The Case Of Kappa, Which Was Once Brilliant And Now In Decline, Is Worth Pondering

In 2010, at its peak, kappa opened 3751 stores nationwide, with annual revenue of 4.246 billion and profit of 1.741 billion, which was called the most potential enterprise in China by Forbes.

Kappa at that time could be regarded as a weathervane of Chinese trend. Everyone called kappa back-to-back. If a child bought a back-to-back, it could show off to his partner for half a month. The street girl could cast envious eyes with her back-to-back clothes and a large gold chain.

Twelve years later, kappa has been basically forgotten. The post-80s and 90s generation talked about kappa and joked that the quality of clothes in those years was really good. What is kappa like after 95 and 00?

According to the report of the first half of fiscal year 2021 / 2022, the operating loss in the first half of the year reached 770 million. No detailed data was released in the third quarter, but it said that "the retail flow of the group's kappa brand stores (including kappa children's clothing business) recorded a mid-term decline of 10% - 20% year-on-year."

From the trend of China to a loss of more than 700 million in half a year, what has kappa experienced?

　　 1、 Foreign brands enter China It sold 4.2 billion in the eighth year

The birth of kappa is quite bloody.

In 1916, Italian Jew abramo Vitale was preparing to marry Catholic Antonia cesarina Mariani. His father objected. He inherited the family business and married this woman. Do you choose one? Is it important for a hot blooded youth to have a daughter-in-law?

After marriage, abramo Vitale and two friends founded the Torino sock factory, which was razed by the US Army in World War II. It has been in a tepid state since its reconstruction, but the brand name gradually evolved into kappa during this period.

In 1968, Maurizio Vitale, the newly appointed CEO, not only established the "back-to-back" brand pattern, but also launched the avant-garde advertisement at that time, which disgusted some conservative Italians, but got the crazy support of young people who were pursuing hippie culture.

This also shows that no matter what era, only by understanding the needs of consumer groups can we achieve success.

In the late 1970s, kappa launched sportswear. In the early 1980s, its us track and field team, sponsored by one million US dollars, won 16 gold medals at the Los Angeles Olympic Games. For the first time, kappa stepped into front of global consumers.

Later, kappa sponsored top international football clubs such as AC Milan, Juve and Barcelona. Kappa was deeply intertwined with popular sports.

In 2002, Li Ning company won the exclusive trademark right of kappa in the mainland of China and Macao, and invested in the establishment of Beijing Dongxiang Sports Development Co., Ltd., specializing in the operation of kappa. Chen Yihong, the general manager of Li Ning company, served as the chairman of Beijing trend, holding 20% of the shares.

Three years later, after internal adjustment of Li Ning company, Chen Yihong gave up the shares of Li Ning company, and bought 80% shares of Beijing trend held by Li Ning Company at the price of 44.814 million yuan. Beijing trend was renamed China trend. So far, Chen Yihong became the major shareholder of China trend.

In 2006, kappa's parent company basicnet was rumored to have a cash flow problem. Chen Yihong went to Italy and won the brand ownership of kappa in mainland China and Macao for $35 million.

Kappa, which has just entered the Chinese market, develops slowly. According to the financial report, the revenue of China trend in 2005 was 148 million, and the net profit was about 38 million. Some media said that the annual sales revenue of kappa was even less than that of Adidas and Nike in a year.

Since 2006, kappa's revenue has almost doubled, reaching 1.7 billion in 2007, 3.3 billion in 2008 and 4.2 billion in 2010.

Compared with other Chinese brands in the same period, although the revenue did not top the list, the profits were absolutely envied by other sports clothing brands. Li Ning's net profit to his mother was 1.1 billion, 361 degrees was about 1.2 billion, and Tebu was only more than 800 million, while the net profit of China trend was 1.46 billion.

In that year, the number of kappa stores in China reached 3751. Judging from the data, kappa operated by China trend reached its peak in the Chinese market.

　　 2、 The downward trend cannot be stopped Profit from investment

After 2010, the Olympic dividend disappeared and the consumption of sportswear industry declined as a whole. In the first half of 2012, the inventory of six Chinese sportswear brands, including Li Ning, Anta, Tebu and 361 degrees, reached 3.721 billion yuan. In the third quarter, the total inventory of 22 A-share clothing listed companies reached 38.2 billion yuan.

