Fitness craze of Chinese boosts US sports brand

Rising popularity of sports and physical exercise among health-conscious Chinese is encouraging Skechers, the California-headquartered sports brand that makes a variety of footwear, trainers, apparel and casual wear, to target $1.9 billion in retail sales revenue in the China market for 2018.

Skechers will increase its sales outlets to over 3,000 in 2018 from around 2,500 in 2017.

According to an internal Skechers report, global revenue was $4 billion in 2017, with the Chinese market making a significant contribution.

"The growth rate in the Chinese market in 2017 reached 50 percent year-on-year. It has outpaced the global growth rate, which was 16.9 percent," said Willie Tan, CEO of Skechers China. "Skechers has achieved double-digit growth in China for three years in a row."

Skechers started its business in China in 2007, but sales performance remained mediocre until 2015.

"Since entering the Chinese market, Skechers has witnessed a dramatic change in the Chinese consumption market," said Tan. "The year 2008 was the hardest time for most of the sports brands due to over-optimism about the Beijing Olympics' expected impact on sales. Many brands suffered inventory pressure till 2010."

Skechers saw a turnaround in fortunes in 2013. "Between slightly cheap domestic brands like Anta and expensive ones from abroad such as Nike and Adidas, there was a void to fill and it was the best shot for Skechers," said Megan Zhang, vice-president of marekting and store development of Skechers China.

After it established a connect with its customers, Skechers increased outlets at a steady pace to reach 2,500 by December last year, triple the 2015 number. In 2016, the company achieved 89 percent sales growth year-on-year.

"We are investing 1 billion yuan ($157 million) on the distribution centers in Jiangsu to make them semi-automated, to align with the e-commerce business," Tan said.

"Skechers is fortunate as we are in sports-related casual wear business. The business is seeing an uptrend in China on the back of a policy that pro-motes health and wellness. We will likely see big growth this year.

"The consumption market in sports is quite promising. The country is expected to see the sports industry expand to 3 trillion yuan, bringing much scope for the retail industry to grow.

"The shopping habit in China is evolving. Consumers are paying more attention to casual sports and a healthy lifestyle," he said.

He further said many foreign sports brands are according importance to the China market in their global strategy.

A report on the business climate conducted by the American Chamber of Commerce in China and Bain & Company, a global management consulting firm, said, "Good growth is predicted for 2018, driven by an expanding, consumption-minded Chinese middle-earning class."

Stephen Shih, a partner of Bain & Company's Shanghai office, said, "Sixty-nine percent of the companies in consumption area from the US and doing business in China think the growth in domestic consumption, rise of an increasingly sizable and affluent middle-earning class are important opportunities in China business."

Increasing customer demand for foreign brands and scope for business expansion are opportunities to drive further growth in the China market, Shih said.

Skecher's strategy reflects awareness of these opportunities, Tan said. "The Chinese market includes not only first-tier cities but lower-tier ones, and those cities are developing fast. Skechers is moving gradually to those places."

He said there are also challenges in the business. "It cost a lot to enter the Chinese market, so for a brand that wants to seek success in China, it needs to find a very clear market position and detailed market plans," he said.