Anta DTC only held up half of the sky

Image source @ Visual China

Wen | Xin Entropy, author | Gu Twenty, editor| Yi page

Jinjiang three-foot carp, Ben in the pond shop residence. The point is to become a dragon and return to the extraordinary fish. Some good people in the industry have adapted an oil poem by Li Bai to praise an achievement of Anta in the past three decades, which is not inappropriate.

In the early years, it first broke through the Jinjiang system and established a nationwide independent brand ANTA; then acquired foreign brands such as Philharre and Disanter to establish a diversified brand matrix; and finally the main brand ANTA made good achievements in the posture of a second venture and continued to this day.

It is not too much to describe the three growth curves that ANTA has developed in the past 30 years with "a dragon and a return of extraordinary fish". It was only when the carp jumped over the dragon gate that How Anta, who had just completed the transformation of the dragon, found his main bone in diversity became a new problem.

On the one hand, in the past decade, the brand Feile, which has always been the core power engine, is facing a slowdown; on the other hand, anta, the main brand that is ready to succeed Feile as a new engine of power, is still in the process of secondary entrepreneurial transformation. At present, for ANTA, which is staging an aerial relay engine replacement, the stalling caused by high growth rates may occur at any time.

The dragon head loses its main heart bone

Anta was so strong, so strong that it almost touched the ceiling.

According to the latest financial report, ANTA's total revenue in 2021 will reach 59.5 billion, which is about equal to 2.1 Li Ning, even if it is only one step away from Nike China's 1.9 billion yuan. This means that for anything now, it is obvious that there is no benchmark brand in the domestic market.

Losing the benchmark, on the one hand, Anta is very strong, on the other hand, Anta is also facing the dilemma of not having a main backbone.

As an enterprise founded in 1991, ANTA focused on the OEM production of sneakers in the early days, gradually established a national sales network on the basis of OEM business, and then produced and sold its own brand products, and thus survived the 1997 Southeast Asian financial crisis brought about by a sharp reduction in overseas OEM orders.

During this period, ANTA, which was based on service trade wholesale, although it went out of the Jinjiang system through the national sales network built by OEMs, the ANTA brand itself had little popularity. In the stage of competition to the national market, ANTA found the industry big brother Li Ning as a rival.

In terms of tactical execution, ANTA first signed Kong Linghui at the 2000 Sydney Olympic Games, and then fully sponsored the CBA League in 2004. Through the marketing investment of the sports resource side, catch up with Li Ning with the marketing model of "sports star + CCTV".

In the end, because of the different brand positioning of the two, the sinking market vacated by Li Ning, which mainly lays out the high-end market, was preempted under ANTA's close-fitting play of "rebuilding a sinking Li Ning", and at the same time, in 2007, ANTA also followed the completion of the listing in Hong Kong.

Anta, which completed a round of original accumulation, continued to adopt a follow-up strategy. At the end of 2008, Li Ning spent a huge amount of money to buy the brand manufacturing and agency rights of the Italian brand Letu in Chinese mainland for 20 years, followed by an ANTA in 2009 for HK$650 million from Belle's Chinese mainland business.

It is also mergers and acquisitions, unfortunately, in 2008, Li Ning had an inventory crisis because of optimistic expectations for the post-Olympic market, which led to a series of subsequent chain reactions, and the newly launched acquisition of diversified brands also fell into a loss deadlock. Anta, which followed Li Ning's "buying, buying and buying", benefited from its management capabilities to restore rapid growth in the Chinese market.

The above three stages also constitute Anta's three-decade plan. In the early stage, through its own brand, it broke through the Jinjiang system to the whole country; in the medium term, Li Ning aimed at the sinking market; in the later stage, it followed Li Ning's merger and acquisition strategy to open the era of Feile cash cattle.

In the three competitions, it can be seen that ANTA is stronger than operation and management, and weaker than market strategy innovation. For example, in the first decade, the sales network was built on the basis of OEM business and sold its own brands, and the core was to do strong management of the sales network and the strong business logic of doing business.

However, in terms of market strategy innovation, it mainly adopts the "benchmarking + following" Li Ning's playing style. When ANTA itself becomes the market boss, the first problem it faces is whether it will lose its main backbone after there is no industry boss benchmark.

Taking Anta's revenue surpassing Li Ning in 2012 to become the boss of domestic sports brands as an observation node, it can be found that after completing the anti-overtaking, ANTA's main market direction is still eating the old line of "benchmarking + following".

On the one hand, in terms of market strategy, it is still mainly based on international mergers and acquisitions, and carries out market incremental development. Through the acquisition of international sports giant Amer and other market segment brands, the brand diversification matrix was completed.

On the other hand, it is reflected in the financial side, for ANTA, which mainly promotes the multi-brand strategy, the growth before 2019 depends on the sinking of the main brand, and the growth after 2019 depends on Feile. The former comes from recreating a sinking Li Ning against the benchmark, and the latter comes from following Li Ning's international M&A strategy.

However, from 2012 to the present, the main brand ANTA's "sinking Li Ning" strategy has fallen into a growth bottleneck after reaching 10,000 stores in 2019 and entered a period of store streamlining. Feile, which has driven anta's high-speed growth after 2019, has also directly declined from a revenue growth rate of 51% in the first half of the year to 6.8% in the second half of the year in 2021, sliding into the speed reduction window.

After losing Li Ning, the main backbone of the benchmark, ANTA fell into not only the market strategy, the single growth momentum, but also the direction of the product system. Even if the annual R & D investment is much greater than Li Ning, but because of the loss of market direction, ANTA's product system is not solid.

