Market Research: The Rise Of Chinese Brands Is Facing A New Round Of Transformation

"Now the first choice is the domestic brand. Now the domestic brand can be compared with the international famous brand in terms of design and quality. Moreover, many popular products have been robbed and can not be bought abroad, which proves that the choice of domestic products can not be wrong." A white-collar who often buys sports fashion brand will firmly support domestic products.

In fact, the consumption of domestic goods is far from the peak, especially the new cycle of the rise of young consumption, there is still a lot of space.

According to Aurora's "2021 new youth consumption Research Report on domestic products", in daily consumption, 70% of the post-90s and nearly 80% of the Post-00 consumers mainly buy domestic brands, and the new generation of consumers show a higher preference for domestic products.

And in the field of sports shoes and clothing performance is even worse. "There are mainly two aspects. Firstly, the global environmental impact and the support of domestic consumers for domestic products have made the market share of international brands in China decline significantly, such as the performance of ADI and Nike. Secondly, domestic brands actively internationalize, and the whole industrial chain has taken a higher-level leap." Industry insiders said.

We can see the trend of the market from the popularity of domestic brands in recent years. Recently, Li Ning released the annual report of fiscal year 2021, achieving double growth of revenue and profit. Other top domestic brands Anta and Tebu have also achieved high growth.

Some analysts said the growth may have reached a high level. But we think that if we take a longer time line, the transformation of this cycle is actually just beginning.

Domestic brand vs international brand: growth vs retrogression

On March 18, domestic sports brand Li Ning released its annual report in 2021. In 2021, the operating revenue of Li Ning Company will reach 22.572 billion yuan, a sharp increase of 56.1% over the same period of last year, and the gross profit will reach 11.969 billion yuan, which will increase by 68.7% compared with 7.094 billion yuan in 2020. The overall gross profit rate reached 53%, an increase of 3.9% over 2020.

(Li Ning's income in recent years)

If we look at its performance in the past five years, it has also achieved stable growth. Even under the premise of greater impact of the epidemic in 2020, Li Ning also maintained growth. By 2021, the growth rate will be obvious.

If we take a closer look, the overall retail flow has increased by 50% - 60%; The offline retail flow of new products increased by 60% - 70%, the sell out rate improved by 14% in 6 months, 13% in 3 months, and the net interest rate increased from 11.7% to 17.8%.

For 2022, the same performance is full of confidence. Zeng Huafeng, financial director of Li Ning company, said, "it is expected that the operating revenue of Li Ning Company will increase by 10% to 20% in 2022, and the net profit margin will be between 10% and 20%

It seems that Li Ning's "single brand, multi category, multi-channel" strategic layout is still positively recognized from the performance.

Of course, it's not just Li Ning. Similarly, other domestic sports brands in the head also have high growth performance.

Take the lead in sports brand. In the fourth quarter of 2021, Anta's main brands achieved a mid-term growth of 10% - 20% year-on-year, compared with the high-end growth of 10% - 20% in the fourth quarter of 2019; Among them, the number of high units of FILA increased by 35% - 40% compared with the fourth quarter of 2019; Other brands increased by 30% - 35%, 100% - 105% compared with the fourth quarter of 2019. It is estimated that the year-on-year income in 2021 will not be less than 35%, and the net profit attributable to the parent company (excluding the share of the joint venture company's loss) will not be less than 35% on a year-on-year basis.

The outstanding performance is also special step. In 2021, its revenue exceeded 10 billion yuan for the first time. The year-on-year increase was 22.5%. The gross profit margin of sales increased to 41.7%, with a year-on-year increase of 2.6 percentage points; The net profit margin reached 9.1%, up 2.8 percentage points year on year.

There are also 361 degrees, noble birds and so on. It can be said that domestic sports brands usher in a good opportunity, but international brands are in a continuous decline stage.

According to Adidas's performance report for fiscal year 2021, the sales volume of Adidas in Greater China region from the second quarter to the fourth quarter of last year were 1.003 billion euro, 1.155 billion euro and 1.037 billion euro respectively, which were 15.9%, 14.6% and 24.3% lower than those in 2020. In the same way, Nike's revenue from Greater China fell 20% in the second quarter.

In the market share of sportswear, Anta has surpassed Nike and Adidas by 22.3% since 2020.

　　 "There is a sharp contrast between the growth of domestic brands and the decline of sales of international brands in China. This is a new red profit brought by the market, which gives domestic sports brands a better space to explore. In terms of the current international situation, at least there will be a long-term impact. Domestic products are afraid to seize this wave of opportunities, which will increase the market share of domestic brands I will Some analysts said.

