China’s sportswear market is one of the largest and fastest-growing in the world. More and more people pursuing active lifestyles, increasing sports participation and the popularity of sportswear in fashion are the main trends shaping the industry.
- China’s sportswear market is expected to grow at an annual average rate of 11% in the five years through 2022.
- A large millennial population, government initiatives to promote fitness and sports participation and the organization of large sports events are among the drivers that are sustaining the growth of sportwear in China.
- International sportwear companies Nike and Adidas led the market in 2017. Domestic firm Anta Sports was the third-largest company in terms of revenue share in 2017 and is working hard to catch up with its international competitors.
The sportswear market in China is one of the largest and fastest-growing in the world, and is driven by several factors, including the presence of a large millennial population, an increase in active lifestyles and sports participation among the population, and the popularity of sportswear as an extension of casualwear in fashion, as epitomized by athleisure.
This report, which is part of our Category Outlook series that reviews the prospects for specific markets, gives an overview of China’s sportswear market and its growth prospects. It highlights the main drivers contributing to the dynamism of the industry and illustrates the competitive environment as well as the strategies that the top-three industry players in China—Nike, Adidas and Anta Sports—have been pursuing in the market.
The China Sportswear Market: A Large and Fast-Growing Category
China’s sportswear market grew 12% to ¥212.1 billion ($31.4 billion) in 2017, making it the second-largest sportswear market globally after the US, according to Euromonitor International. The sportswear industry in China is expected to maintain its momentum, with an average annual rate of 11% growth in the five-year period through 2022, according to our analysis of Euromonitor International data shown in Figure 1.
Two main trends have been contributing to the dynamism of the market: an increasing number of consumers pursuing active lifestyles and participating in sports, and the popularity of sportswear as an extension of casualwear in fashion, as epitomized by athleisure.
The widespread use of social media and mobile technology has contributed to the growth of the sportswear sector in China by encouraging participation in fitness activities:
- Consumers use social media such as WeChat and Weibo to post snapshots of themselves working out at the gym or of their athleisure outfit.
- Chinese fitness app Keep reached 100 million registered users in August 2017.
- Fitness key opinion leaders (KOLs) on platforms such as Weibo and WeChat have thousands of followers and are a powerful marketing tool for companies.
As an example, Canadian sportswear company Lululemon has been using KOLs at events to promote yoga participation, such as Unroll China 2017—a large gathering in Beijing that the company organized in June 2017—which attracted more than 5,000 people and saw the participation of Tiffany Hua, an influencer with more than 80,000 followers on live-streaming platform Inke.
Aesthetic is very important in sportswear for Chinese consumers. Chinese women’s sportwear brand Maia Active, for instance, designs apparel tailored to slim bodies to make women who aspire to a curvier body shape feel good. The tailored design aims to please the wearer aesthetically, rather than for performance.
In general, Chinese shoppers are also attracted by the use of hi-tech, breathable fabric and minimalist design that give the garments a futuristic look.
Market Drivers: The Government’s Role in Promoting Fitness
Several factors have been contributing to the strong growth of the sportswear market in China, including:
- The growth of the broader sports industry: China’s sports industry—which includes the production of sporting goods and the provision of services such as sports management activities, training and education and media services—grew 11.1% year over year to ¥1.9 trillion ($295 billion) in 2016 (latest, released on January 13, 2018,) according to the Chinese National Bureau of Statistics. There is still scope for further growth, as the sports industry in China is still immature. Competitive sports are not as prevalent as they are in the US, and participation is more for enjoyment rather than competition, according to Azoya, a cross-border e-commerce service provider that partners with international retailers to expand their businesses in China.
- Large millennial population: Millennials are the main target market for both performance and lifestyle sportswear, and this segment is huge in China. There are about 400 million millennials in China, according to our analysis of World Bank data, more than the entire US population.
- Government investment in sports: The Chinese government is promoting sports and a more active lifestyle among the population to encourage the economic benefits that sports participation generates. It is also encouraging a healthier lifestyle among the population, which, in the long term, should reflect positively on healthcare costs.
- Big sporting events: Large sporting events raise interest in sports among the population and encourage active participation. In China, this process is often helped by government initiatives. For example, in preparation for the Beijing Winter Olympics in 2022, the Chinese government has been promoting winter sports and is looking to increase the number of ski resorts to 1,000 by 2030 from 500 currently, and to boost the number of skiers to 300 million from about 5 million currently, according to the Financial Times.
