Text / Five Lines
Producer / Node Finance
In 2021, ANTA achieved eight consecutive years of growth, with revenue 2.2 times that of Li Ning and nearly 5 times that of Xtep. The operating performance of FILA, the international brand acquired by ANTA, is not inferior to that of local brands, and the effect of online strategies such as Li Ning's live marketing has emerged.
The three major brands are continuing to break through in the high-end market, however, FILA's growth has peaked, Li Ning's strategy has been improper, Xtep's single brand, and many problems such as R&D investment is much lower than Nike and Adi's "two xiongs", which have still become short boards with limited development.
In the future, how long can ANTA lead under the national tide, and is it like Li Ning after the Olympics and falling into Waterloo?
/ 01 /
Anta was crowned king and won Li Ning
In 2021, ANTA achieved surpassing Adidas, and it is expected to win Nike this year. After many years, local brand ANTA has regained the leading position of sports brands that have long been occupied by foreign countries. Before Anta, it was Li Ning who put on the crown. In less than 30 years, Chinese sports brands started from foundry imitation and finally completed transcendence.
2021 is a year of explosive growth for local sports brands. In 2021, ANTA's operating profit exceeded the mark of 10 billion yuan (a total of about 10.989 billion yuan) for the first time, with a growth rate of 20.1%. Li Ning's profit last year exceeded the sum of the previous three years, while Xtep entered the 10 billion club of domestic sports brands.
From the perspective of major financial indicators, the year-on-year growth rate of a number of ANTA data (revenue, net profit, gross profit margin) is lower than that of Li Ning, but the net amount still leaves Li Ning behind, and Xtep as a whole is far behind the first two.
Anta is rising at rocket speed and ushering in its own era. In 2021, ANTA's market share increased by 1 percentage point year-on-year to 16.2%, ranking first among local brands. At the same time, Li Ning's market share is only 8.2%. This figure compares with Li Ning's performance in the highlight moment many years ago, which shows anything more about Anta's current performance.
In 2008, at the peak of the development of Chinese sports brands driven by the Olympic Games, the total market size exceeded 100 billion (103.9 billion yuan). At that time, Li Ning, who was at the center of the stage, ranked first with a market share of 9% – a figure that was slightly higher than in 2021 – far ahead of ANTA (5.8%), Xtep (4%), and 361 degrees (3.7%). More than ten years later, Li Ning, Xtep, and 361 degrees of market share have basically remained in place, and only Anta has ridden the dust with a double-digit proportion.
Sporting events are the key moment for major brands to "brush the sense of existence". In 2008, Li Ning ate the "Olympic dividend", and after two years of boom, Li Ning once exceeded Adi's market share, second only to Nike, and today's anthata who took off with the "national tide" is similar to the situation of ANTA.
However, when the enthusiasm for the Olympic Games cooled, the decline in performance and the closure of stores became the common fate of a number of brands such as Li Ning. It was at that time that ANTA began to build a brand matrix and acquired the future "cash cow" FILA. Soon, "taking advantage of the void" surpassed Li Ning in one fell swoop and maintained its dominant position to this day.
When ANTA invaded Li Ning's territory, there was an embarrassing scene: "The Prince of Gymnastics" Li Ning wore an ANTA-sponsored sportswear to attend the event. Li Ning survived for 3 years and did not reverse the downward trend of performance until 2015.
Li Ning, a symbol of China's sportsmanship, naturally has brand appeal. Li Ning, who is "born noble", has maintained the position of domestic sports brand sales champion for a long time, but the marketing strategy is not much different from other local brands, and almost all of them copy the foreign model.
When foreign brands enter China, the limelight quickly overshadows domestic brands – local brands are weak and difficult to compete in terms of quality and brand power. In 2003, Nike stole the number one market share that Li Ning had maintained for nine years. In 2004, Adi became second, surpassing Li Ning.
In the Li Ning era, ANTA was unknown and was only one of the many second-tier brands of the "Jinjiang system". Anta founder Ding Shizhong, Xtep founder Ding Shuibo and 361 degree founder Ding Jiantong are all from The Ding clan of Jinjiang, Fujian. This is not entirely a coincidence, but a typical feature of the first generation of entrepreneurs in the early days of reform and opening up: the same hometown entered the same field to start a business.
