Market success boots the bugbears away

The maker of Ugg footwear feels it has got the better of counterfeiters and is ready to expand in China

One of its biggest bugbears has been counterfeits, but the company that owns the Ugg footwear brand is still managing to find more than a comfortable footing in China.

While the counterfeit fleece-lined boots have undoubtedly dented the company's bottom line, demand for the real thing is helping it conquer heights that make its footwear seem more like sturdy mountain boots.

Deckers Outdoor Corp first dipped its toes into the Chinese market in a joint venture four years ago but is now going it alone with a direct subsidiary.

A joint venture with Stella International Holdings Ltd for sales and distribution of Ugg footwear in China ended in April, and the company set up the subsidiary in Beijing, with plans to open a satellite office in Shanghai this year.

"It was the right way for us to enter the market, with a partner that really understood the market," says Pete Worley, president of Deckers Asia Pacific, "but it was never a plan to be forever."

Pete Worley, president of Deckers Asia Pacific, sees the growing importance of the Chinese market. [Photo/China Daily]

The maker of fashion-oriented outdoor, athletic and casual products based in Coleta, California, felt it was time for it to have more control of the brand in the marketplace after it had found its feet in China.

In Shanghai, unveiling the new autumn collection said to have been inspired by New York, Worley says Deckers plans to have 20 stores in China by the end of this year, based on the current 13 stores.

"China contributes a very small percentage at the moment, but we are roughly doubling our business here year-on-year since we entered the market with one store in Beijing and another in Shanghai in the first year (2008).

"China has the potential to be the equal of our US business in terms of percentage of global business in the next five years."

Among the company's expansion plans, it will launch the Chinese version of its website to cash in on the increasing propensity of Chinese to buy online, and will introduce two other brands, Teva and Sanuk, to the market.

"Ugg is by far and away our most successful brand today, which represents 85 percent of our total global business that reached $1.38 billion in 2011," Worley says.

Before last year, Ugg contributed to as much as 88 percent of the company's turnover, he says.

However, both the Teva brand, which grew 22 percent last year, and Sanuk are beginning to show great power now, so it is time to introduce them to the Chinese market, he says.

The subsidiary is also working with the brand team in the global headquarters in California to create products specifically for China to take advantage of Chinese consumers' attraction to the brand.

Yet there still is that threat of counterfeiting. Worley says that as a result of aggressive legal action in the past couple of years, many counterfeiters have been put out of business.

In May, Deckers Outdoor Corp announced it had won two cases against 3,007 websites based in China selling counterfeit Ugg Australia products. An Illinois Federal court ordered a permanent injunction against the defendants and awarded Deckers a combined $686 million in damages.

Since last year, Deckers has filed six lawsuits that have resulted in the transfer of more than 6,000 domains and the freezing of $1 million in linked financial accounts.