- Appetite for foreign brands: On Adidas’s fiscal 2017 earnings call earlier this year, CEO Kasper Bo Rorsted said that the attractiveness of global brands and the image they project are still quite high to the typical Chinese consumer. This should continue to create opportunities for further expansion for international sportswear brands in the market.
- • Increased interest in sports: Beyond active participation, interest in following sports has been growing in China, particularly for popular sports such as basketball and soccer. Nearly 200 million viewers watched the 2017 NBA finals on their mobile phones, according to the South China Morning Post in September 2017. At the time of writing, the NBA’s Weibo account had 34.6 million followers. By comparison, the NBA’s Twitter account had “only” 27.2 million. There are currently more than 300 million active basketball players in China, almost equivalent to the entire US population, according to the Chinese Basketball Association, and an estimated 307 million soccer fans in China, the English Premier League website reports.
- • Increased health and wellness awareness and physical activity uptake: Active lifestyles have become increasingly important among Chinese consumers. The figure below shows that regular exercise is regarded as the main way to stay healthy by the majority of respondents to a survey of Chinese consumers undertaken by Prosper Insights & Analytics in June 2018.
Competitive Environment: International Brands Lead a Relatively Concentrated Sector
International companies lead the sportswear market in China, with Nike and Adidas each holding about a 20% share of the market in 2017. However, leading domestic player Anta Sports, with 8% of the market in 2017, was the third-largest sportswear company in China, and is working hard to catch up with the two dominant international players.
The next section examines the China market strategy of the three largest sportswear players in the market—Nike, Adidas and Anta Sports—and we share our view of how effective we rate them.
Nike: The Market Leader with an Aspirational Image
China is one of the most important markets for Nike. Greater China—which includes Mainland China, Hong Kong, Macau and Taiwan—comprised 14% of total revenues in the fiscal year ended May 2018, making it the third-largest region for Nike after North America and Europe, Middle East and Africa.
China is a high-growth market for Nike. While its domestic market (the US) declined, Greater China was Nike’s most dynamic region, with constant-currency revenue growth of 18% in fiscal year 2018.
Nike has long been a pioneer in the China market. The company established factories in mainland China in 1981 and expanded in the country’s consumer market in the 1990s.
Nike Has Actively Promoted Basketball and Soccer
For years, Nike has cultivated the China market, investing extensively in marketing and several initiatives to grow its market share. The company has sponsored several clubs and sports-related events in the country, including professional basketball and soccer leagues, hence capitalizing on—and also contributing to—the growing popularity of sports in the country.
Nike has been very active in promoting soccer and has run campaigns featuring big soccer and basketball stars. Recent examples include:
- During Cristiano Ronaldo’s second visit to China in July 2018, Nike launched an exclusive collection dedicated to the player and available only in the China market.
- In May 2018, Nike announced a 10-year partnership with the China Super League and unveiled the China National Team Collection.
- NBA player Russell Westbrook toured China in September 2017 and took part in the opening of Shanghai’s first Jordan branded store.
- In May 2017, Nike’s Jordan Brand signed a sponsorship deal with basketball player Guo Ailun, the first Chinese player to sign with the brand.
Premiumization is one of the strategies that Nike has been pursuing in the China market. This strategy has been used to preserve the brand’s aspirational image among Chinese consumers. One example is premium basketball gear brand Nike Jordan. The brand appeals to affluent young consumers who consider it to be trendy and aspirational, according to Azoya. Nike Jordan shoes rarely sell for less than ¥700 (about $100) on Alibaba’s e-commerce platform Tmall (at the time of writing). Nike reported that in the quarter ended May 31, 2018 (latest), sales for the Jordan brand were up nearly 50% in China.
Nike’s aspirational image has made the brand very attractive to those consumers looking to buy sportswear as fashion items as an extension of casualwear. Eric Tian, a former marketing manager for the Jordan brand in China, estimated that 65% of Jordan sales in the country were lifestyle and 35% performance, global business publication Fortune reported in October 2015.
This premium, lifestyle brand image is very important in explaining the company’s success in China.
For many years leading up to 2014, Nike sales in the China market were declining. This was mainly because its campaigns centered around running and sports, which, at the time, were not so mainstream and did not have mass appeal. The company has since shifted its approach to focus more on fashionable brands, including Nike x Yeezy and Jordan, to appeal more to fashion-conscious and aspirational shoppers.
