTEP has been focusing on the opportunities of many brands in the past three years. For the number of targets, he used two times "countless" to describe, "we have been very cautious, have been looking at, have been looking for."

He explained the reasons for the final selection of Merrell and Saucony, "XTEP's center of gravity is running, we are now serving the public runner, with high-end brands coming in, which can cover different groups of people, and the area of target consumers will continue to widen."

"In fact, there are many similarities between Japan and Europe and America. They are very persistent in their ingenuity."

Ding Shuibo recalled that when he went to Tokyo last time and saw a fan shop open for 400 years, a noodle shop opened for more than 100 years on a bowl of noodles. The businessman from Jinjiang was very surprised. "How does it look like that? I don't know how they opened it."

He was generous with his appreciation of products and DNA under such ingenuity.

According to XTEP's plan, the next store's product sales will adopt a two pronged strategy. "Mai le and St. John's" in China's market positioning, we will focus on (price) 800 to 1000 yuan or more high-end classic products, is expected to bring the desired gross profit margin for the joint venture company.

At the same time, there will be 500-600 yuan pricing, the Chinese style and taste tailored style launched.

Judging from the existing resources, the choice of running brand is indeed consistent with XTEP.

While XTEP is marketing its own brand of running products, many high-end runners will also see it, but they are not the target audience of XTEP.

Once the audience coverage of the public and high-end, help to create synergy in marketing.

The biggest challenges may arise in channels.

The positioning of high-end international brands needs to match better quality channel resources. Currently, XTEP, which is mainly concentrated on three or four lines, is trying to make up for the short board in this respect, and they also need to prove their expansion ability in the channel to the market.

A multi brand incubation requires strength, capital, time and patience.

At this stage, the two brands of Merrell and Saucony are still in the stage of organization and R & D in China. The stores will not be seen until 2020.

Ding Shuibo used "raising" to describe the operation of many brands in the early two or three years. "Once a certain base is reached in the future, there will be leaping growth."

"We are going to push the market harder.

Meeting and catering to the market is a must for an enterprise.

Consumers are changing, the market is changing, and there are more middle income groups. Their demand is different now. "

Ding Shuibo said, "I remember correctly, ten or twenty years ago, a pair of shoes more than 100 yuan, but 20 years ago, the salary seems to be about one thousand yuan.

Although the price of a pair of shoes is now about 300 yuan, everyone's income has increased greatly. Buying a pair of shoes of 300 yuan is like eating a meal. Everyone's purchasing power is increasing.

The market situation is very good. "