From 2011 to 2014, the brand of Li Ning suffered a trough. Since 2012, it has suffered losses for three consecutive years, with a total loss of more than 3 billion yuan.

Although China's trend is better than that of Li Ning, it is also bleak compared with 2010. From 2011 to 2013, the revenue was 2.7 billion, 1.8 billion and 1.4 billion, and the net profit attributable to the parent was 100 million, 180 million and 210 million.

No matter Anta or Li Ning, or Tebu and 361 degrees, after the end of the transition period, the revenue and market share of Anta, Li Ning, or Tebu and 361 degrees have been steadily improved. However, kappa, once a fashion brand, is not hot, and its revenue has not exceeded 2 billion. Guimu net has remained at 800-900 million in 2014-2017, dropped to more than 300 million from 2018 to 2020, and finally reached 1.811 billion in fiscal year 2020 / 2021, Among them, 2.115 billion are financial assets and investment income, so the clothing business does not make money? According to the official data, "the operating profit after excluding the investment division is RMB 59 million.".

According to the financial report for the half year of 2021-2022, as of September 30 last year, the revenue of China trend in the six months was 852 million, and the net profit attributable to the parent company was 748 million, including investment loss of 661 million.

From the investment distribution of China's trend, it involves stocks, private equity funds, stock funds, equity investment, bonds and other categories. Among them, the earliest investment started in 2011. According to its announcement, Mingtai, a wholly-owned subsidiary of the company, invested US $100 million to subscribe for Yunfeng fund, which indirectly realized the investment in Alibaba group.

China trend is known as the best investment enterprise in sports apparel brand. On the whole, the investment income fluctuates greatly, the revenue growth of clothing business is weak, and the profit is indescribable. Neither of the two main businesses can become the growth point.

In 2008, China trend acquired 91% of the shares of Japan's Phenix company for HK $38.438 million. Phenix not only owns the ownership of the kappa brand in the Japanese market, but also owns the world's top skiing brand Phenix. After more than ten years of operation, in 2020, China trend sold kappa's ownership in the Japanese market for us $13 million, and licensed the Phenix brand to other enterprises for a period of three years and three months.

To make matters worse, rumors about kappa counterfeits continue on the Internet, and it is the exclusive stores that sell fake goods. According to Fenghuang fashion report, in 2011, after the Olympic dividend disappeared, kappa closed its stores with low efficiency, while the remaining agents began to sell fake goods in order to survive, so kappa fake goods were rampant in the market.

According to tmall's complaint, last year, a consumer spent 190 yuan on a kappa store in pinduoduo to buy a pair of sports shoes, which were identified as fake on an identification platform.

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Kappa's life is not so good under China trend.

　 　3、 China's trend of falling from the altar What is missing?

From becoming the leading enterprise of Chinese sportswear brand in less than 8 years to the situation of weak revenue growth and declining profits, what happened to kappa under China trend?

Looking at the rise and fall of a brand history, mainly depends on brand positioning, products, channels, marketing and other factors.

　 A. gains and losses of positioning fashion

When it first entered the Chinese market, kappa was positioned as medium and high-end products. Compared with domestic brands Anta and Li Ning, it had a strong advantage. At that time, consumers could wear kappa clothes, which was worth showing off.

Nowadays, in order to occupy the market and take the popular route, the brand will no longer have an advantage when the sales volume rises, and consumers will not pay for the personality.

The brand positioning of Italy's kappa is professional sports, while the brand positioning of kappa operated by China trend is fashion sports. On the basis of sports, it has integrated the elements of fashion and leisure, such as more tight sportswear. Such brand positioning achieved great success at that time, but with the change of consumer demand, Chinese consumers' demand for sports brand, on the basis of fashion, paid more attention to sports specialty.

At the same time, both design and production of kappa in the Chinese market have been localized, which can be said to be a domestic brand. However, kappa has been promoting that it is an Italian brand. As a result, foreign brands do not have the tonality of foreign brands, and the trend of national trend has not caught up. Consumers often show that it is better to buy domestic brands than to buy kappa.