Digital strategy is crucial for Nike in China, and CEO Mark Parker reiterated this on the recent earnings call: the company is continuing its partnership with China’s leading digital platforms. Recent initiatives include the launch in March 2018 on Tmall of the Air Max Super Brand Day, a brand-specific promotional day, which became the second-largest day for Nike on the platform after Singles’ Day 2017; and the Choose Go campaign, which was run through digital media in collaboration with Tencent, and which created strong demand for Nike’s Epic React running shoes.
In the third quarter of fiscal year 2018, Nike reported that its digital business in China was fueled by the launch of the SNKRS app in the market and the continued success of its partnership with Tmall. Future digital strategy initiatives include the planned launch in the first quarter of fiscal year 2019 China of NikePlus membership—a membership program that grants a number of benefits to its members.
Our view on Nike’s China strategy: Nike has built an aspirational lifestyle image that appeals to Chinese shoppers looking for quality and status. Since 2014, the company has focused on lifestyle sportswear and has largely succeeded in its goal to conquer the premium segment of the market. The success of Nike brands as aspirational and trendy also comes with risks, as fashion trends tend to fade. To ensure future growth, Nike should also resume targeting the high-quality performance sportswear segment which is expected to continue growing as more people engage in active lifestyles.
Adidas: The Runner-Up with a Fresher, Younger Appeal
China is Adidas’s third-largest market and its most dynamic. Greater China—Mainland China, Taiwan, Hong Kong and Macau—accounted for 18% of Adidas’s revenues in the year ended December 31, 2017. The company grew Greater China revenues by 29% on a currency-neutral basis during the same period, surpassing the growth recorded in all the other regions.
Adidas first entered the market in the early 1990s and founded a subsidiary, Adidas China, in 1997. The company entered the Chinese direct-to-consumer e-commerce market in 2010 with the launch of its online store on Tmall.
Adidas shares with its arch-rival Nike an involvement in and contribution to the sports culture in the country, which Adidas has cultivated over the years by sponsoring several sports events and teams. It was the official sportswear partner of the Beijing 2008 Olympic Games, a platform that significantly helped the brand’s expansion in the market.
On the company’s fiscal 2017 earnings call, CEO Kasper Bo Rorsted said that a solid digital strategy is crucial for Adidas in China and the company’s expansion into the digital channel is more advanced in that country than in any other market. Adidas runs its own site and e-commerce operations through partnerships with domestic Internet giants including Alibaba and Tencent. While the digital channel is key, Adidas’s store presence and expansion remains a key revenue growth driver for the Chinese market, and growth is also coming from lifestyle and sports, positively impacted by government initiatives such as the introduction of sports in schools, Bo Rorsted added in the call.
Adidas has adopted a multi-brand strategy in China to enable it to reach different segments of the consumer base and to achieve different targets. For example, the adidas Originals brand is used by the company to raise awareness of its street culture heritage, a factor that appeals to consumers looking for trendy, fashionable lifestyle sportswear brands. Conversely, the Adidas Neo brand targets teenage consumers with products with a fresh and colorful design.
In terms of pricing strategy, Adidas is seeing an increased demand for mid-tier price-point products and is aiming to address this demand, according to Rorsted. He added that Adidas entered the China market offering products with a high price point and still aims to remain a premium brand that people can aspire to, but at the same time, it is planning to further expand its product range to include lower-price point items.
Adidas ran several successful campaigns in China that helped it to convey the image of its brands as young, fun and hip. These campaigns were based on lifestyles consumers can aspire to and the celebration of individuality and creativity, rather than on sport performance.
#thisisme: Adidas Original’s #thisisme campaign in 2014 showed young urban consumers wearing colorful adidas clothing as a statement to celebrate their creativity and uniqueness. The campaign used youth influencers rather than sports celebrities, and was clearly aimed at promoting adidas Original as a cool lifestyle brand, rather than a performance sportswear brand.
One in a Billion: More recently, in 2017, Adidas ran the “One in a Billion” campaign, which still maintained the key message of promoting individuality and showed young people engaging in athletic performances and standing out from the group by behaving differently.