　　 According to the retail business review, the rise of Chinese brands is fundamentally strong enough.

　　 The investment in innovation, R & D and supply chain of domestic sports brands is the internal driving force of brand growth, which makes it accelerating its internationalization. Even some international brands began to appear, copying the design of domestic brands. In addition, the new retail and new marketing methods make it possible for domestic brands to overtake on corners.

For example, Li Ning's goal is to be a "muscle type" enterprise, that is, it can be efficient and constantly generate kinetic energy. It is also increasing investment in R & D and innovation.

From the design point of view, the creation of a lot of explosive products has caused the crazy scramble of consumers. For example, Li Ning and Baoyun building, the holy land of the Forbidden City, have joined hands to create cultural and creative commodities such as vests, down jackets and waistcoats. The theme party for the 30th anniversary of Li Ning brand with the theme of "30 years of success and silk road exploration" was staged in Dunhuang. Cross border cooperation with line friends, a global creative studio. It can be said that Li Ning is very fashionable now and has attracted a lot of young fans.

Another example is Anta's technology products. Anta Group's annual investment in technology R & D exceeds 5% of sales cost, and R & D investment increases from 308 million yuan in 2015 to 871 million yuan in 2020. At the same time, Anta plans to invest more than 4 billion yuan in research and development costs in the next five years to strengthen the core ability of scientific and technological innovation.

Of course, Chinese brands are also collectively facing a new round of transformation of the "big test.".

Rise of domestic brands vs challenges

From the market point of view, there is still a big outbreak point in the consumer market of domestic brands.

The main reason is the upgrading of sports consumption. Major events have directly led to the continuous expansion of sports enthusiasts. From 2019 to 2020, the number of people who often participate in sports in China will increase significantly, reaching 435 million in 2020, with a year-on-year increase of 6.62%. The proportion of young consumers aged 18-24 is getting higher and higher, and generation Z is becoming one of the main forces.

Consumption upgrading promotes the market cake to enlarge.

According to iimedia research, the retail sales of sportswear in China will reach 252.3 billion yuan in 2020, showing an upward trend. It is estimated that the retail sales of sportswear in China will reach 269.6 billion yuan in 2021, an increase of 6.9% compared with that in 2020.

　　 According to retail business review, there will be several key trends in the sportswear market.

　　 First, medium and high-end + fine differentiation. The market has entered the stage of technological competition and innovation competition.

First of all, the per capita disposable income and consumption expenditure of domestic residents have basically kept rising year by year. According to AI media data, it is estimated that by 2025, the GDP proportion of China's sports industry will double compared with that in 2020.

The medium and high-end market is growing fast. But it also tests the brand's technology and innovation ability. According to Bain consulting data, 60% of sports people will consider product function and 44% will consider intelligent technology when purchasing products, both of which are in the forefront of all considerations.

We found that the top brands in the industry are in the high-end layout of the DPRK, middle and high-end.

At the end of last year, Li Ning officially launched Li-Ning 1990, a new independent sports fashion brand. Its official positioning is that Li-Ning 1990 represents the classic style concept, is an "independent advanced sports fashion brand", and is also a new exploration in the sports market segmentation field. The price is 30% - 50% higher than China's Li Ning product line.

Xu Yanfang, general manager of Li Ning 1990 brand products, previously said that the styles of Li Ning 1990 were completely different, and the tailoring and design were more fashionable, emphasizing the overall style of wearing and creating a sense of quality and "advanced sense".

In order to strengthen the high-end attribute of this brand (sub brand), the action of Li Ning 1990 brand in combination with other international famous brands has continued. For example, it launched a co branded series with corthay; With Pierre Hardy, design director of herm è s shoes and high-end jewelry, Pierre Hardy, CO branded with Li-Ning 1990 x Pierre Hardy.

As for Anta, its high-end line has begun to form a high-end brand matrix with the successive acquisition of international brands. And these high-end layout, also contributed to higher revenue.

In particular, the successful operation of FILA has brought about high revenue growth for Anta and has become an engine of performance growth. In 2020, the revenue of FILA was 17.45 billion yuan, accounting for 49.1% of Anta's revenue, surpassing Anta's main brand for the first time. Anta also acquired Amer sports, an international sports giant with three famous brands of Archaeopteryx, Salomon and Wilson.

From the perspective of Anta's current brand layout, not only the high-end market, but also the high-end professional market has been basically completed.

For example, Anta, Li Ning, Tebu, hongxingerke, peak, etc. also aim at women's sports track.