In the era of the rise of new domestic products, the market share of domestic brands is increasing, and the growth rate of foreign brands is slow. Foreign brands may not have advantages over domestic brands.

　　 B. Product differentiation and popularization

Early kappa can rise rapidly, and product design has played a decisive role. The back-to-back logo, highly attractive colors, and slim sportswear take into account both sports and leisure, leading in the product appearance.

The aesthetic is constantly changing with time, and a fresh one can't be eaten all over the sky. Kappa has not changed too much in its design, and it is difficult to conquer consumers only by big logo.

Li Ning combined with Chinese style, printed the four characters of Chinese Li Ning on clothes. From the aesthetic point of view, it is difficult to say who is good or who is bad. But for Chinese consumers, accustomed to the stereotyped English, the attraction of Chinese characters seems to be more attractive. Li Ning, who landed in New York Fashion Week, not only surprised the Chinese, but also the foreigners. Only by conforming to the aesthetics of the times can he conquer the current consumers.

The quality of products will also affect consumers' choice of brands. Ten years ago, kappa's quality belonged to the type that can't be worn out, Some netizens shared: "I remember a pair of board shoes bought by the exclusive store in 2009. The upper was made of cow hide. After three years of wearing, not only did the paint fall off, but also the upper and sole did not deform. Later, the sole broke. I went to the shoe repair shop to change the sole. I went to the shoe repair shop to pick up the shoes after several days, but the result was not changed. The old board said that it could not be replaced. The glue of the shoes was too good to pry off."

Now the quality of kappa's products can't be compared with that before. The consumer who can't repair the shoes said that he bought a new pair of shoes in the exclusive store, and it didn't take long to wear them. After buying several more pairs, they couldn't do it. I don't know how the quality is getting worse and worse.

　　 C. Confusion and delay of channels

For industrial enterprises, channels and products are equally important. Channels determine the sales volume of products to a certain extent.

Before 2010, the sales of Chinese sportswear brands were almost the same as the "big wholesale" mode, that is, after the brand side produces the products, they wholesale them to the distributors, and then the distributors sell them to the users. Most of the distributors and brands cooperate or join in. China trend has achieved great success in this way, as can be seen from the company with hundreds of people making 4.2 billion revenue.

But since 2011, after the Olympic dividend disappeared, the inventory increased, and the disadvantages of this "wholesale" mode appeared. Li Zhiqi, vice chairman of the Beijing Federation of industry and commerce, said: "brand manufacturers manufacture products, wholesale them to distributors, and then distributors sell them to consumers. But whether the products in this season are really the favorite of consumers, brand merchants and dealers are not clear.".

Li Ning, Anta, peak and other brands began to integrate the channel, through the way of equity participation and acquisition to control the channel, and transform the retail mode.

Kappa adopts the exclusive dealer policy, that is, there is only one dealer in a region. Kappa gives the dealers greater autonomy and encourages them to be bigger and stronger. The number of stores in a region is up to the dealers, which leads to the opening of stores when the business is good and closing when the business is bad.

When we realized the disadvantages of this policy, we had lost the opportunity to rearrange the offline channels. According to the financial report of the half year of 2021-2022, as of September 30, 2021, the total number of kappa stores was 1421, of which only 618 were self operated stores and the sales volume was only 413 million.

When kappa built its offline stores, it was affected by the epidemic and its offline business was greatly affected. It was only when kappa realized the importance of online channels that the word "online" was mentioned 14 times in the financial report of 2021-2022. At this time, Anta's online sales accounted for more than 30% of the total sales, and the online sales of Li Ning also accounted for nearly 30% of the total sales.

In the era of higher and higher consumption cognition and more and more picky consumers, only by understanding the consumption needs and habits of users can we keep up with the pace of consumers.

Those once brilliant but now declining enterprises are not abandoned by the times, but they fail to keep up with the times, not abandoned by consumers, but because you do not understand the needs of consumers.

Only by keeping pace with the times and keeping pace with consumers can we keep up with the times for a long time.