Our view on Adidas’s China strategy: Adidas has been pursuing a successful multi-brand strategy that appeals to young consumers that see its brands as trendy, fashionable and hip. The company’s brands are less aspirational and premium than, for example, Nike’s Jordan brand, but nevertheless, remain mainly on the higher-end of the market. However, the company is also aiming to tackle the mid-price-point segment, which. in the long term. might compromise consumers’ perception of its brands as fashionable and trendy.
Anta Sports: The Domestic Player Competing with the International Giants
Anta Sports has grown to become the largest domestic player in the China sportwear market. In the year ended December 2017, the company grew revenues by 25%, to ¥16.7 billion ($2.5 billion).
Anta Sports was founded in 1994 in Jinjiang, Fujian, and was listed on the Hong Kong Stock Exchange in 2007.
In a bid to raise brand awareness, and mimic the strategies adopted by international competitors Nike and Adidas, Anta Sports has engaged in a series of events and athletes’ sponsorships. Two significant examples include:
- On September 2017, the company announced sponsorship of the 2022 Beijing Winter Olympics Games and Paralympics Winter Games, making Anta Sports the first Chinese sportswear brand to sponsor a national Olympic event. As part of the sponsorship, Anta Sports will be the official supplier of sports gear for the athletes of the People’s Republic of China.
- Anta Sports has backed several basketball players: In 2010, it sponsored NBA player Kevin Garnett and launched the “KG” Line of Basketball Sportswear; and more recently, in 2015, the company sponsored another NBA player, Klay Thompson, and launched the “KT Fire” line of basketball shoes.
In 2016, Anta Sports formalized its strategic approach as “a single-focus, multi-brand and omnichannel strategy.”
The single-focus strategy is straightforward and means the company is concentrating its efforts on the fast-growing China sportswear market.
Its multi-brand strategy aims at expanding its reach to different segments of the sportswear market. Currently, Anta Sports’ brand portfolio includes Anta, Fila, Descente and NBA. The Anta brand, which offers good quality products at affordable prices, has been catering mainly to the lower-price, mass-market segment, which has enabled the company to target a wide segment of the consumer base. This includes shoppers in lower-tier cities that have a lower purchasing power compared to customers in the main tier-1 cities. However, thanks to a series of acquisitions and joint ventures, the company managed to expand its brand portfolio to include more premium brands.
Fila: In 2009, the company became the brand owner in China of international sportswear brand Fila.
NBA logo: In 2014, Anta Sports became the official licensee of the NBA logo in China.
Descente: In 2016, the firm started a joint venture with Japanese sportswear company Descente for the exclusive distribution of the high-end sportswear brand Descente in China.
The omnichannel strategy has been responding to the evolving shopping behavior of the Chinese consumer. The company continues to place great importance on the brick-and-mortar channel, which, despite the importance of e-commerce in China, still accounts for the majority of sportswear sales. As such, the company operates different physical store formats including own stores, outlets, shopping malls and department store concessions. As of December 31, 2017, the company operates 9,467 Anta stores, 1,086 Fila stores and 64 Descente stores around China.
The digital channel is very important for Anta. In addition to the official online flagship store, Anta operates online through collaborations with leading e-commerce platforms such as Tmall and JD.com. In 2017, Anta Sports attained the highest market share in e-commerce in China, and, according to company President Jie Zheng on its fiscal year 2017 earnings call, became one of the top three sportswear brands on Tmall in 2018.
Our View of Anta Sports’ Strategy: Anta sports started from a very different market positioning compared to its international rivals—by catering to the low-price segment of the market. While the company continues to compete against its international rivals by offering good-value products at affordable prices, Anta Sports is cleverly using its multi-brand strategy to expand into the more premium segment of the market, the sponsorship of key sporting events and the backing of NBA players to raise the brand’s profile and compete more closely with the likes of Nike. We believe that this strategy will be largely effective in raising the company’s brand recognition among Chinese consumers. In the long term, we believe we will start to see Anta Sports’ brands as solid alternatives to the more expensive international brands.
The China sportswear market is expected to continue to grow at an annual average rate of 11% in the five years to 2022. Increasing active lifestyles, sports participation and the popularity of athleisure are the key trends shaping the industry.
The large millennial population, government initiatives to promote fitness and sports participation, and the sponsoring of large sports events are among the drivers that have been sustaining the growth of sportwear in China.
International sportwear companies Nike and Adidas led the market in 2017. Anta Sports was the third-largest company in terms of revenues in 2017 and is working hard to catch up with its international competitors.