361 Degrees is just the latest Chinese sports apparel company to hop aboard the country’s domestic basketball market.
The bus. The 公交车. For some, it is a staple of everyday transportation that allows one to get from Point A to Point B with a balanced combination of efficiency and thrif. For others, throwing down one kuai (or 40 fen if you have a Beijing transportation card) to ride a bus is a nightmare straight from the depths of hell. Because in China, nowhere epitomizes the phenomenon of “ren tai duo” (there are too many people) better than the country’s huge network of public buses that are packed shoulder to shoulder and chest to chest with people of all ages, heights and smells.
In China, too many people equals about 1.3 billion; a number that is roughly four times the population of the United States. Quick to point out this unavoidable fact of life, ren tai duo is a common statement that often precedes and/or ends most conversations about various issues in Chinese society.
Why do Chinese students study six to eight hours a day for four years straight in high school? Ren tai duo, there’s too much competition to get into college. Why does it take an hour to get from northeast fourth ring road to Guo Mao at 4pm on a Tuesday? Ren tai duo, too many people, too many cars. Why is there a one-child policy? In the eyes of the government, ren tai duo. (Interestingly, the problem afflicting the Chinese National Basketball Team is ren tai shao, not enough people.)
Ren tai duo has an obvious flipside though when you substitute ren (people) for xiaofeizhe (customers), which in turn is why almost every single industry in the world is trying to get a piece of the Chinese pie.
Sports apparel is one of those industries. Foreign companies like Nike and adidas have poured in heavy investments into the Middle Kingdom with the intention of putting their sneakers on the feet of China’s rapidly growing numbers of internationally aware, upper-class customers. Not content to let foreigners come into their country and corner their own market, Chinese companies like Li Ning, Anta, PEAK and more have emerged over the years in the hopes of selling their shoes at a lower cost to China’s many middle and lower tiered customers.
So far, the results have been mixed. For foreign companies, Nike chugs along virtually unimpeded as China’s top seller as it continues to pump out impressive numbers. adidas, who experienced a post-Olympics slowdown, has rebounded somewhat in 2011. For a while, Li Ning had been on the up as well, at one point even passing adidas as China’s second largest seller in 2009. Feeding off of the already high demand from the scores of people who live in China’s second and third tier cities, Anta and PEAK were on similar trajectories as well.
But over the last year, Chinese brands have experienced major declines as a result from increased competition and overexpansion. Li Ning’s downturn has been especially alarming, and experts think it could be a sign of things to come for Chinese brands in general.
Enter Nike. Perhaps spurred by the decline of Li Ning and other Chinese brands, the Portland-based giant is set on doubling its China sales by 2015“to reach a target of $4 billion annually,” according to Don Blair, chief financial officer and vice president, in an interview with the Wall Street Journal online.
As author Laurie Burkitt writes, that won’t be easy given that most Chinese are merely observers of sport and not participants. Creating a sports culture similar to ones in the West, where people play individual and team sports as part of their everyday routines, will be a challenge. But, Blair says that the brand will build off its already dominant hold Chinese basketball fans by pushing recreational sports like running and snowboarding to consumers.
Blair says Nike also plans to “take its gear into China’s smaller cities to sell sneakers and sweatbands to consumers who are just learning about the brand” as one way to boost sales.
Still, with the shadow of Nike hovering over dipping Chinese brands, Chinese shoe companies continue to try to get a piece of the action. Allured by the motto of ren tai duo, Fujian-based 361 Degrees is making a splash in the lucrative basketball sneaker market after having signed former PEAK endorser, Minnesota Timberwolves forward Kevin Love, to a shoe contract this summer. It’s the company’s first NBA endorser, joining the ranks of Li Ning, Anta, Lu You and the aforementioned PEAK as Chinese brands with NBA players on its roster.
361 Degrees delve into the world of basketball kicks serves as a reminder to the current realities of the Chinese market. The first of which is there’s still a ton of people in China who want to buy shoes. As Anil K. Gupta and Haiyan Wang write for Bloomsberg BusinessWeek, there’s still room for growth in China’s multi-segmented “large and very diverse customer base.” Even if companies like 361, Anta and PEAK are never able to appeal to China’s wealthiest customers, which only make up 2% of the population, there’s still a lot of potential with the other 98%.
However, that still doesn’t change the fact that there are a lot of companies trying to get into that 98%. The increased competition between domestic shoe brands has lead to confused customers who are finding it difficult to decipher each company’s target audience. The result is a consumer perceived blob of indistinguishable companies that are tough to separate from one another.
Our take: Nike’s success is going to depend largely on its success in changing the recreational sports culture of China. And seeing how one is almost non-existent in China right now (seriously, when have you ever seen a serious Chinese runner in Beijing or Shanghai), we think that’s going to be tough to do in four years. Still, Nike’s goal to double their sales is probably more bad than good for the Li Ning’s of the world. Up until now, Nike has been content to sell $200 shoes to China’s rich upper-class. If they can get affordable products into China’s smaller cities, consumers will be likely to choose the internationally known and highly reputable Nike over their generic Chinese counterparts.
In the meantime though, the bus that is sports apparel continues to get more and more crowded.
If you’re interested in seeing Love’s new kicks, 361 Degrees just released images of his new debut shoe, the Kevin Love 1. And if you’re interested in reading a review of that shoe, you’re going to want to click on over to Deadspin, who goes the extra one degree in delving into the brand’s overall slogan.