Matthias Preussel, sales director for the Asia-Pacific region at Lowa, discussed the challenges and opportunities of marketing an outdoor brand in China during a “Market Introduction Seminar for China” that was held in Munich on the third day of the OutDoor by Ispo show early last month.
Working through a distributor, Lowa has had a presence in China since 2005. The brand exports its products to 65 markets worldwide, deriving about half of its total turnover of nearly €200 million from outside the core markets of Germany, Austria and Switzerland, where it controls the distribution.
According to Preussel’s estimate, the Chinese outdoor market reached the equivalent of $3.5 billion in retail sales in 2018, a small decrease after the saturation point brought on by the strong increases of the previous two years.
The figure corresponds more or less to an estimate given by Sanfo, China’s biggest outdoor retailer, at the same conference for the so-called core outdoor market. Quoting the annual report of COCA, the Chinese outdoor industry association, the chain’s founder and president, Heng Zhang, gave a figure of 24.98 billion yuan renminbi (€3.2bn-$3.6bn) for 2018. COCA had previously reported a figure of RMB 23.28 billion for the market in 2016.
Zhang said that sales of functional clothing are flattening in China, and that outdoor activities like backpacking and trekking are weakening, while skiing is on the rise. Another executive from Sanfo had said at a conference on China at the last Ispo Munich show that urban sports like fitness and cycling are now becoming more important, and that consumers are embracing fashion brands that use more functional fabrics.
About 775 outdoor brands sold their products in the Chinese market in 2018, said Preussel, and there were more before, according to former market research data. While 354 of them are domestic brands, 421 are foreign. The numbers given by COCA in the past had been higher.
In 2017, 15.4 percent of outdoor products were sold online, 22 percent at the wholesale level and 62.9 percent through the retail sales channel. Online sales are expected to increase further in 2020, leading to decreases in the other two channels.
While mono-brand stores can be used for flagship purposes, many of them are not profitable, Preussel noted, and their turnover often covers only the annual rent for the store. E-commerce and wholesale – through department stores and shopping malls, for example – can be used more effectively at the beginning of the market penetration process to gain brand awareness in the Chinese market.
Success in China also depends on the product. Adapting to different styles, different sizes and a different climates can help to gain ground in the Chinese market.
BC Sports, which distributes Lowa as well as Halti, Head, Leki, Alpina, Kjus, Northland, Level and Vauhti in China, with 12 branch offices in the country, also offered some insights into the Chinese outdoor market during the seminar.
According to BC Sports, the number of specialized outdoor retailers increased between 2012 and 2015. However, from 2015 to 2018, their number decreased to a current level of around 2,300.
Department stores are said to be suffering declining sales. There were still 7,800 department stores in China in 2014, but the figure was down to 5,700 in 2018. On the other hand, the number of shopping malls increased from 2,500 in 2011 to 5,200 in 2018.
Last but not least, vertical e-commerce retailers like Junpin.com as well as web stores supported by social media and based on WeChat, like Max and Outfit, are currently gaining market share. According to BC Sports, about 20,000 outdoor tour guides use WeChat for recommendations and consultancy.
Martin Kössler, an expert in the field who has been running a Chinese market penetration program in collaboration with Ispo since 2008, pointed out that Chinese businessmen look at things differently from their Western counterparts. Negotiations can be difficult. Trademark protection is a must. The logistics can be complicated, especially if the products sold in China are made in China. Marketing strategies can be expensive, requiring an external agency, but payment may be based on royalties.
Kössler, who has worked for Craft, Haglöfs, Thule and other brands in China, also pointed to the huge differences that exist among the different parts of China, with some 200 languages and dialects spoken and big differences in climate. People are also physically different: in the northern part of the country, they tend to wear bigger sizes and their feet require wider lasts than in the south.
Chinese customers use the internet a lot, although American portals like Facebook, Google, Twitter and Instagram are banned. Some buy products on REI’s website. Tmall, which now has a page in English for inquiries by foreign brands, and other marketplaces are used heavily. Kössler offers to work with a local partner for e-commerce, and to use events to drive traffic to brick-and-mortar stores.