Recently, Luo Jie, Secretary-General of China Sporting Goods Federation (CSGF) reviewed the development of China's sporting goods industry in 2016 and looked to the year of 2017. He believes that with the advent of "new golden age" of second wave of consumption in sporting goods market, the industry undergoes sound development as a whole, but confronts great challenges like transformation and upgrading, supply-side reform, especially for the vast majority of SMEs.
With the release of various favorable policies and increasing awareness of national fitness, sporting goods industry began to pick up as of 2014, and will usher in the best times gradually with the boom of sports industry in the future.
Throughout the development of sporting goods industry in 2016, different categories vary in development status. Sportswear and footwear industry is expected to a gradual pickup. "A few giants" are picking up and gradually consolidating their leadership position. In terms of the market pattern, a few brands started to succeed in a competitive market place, while some second- and third-tier brands that have not kept pace or suffer unsuccessful transformation are gradually driven out of the market. With the increase of fitness clubs and diversification of operation pattern, fitness equipment industry has witnessed the substantial improvement of overall competitiveness compared with the past. The development of sub-categories basically remains stable with a slight rise, such as venue facilities, ball games, roller skating, etc.
1. "Golden age" is different from that of the past.
Since 2014, a succession of favorable policies has been issued in the sports industry. National fitness has been upgraded to a national strategy, and the public awareness of sports fitness has been awakened. In the opinion of Luo Jie, the environments of policy, society and public opinion have been fully mobilized today. Especially mass sports is in the stage of rapid development, and everyone in the participation of sports needs appropriate sporting goods, such as sportswear and footwear, racket, and snowboard. This definitely exerts the most direct impact on the sporting goods industry. The industry hasn't developed as rapidly as in the past, but still "achieves fruitful results for these two years."
For instance, ANTA became the first Chinese sporting good enterprise to be listed in the "Hundred Million Clubs" in 2015. Li-Ning turned the tide and even began to make profits for the first time since 2012.
According to the data released by General Administration of Sport and National Bureau of Statistics not long ago, the total output (scale) of national sports industry in 2015 amounted to RMB1.7 trillion, an increase of RMB549.4 billion. It accounted for 0.8% of GDP over the same period. The total output of sporting goods and related product manufacturing reached RMB1.1 trillion, an increase of RMB275.6 billion. It accounted for 65.7% and 50.2% of total output and increase of the sports industry respectively. CIConsulting Industry Research Center predicted that the sporting goods market scale was expected to reach about RMB240 billion by 2020 and the compound growth rate would be about 10% in the next five years.
However, Luo Jie added that this round of development was different from "golden age" of sporting goods in the first decade of this century in nature. In the past, there is a short of sporting goods, so the public had to use what they had and what were produced. In comparison, the public nowadays have become more aware of sports which means they begin to take it serious, and thus have more specific and professional demands with great variety. As a result, many segment and professional markets come into being and are boosted, including traditional shoes and apparel.
Luo Jie suggested this development trend and "leading reference" of the industry was demonstrated in China Sport Show organized by China Sporting Goods Federation. "At present, we have begun to take into account the exhibitions of segment industries.
2. Consumers are not easily induced and the industry is confronted with reshuffle.
Luo Jie maintained the biggest change in the wake of increasing awareness of national fitness was that consumers cannot be easily induced. The focus on consumer demands shifted from price to quality and demand.
Sporting goods industry, in spite of sound development as a whole in 2016, confronted the outbreaks of business failure, substantial unemployment and pay cut. In this regard, Luo Jie thought "sports industry curve" had kept growing, but in the traditional sports manufacturing industry, some local small businesses closed in large scale. As a matter of fact, the change of consumer demand brought about industry elimination and reshuffle. In the past, extensive expansion model prevailed. Some businesses supplied only single product for long, leading to serious industry homogeneity. But the consumer market was segmented and divided, which required upgrading and subdividing technological content and specialty of products. Nevertheless, some traditional manufacturing businesses are not ready for this change.
Luo Jie thought it a "normal phenomenon", or even a "good phenomenon". In his view, consumer demand is upgraded, which will impel the acceleration of industry transformation and upgrading, strengthen the supply-side reform, and emphasize product development, channel optimization and operational capacity. When some backward businesses are eliminated, squeezed market space will be re-allocated. Chinese sporting goods industry will enter the stage of intensive growth.
Industry giants even like ANTA, Li-Ning are faced with fierce global competition with international brands.
3. Is it just a false prosperity? Sustainable consumption capacity is the key.
In this new normal economy, sporting industry rose against recession-hit market and became a new investment hotspot. Luo Jie agreed he had indeed witnessed the flourishing scene that enormous capital flowing into sporting industry over past two years. But is it just a false prosperity? The key is whether consumption is truly achieved, sustainable and stable.
For example, the concept of "Internet plus sports" once prevailed, leading to a flood of O2O (online to offline) sports entrepreneurship. It was usually stuck in the link of "turn transaction to reality" in spite of the busy online traffic. Luo Jie cited an example that the fitness industry is booming in recent years. Some vendors of equipment sales also follow the trend of opening a fitness club. "Low price competition is still the top choice. Some even ask for only two or three thousand for a two-year fitness card, which is to stimulate impulse consumption. Once got the card, you'll never appear in the club. Sustainable consumption is impossible without consumption for the second time."
He pointed out that sustainable and stable sports consumption depends on the improvement of economic life standard, the guidance of government and public opinion, and more importantly, what kind of products and services are available in the market, that is, "supply-side reform".
To adapt to the upgrading and segmentation of consumer demands, sporting goods industry need carry out "supply-side" reform, whose key is to provide multi-level products and services for meeting multi-level consumer demands. At the same time, the transformation and upgrading of sporting goods industry need shift from product to service in the future.
Luo Jie believed that, products, expensive or not, are "one and you're done" affairs and have fixed prices, while there's much value-added space for service. Long-term and high-quality service is difficult to be replaced.
Service is of huge potential in "Internet plus" development. It's impossible to solely rely on the Internet that creates consumer demands in experience-oriented sports industry. Technology and assistance of the Internet enables consumers have access to better and more humanized consumption experience.
"Let us say, no time to exercise may not be entirely an excuse in modern society. Time cost is indeed a restraining factor for sports. Therefore, we need to improve efficiency by means of the Internet, Internet of Things and technical methods. In this way, consumers can do physical exercises in a near place around the clock."
4. With the reform of China Sporting Goods Federation, what opportunities are waiting ahead for future development of the industry?
The past year is of great significance for China Sporting Goods Federation. As pilot unit of "de-administration" reform by Chinese Sports Industry Association, China Sporting Goods Federation formally put into independent operation in 2017. Luo Jie has too many thoughts about "the first year".
Above all, he feels there is so much to be done. In his words, as part of early developed industry in China's sports field, it's no problem for survival of the whole industry. We should care more about how to promote healthy development of the industry to realize stable consumption, especially in the situation that a great number of emerging segment industries comes into being with the fitness boom.
Standardization is very important in future development.
"For example, with the development of national fitness and school sports, the construction of stadiums and venues has developed by leaps and bounds over past two years. Nevertheless, the running track scandal struck a heavy blow to the industry and provoked deep reflection last year.
The future work of the Federation will be segmented to a larger extent. We'll attach more importance to industry guidance and services. For the present, we have established as many as seven professional committees like the committee of artificial turf.
"For the professional committees of segment industries, the Federation will offer support and service in aspects of government communication, industry exchange, media publicity, international exchange and standardization for their better development."
In addition, we will also actively guide businesses to carry out public welfare activities and provide public service for the improvement of industry image and reputation.