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Although the Olympic spirit emphasizes the involvement of each and every individual, the essence of competition in the sportswear business is winner takes all. Chinese sportswear companies have a chance to present themselves to a global audience during the 2008 Beijing Olympics. It is not only the most important campaign for them in the first decade of this century, but a key to their success or failure in the next few decades. Some of the smaller brands may well disappear.

 

Thus, how to take the opportunity to market brands and products has become a top priority for domestic sportswear makers.

 

With the rise of Chinese athletes on the international stage, the country's sportswear business has also flourished. But challenges remain.

 

If we divide the current sportswear market into three tiers, Nike and Adidas have a tight grip on the premium segment, while Lining is in the second tier and other local makers like Anta occupy the majority of the low- and medium-end segments. Domestic brands are faced with the challenge of moving up the value chain and going global.

 

Lining, named after the famous Chinese gymnast, opened its first overseas outlet in Spain in 2001. It signed the Spanish basketball team, the world champions in 2006, and partnered with the national basketball team of Argentina. But its overseas revenue has remained at 700 million yuan. In the high-end market, it faces attacks from Nike and Adidas.

 

Sports footwear makers in east China's Fujian Province have had a difficult time differentiating themselves since rival Anta achieved popularity in 2000. Goals of becoming global premium brands have been thwarted by price wars. Most of the companies are either contracted manufacturers for international brands or they struggle with meager sales in developing markets.

 

Branding dilemma

 

Local companies are also facing a marketing and branding dilemma over whether to invest in TV commercials and sign up sports stars as brand ambassadors.

 

In 2000, Anta spent a huge amount of money advertising on national broadcaster CCTV, using former table tennis champion Kong Linghui as its representative. The exposure helped the company achieve great success in the domestic market. Other sportswear firms followed suit, spending tens or even hundreds of millions of yuan on TV commercials featuring sports or entertainment; stars.

 

This strategy can bring short-term success, but often only the faces of the stars stick in the minds of consumers, rather than the brands.

 

Many sportswear companies focus on basketball and are unsure about whether to position their brands as professional sportswear or fashion.

 

Basketball is the No 1 sport in China. But with so many companies signing basketball players and competing for fans, the limited consumer pool is reduced further.

 

XStep signed up Hong Kong star Aaron Kwok to promote its brand, while Derh hired Taiwanese singer Jay Chou. But both companies have struggled with building themselves as professional sportswear or fashion.

 

Chinese brands have, however, succeeded in their distribution model, signing one agency in every province that then develops a retail network in the region. This model has allowed the companies to take a huge market in a short period of time. But it has also played out in the usual way, with many sportswear retail outlets competing along small shopping streets for a limited consumer population.

 

China makes 65 percent of the world's sportswear, according to the World Federation of Sports Goods Industry, and most of the world's sports shoes.

 

But with the cost of labor increasing, it is losing its manufacturing competitiveness, with more contracts going to other low-cost markets like Southeast Asia and Pakistan.

 

China used to make most of the world's basketballs, volleyballs and footballs, but now 60 percent of footballs are made in Pakistan.

 

Chinese sports product makers are mainly small and medium-sized companies whose manufacturing equipment, technology and management lag behind the international level. Some make fake or low-quality products, hurting the image of Chinese manufacturers.

 

Chinese manufacturers are facing unprecedented challenges, although hosting the Olympic Games could provide a much-needed boost.

 

The author is chief consultant to Landbird International PR Agency in Beijing

 

(China Daily March 29, 2007)