According to the Guoyuan International Securities Research Report, after the two mid-tosoles technological innovations of Adidas and Nike in 2013 and 2017, Li Ning is the first local brand to catch up, through the sinking of "Li Ning" technology, to achieve mass product price increases, high-end product pricing and international brands successfully anchored. Anta will not release the "Nitrogen Technology" platform until 2021, with the help of Shuangao resources, and strive for specialization and high-end.

Obviously, it has been using the "benchmarking + following" strategy to surpass Li Ning on the throne of domestic sports brands, but ANTA, which has the market share of the king, still has not grown the main backbone of the king himself.

Therefore, in 2020, ANTA once again upgraded the benchmarking object, this time from the domestic brand to the international brand Nike, and comprehensively transformed the learning DTC model. It's just that ANTA's DTC seems to have learned a de-channel sales model, but it has not learned the consumer-centric DTC brand building.

DTC is only half learned

The core idea of DTC is to face consumers. As a brand model that originated in North America, it originally referred to an independent retailer born online, selling products directly to consumers, eliminating a series of links such as distributors, agents, and retailers.

Nowadays, DTC has become a synonym for sales channels, and a common type of DTC model is: de-channeling, removing middlemen to earn the difference.

For example, brands that claim to be THEC model in China often have the following characteristics: opening direct physical stores offline, building official mini programs online, developing official Apps, building official website sales, and opening brand flagship stores on e-commerce platforms.

Among them, the typical representative of the service trade sports brand is Nike, which officially took the DIRECT BUSINESS OF DTC as a corporate strategy in 2015, and upgraded to the CDO model on this basis in 2017, emphasizing closer to consumer demand.

In terms of domestic sports brands, ANTA announced in August 2020 that the main strategy for the DTC transformation of anTA main brand is to transform the stores operated by offline dealers into direct stores.

Through channel reform, the direct face of goods to consumers, shorten the transaction link, for the brand to get more profits, for consumers, can also get a lower purchase price. But the change of channels can not bring qualitative changes to the brand, let alone the luxury of detonating the entire brand.

For the DTC transformation, it usually includes two core contents, one is the channel structure change, that is, increasing the proportion of online channel sales and the number of offline direct stores.

The central idea of this process is to shorten the trading chain, improve efficiency and reduce prices at the same time. Not only DTC, but also in the domestic market, the rise of early e-commerce brands also emphasizes the removal of middlemen and the price difference.

In addition to the channel revolution, another core content of DTC is the digital transformation of brands, which is also the main reason why DTC brands are currently sought after by capital. Ding Hall, a partner at Zheluo Capital, said that the core of the DTC concept lies in starting from the user's point of view, truly solving the core differentiation of the brand, truly realizing the emotional connection of users, and forming brand loyalty.

Take the classic DTC brand Lululemon, for example, which was founded in 1998 26 years later than Nike. Compared with Nike's era development advantages and the number of stores directly operated in retail, lululemon is actively embracing the consumer-centric era and rapidly growing into the world's third-largest service trade sports brand in the form of DTC's digital brand.

The core of brand digital transformation is to quickly adjust products, marketing, and experience through direct contact with consumers through omni-channel outside the channel, so as to improve the sense of user participation in brand building. In an omni-channel multi-touch manner, quickly complete the penetration of target consumers and quickly iterate on products through trial and error, and constantly create a brand-exclusive "explosive SKU".

With the explosive strategy to drive the word-of-mouth effect, the communication method is to take the explosive products as the center, form the outward diffusion of the precision consumer group, bring more consumer groups to the DTC brand, and thus win the scale benefits. In contrast, ANTA's main brand communication method is still focused on sports endorsement, essentially from the sports exclusive resource side to complete the brand communication from top to bottom.

However, some industry observers said that the main reason why ANTA does not care about the transformation of communication is that the main object of the group's DTC transformation is the secondary entrepreneurship of its main brand, and the core lies in the concept of DTC transformation, recovering the stores in the hands of dealers and reorganizing.

According to the data of past annual reports, the scale of ANTA's main brand stores in 2018 has exceeded 10,000, and the number of Li Ning stores has reached about 7,000 in the same period. After that, in 2019, ANTA announced revenue for the first time according to the brand, and its main brand revenue in that year was 17.45 billion yuan, an increase of 21.8% year-on-year, while the revenue in 2020 was 15.749 billion yuan, down 9.7% year-on-year.

This means that the past way of driving the revenue growth of ANTA's main brand with the increase in the number of stores may have entered a bottleneck period after the number of stores reached the ceiling. According to the financial report, after the announcement of the DTC transformation in 2020, the number of ANTA stores began to enter a net closed state. It is expected to continue to maintain a net closure state in 2022. To a certain extent, it proves that the pseudo-concept of DTC transformation is to reclaim dealers' stores, and store streamlining may be the core of ANTA DTC transformation.

In terms of the unique explosive product creation of the digital transformation of the brand, ANTA has created a national flag series of clothing explosions with double Olympic resources, which is essentially an exclusive resource for eating or sports.

In terms of DTC's emphasis on the creation of exclusive explosive SKUs according to consumer demand insights, ANTA has previously launched a new brand series (ANTA PLUS), and wants to try to break through the growth bottleneck by improving the product structure and increasing the unit price, but the final effect and market feedback are more general.

On the one hand, the dtc pseudo-concept solves the ceiling of the main brand stores, on the other hand, the main growth engine Phillips has slowed down in recent years. Both power engines are facing an overhaul stage of Anta, whether they can find the direction to re-ignite the engine, may be the key to avoid falling into the growth rate stagnation trap because of the power vacuum.