The first batch of private clothing, shoes and hat processing plants started from OEM. After that, follow the big brother Li Ning to learn the foreign model. As a result, signing star athletes, sponsoring major events, and going on CCTV have become the standard for the marketing of these brands. Smashing heavy money on CCTV five sets, the figure is common in major events.
Ding Shuibo, the founder of Xtep, once said: "In the 2000 Sydney Olympic Games, when basically China's Olympic champions were all invited out of Fujian, or all these sporting goods in the country, we joked that even a diver who did not wear shoes was invited to be a spokesperson for sneakers." ”
Once Li Ning learned from foreign brands, but today's ANTA seems to have lost the situation of no one to learn.
/ 02 /
ANTA, LI Ning, Xtep
The reform of the "Big Three" has not stopped
ANTA, Li Ning, Xtep, the local head sports brand has undergone continuous iteration to form today's appearance.
Since 2012, ANTA has strategically emulated Li Ning and continued to shop stores offline to enter the sinking market, and after reaching 10,000 stores in 2019, this growth model gradually cannot get more spillover revenue. While SHRINKING stores, ANTA has launched a DTC (Direct to Consumer, direct-to-consumer) model in terms of channel reform.
DTC is the direction of the transformation trend of footwear brands in recent years, nike, Under Armour, Puma and so on have taken DTC as a strategic direction. With the DTC model, at the end of 2020, Anta's performance began to rebound. In 2021, dtc brought revenue reached 8.55 billion yuan, a year-on-year surge of 484.7%, accounting for 35.6% of the revenue in the ANTA brand, compared with only 9.3% in the previous year. The sharp increase in access has led to a rapid turn on ANTA, while the income generated by traditional wholesale and others has fallen from nearly 60% to 30% in 2020.
Before this round of DTC model reform, ANTA had carried out a round of retail strategic transformation. In the past, brands contacted consumers through agents, and in the retail era, brands began to be directly linked to consumers, and in 2013, ANTA's retail transformation strategy gradually got rid of the wholesale model and enhanced the brand's control over the downstream. More importantly, after many reforms, the distance between ANTA and consumers is getting closer, and it can make more flexible and adaptable decisions to the market environment.
FILA falls, DTC drives the main brand to the bottom, this is ANTA's 2021. DTC has led to the rapid growth of ANTA's main brand, but the "half of the country" sub-brand FILA has fallen into a slowdown in growth. FILA is one of ANTA's most important sources of revenue and profits. In addition to the ANTA main brand and FILA, the rest of the brand revenue accounted for only about 7%. FILA's growth stalled in 2021, causing ANTA's share price to continue to fall. With the support of DTC, an ANTA main brand has risen rapidly (a 52% year-on-year increase in 2021), and the revenue growth rate of the main brand has exceeded FILA for the first time.
Look at Li Ning's 2021. The impetus for revenue generation comes from channel transformation, where the focus is on storefront upgrades. Last year, Li Ning's "eight generations of image stores" accounted for more than 40%. Another big reason is driven by e-commerce live broadcasting, online direct sales increased by 60% to 70%, of which 58.4% are driven by live broadcast channels.
Nowadays, the extensive model of single, high-profile advertising has been gradually marginalized, and Li Ning has chosen a more online path to face Anta, the largest rival in China. After being surpassed by ANTA, Li Ning rose to catch up, until 2019, Li Ning's revenue growth and net profit growth surpassed ANTA, maintaining it to this day, but still being far away from ANTA in terms of net profit and market value.
Xtep, which ranks third, has become an important presence in the sinking market. In 2012, Xtep began to make efforts to lay out the domestic third- and fourth-tier cities, targeting the target group as small-town youth, and strongly competing for 20% of the market share of the "miscellaneous brand army" in low-tier cities. In the external competitive environment of the rapid rise of digitalization, Xtep is still slightly slow to exert its power online, and in 2019, Xtep opened a Tmall flagship store for the first time. Some data show that Xtep's online revenue is 2:8 compared to offline revenue. This is significantly different from the proportion of ANTA and Li Ning on the line.
Xtep firmly grasps the subdivision track of running shoes, and the sales performance of the main brand accounts for nearly 90% of the revenue. For a long time, it has maintained a relatively steady pace of growth, such as in the five years from 2008 to 2012, in the "Olympic cycle" at that time, it became the only brand that did not experience negative growth. A common challenge in the apparel industry is the matching efficiency between inventory and production. In terms of profitability, taking inventory efficiency as an example, Xtep belongs to the middle of the industry. In 2021, Xtep's inventory efficiency is 77 days. Anta's average inventory turnover days are 127 days, while Li Ning's lowest, with an average inventory turnover days of only 54 days.