In recent years, women's consumption power in the field of sports has continued to rise. According to the "2022 women's consumption trend report" released by Jingdong Institute of consumption and industrial development, women's purchase of sports services, swimming, ice sports, skiing and equestrian / folk sports increased significantly in 2021, The number of goods purchased for sports services increased by 8.4 times over the same period last year.

For example, Anta joined hands with freestyle skiing Winter Olympic champions Gu Ailing and Li Ning to sign up for actress Zhong Chuxi as the women's sports fashion ambassador and launched a series of women's fitness products. Peak online women's running series, women's comprehensive training series, women's fashion trend series.

In our opinion, in the middle and high-end market, the competition between international brands and domestic brands will gradually increase. In the past, ADI and Nike have strong advantages in the middle and high-end market, but the investment in domestic technology research and development will gradually narrow the gap. The segmentation market and professional market will be cut out from the mass sports consumption, such as the skiing sports driven by the Olympic Games, 300 million people go to the ice and snow, the market space is enlarged once, and the skiing equipment will have a great growth.

　　 Second, the combination of omni-channel and multi-mode is the key to open the new consumption mode.

According to AI media consulting data, the channels for consumers to obtain sports shoes and clothing information are mainly online. Among them, 47.7% of consumers will choose to obtain information from the official website of the brand, and 39.4% of the consumers will obtain information on the social platform. In terms of purchasing channels, offline physical stores and integrated e-commerce platforms are the two most popular ways of purchasing.

The new consumption mode is pushing back the transformation of B2C connection.

At present, the sports brands basically realize the omni channel layout of online and offline, and find new growth points of business.

For example, Li Ning began to accelerate the new retail business, integrate the advantages of online and offline platforms, and improve differentiated consumption interaction and service. As of December 31, 2021, there were 5935 outlets in China (excluding Li Ning young), a net increase of 132 compared with the end of the previous quarter and a net increase of 23 over the beginning of the year.

　　 Similarly, Li Ning's performance in e-commerce is gratifying. From the perspective of channels, in 2021, Li Ning's sales, Direct stores and e-commerce accounted for 48.1%, 22.2% and 28.4% respectively (the remaining 1.3% was sales in the international market), and the revenue increased by 56.7%, 53.5% and 58.4% respectively year-on-year.

Anta has also found a new model to help. For example, through full retail, store live broadcast, KOL grass planting and other ways to conduct drainage to improve the transaction rate.

Founder Securities recently released a research report on Anta sports, a listed company, which said: by 2025, Anta private domain will account for more than 20%, the number of effective members will reach 120 million, and the repurchase rate of members will be 40%. Its brand FILA is also expected to account for 40% of the online market in 2025.

We believe that the proportion of online business may reach 50% in the future. But how to realize the optimal solution of the combination is the real problem. If we want to predict which mode will be the next outbreak point, we think it may be the same city retail.

　　 Third, digital + DTC, the industry will enter the efficiency competition.

DTC has become a new strategy for domestic sports brands. In terms of mode, the transformation from "brand retailer" to "direct retailer" can directly face consumers, control consumption data and improve consumption experience.

Anta announced in August 2020 that it would transform its main brand into DTC and transform its stores (about 35% and nearly 3500 stores) operated by offline distributors into direct marketing mode. Anta plans to transform its entire DTC reform from the third quarter of 2020 to the first quarter of 2021.

Anta's DTC strategy is reflected in the semi annual report of 2021, About 60% of the 3500 stores under its channel reform plan are directly operated by Anta, and 40% are operated by franchisees in accordance with Anta's operating standards. DTC's business income was 3.703 billion yuan (accounting for 35%), and the gross profit rate increased by 11.2% compared with the same period in 2020. The average store efficiency of a single store is about 300000 yuan, which is higher than that of wholesale stores in the same period and the same period in 2019.

It also confirms the return of DTC.

Anta executives have said that the repurchase rate will rise to 75% in 2023. DTC accounts for 70% of the total, and the annual compound of online flow is 30%. But at present, we can see that the proportion of DTC has not increased so fast.

Of course, the chassis of DTC is digital. Digitalization will be the focus of the enterprise. First of all, it is still based on the starting point of consumption trend. In the future, C2B and c2m mode will be the dominant mode. Then enterprises must make fast decisions and respond to the feedback of consumers to adapt to the changes of the market. Of course, it is also reflected in the overall efficiency improvement of the front, middle and back end of the enterprise.

We think this is two-way. On the one hand, consumer information is quickly fed back to enterprises to make decisions. On the other hand, between the brand and the consumer, the formation of efficient product and service experience.

　　 The "movement tide of domestic products" is a bonus period for Anta, Li Ning and Tebu, but the market competition has also obviously begun to involute. Only by practicing the "internal skills" can we aim at a larger international market.