/ 03 /
After the "national tide wind"
What needs to be done to boost the market?
Products in the apparel industry should take into account both fashion and functionality. We look at the coordinates of the three major brands based on these two criteria.
Functionality refers to the ability of the product itself to meet the basic needs of consumers. Qian Wei, co-CEO of Li Ning Group, said, "Under the premise of a clear investment plan, there is no upper limit to the R&D budget of Li Ning Group, and it is dare to approve as much as it wants." Li Ning boasted about Haikou's support for R&D and innovation, but what about the facts?
Several major domestic brands account for less than 3% of R&D investment, and ANTA and Li Ning have a downward trend. This level is a low level compared with Adidas and Nike. The latter's R& D expenditure accounts for nearly 10%, maintaining more than 7% all year round. Nike has the famous Flywire flying wire technology, Fliknit upper technology, Adi has Boost technology, etc., but domestic brands basically do not have decent technology to get their hands on.
Lack of functionality, fashion has become the "traffic password" mastered by domestic brands. Whether it is the current national tide, the Olympic Games and major events. Grasping the fashion trend will indeed win important development opportunities. It has to be mentioned that the foreign brands affected in the "Xinjiang Cotton" incident are typical counterexamples.
In 2021, the wind of the national tide is flourishing, from the Palace Museum Series of beauty to Li Ning, Anta and other overseas fashion weeks. Anta's high growth is comparable to Li Ning's heyday in 2008. Last year, Li Ning's gross profit margin exceeded 50% for the first time, setting a record. In the future, with the improvement of national self-esteem of Chinese people, local brands will seize the "national tide" fashion trend and still have room for advancement. However, making up for the shortcomings of research and development is the road that must be taken in the future.
From the perspective of the prospects of the entire future market, the three major brands are still worthy of expectations from the outside world. Brands have also sent positive signals. According to Bloomberg database, the current domestic sports shoes and apparel market size of about 350 billion yuan, the growth rate in the past few years reached double digits, much higher than the average growth rate of the industry.
The trough performance of foreign Adi and Nike in the Chinese market has also bought time for local companies. Nike's revenue in the third quarter of last year, excluding the impact of the exchange rate, increased by only 1% year-on-year, the region with the lowest increase; Adi's revenue in The fourth quarter of Greater China fell by 24% year-on-year.
Between foreign brands and local brands, it gives the market more possibilities, especially the opportunity of the mid-to-high-end blank market.
Over the past few years, ANTA has explored the mid-to-high-end market with the acquisition of international sports brands. Multi-brand operation has become a universal playing method between ANTA, Li Ning and Xtep, and ANTA and sub-brand FILA are typical cases. Xtep began to try to acquire international brands in 2019, but it was "more cautious" in its approach. Xtep's concern is not unreasonable, although multi-brand increases the possibility of stratification into consumers, but the growth of the brand will expose some obvious problems - the formation of brand recognition between the two subordinate brands.
Li Ning once relied on the national tide "China Li Ning" to turn around, but the brand segmentation caused confusion among users at the cognitive level. Most of Li Ning's products sell at low-end prices, but "China Li Ning" sells high-end prices, which is easy for consumers to confuse the overall positioning of the brand. This problem also exists with FILA and anTA's main brands. FiLA's weakness lies in the fact that it is difficult to break through as an international brand in the "national tide" heat, and many consumers regard it as a foreign brand.
Regarding the next step, the growth rate of an Anta sub-brand FILA this year, some professionals gave 15% expectations. Xtep expects the main brand revenue to reach RMB20 billion by 2025, with a compound annual growth rate of more than 23%, and the new brand expects to reach 4 billion yuan in 2025, with a compound annual growth rate of more than 30%.
In 1979, Italian fashion designer Pierre Cardin and 12 blonde French girls boarded the Palace of National Culture in Beijing and opened the first fashion show in New China, which opened the eyes of the Chinese people to fashion fashion. In a few decades, will Chinese consumers be able to lock in local brands steadily? Anta, Li Ning, and Xtep will give the answer.
Node Finance Statement: The content of the article is for reference only, the information in the article or the opinions expressed do not constitute any investment advice, and Node Finance does not assume any responsibility for any action taken as a result of using this article.