While action sports brands have sourced products in China for years, many have begun to look at the country as a major sales channel and there are a handful of action sports brands already thriving there.
China has a population over 1.3 billion people. Its middle class alone is said to be as big if not bigger than the entire population of the U.S. (roughly 307 million people).
China has the largest car market in the world, more millionaires than the U.S., and the desire for luxury items is growing at exponential rates.
With the “One Child Policy” having taken affect in 1978, people under 32 often have two parents and four grandparents that can spend money on them.
There are also a variety of action sports events trickling into China. X Games has been in China since 2007, and Woodward (the well-known action sports training camp) set up in China last year.
More recently, the ISA added Chinese Taipei to its list of member nations, the Women’s World Surfing Championships took place in Hainan last month, and the ISA is hosting the Hainan Riyue Bay International Surfing Festival presented by Quiksilver in January.
In 2005, SMP also built the largest skate park in the world, in Shanghai, and new skate parks are being built every year.
As China increasingly becomes a focus for action sports companies, we decided to dig deeper into business landscape there. I interviewed over 25 people from a variety of surf, skate and snow companies, Chinese brand consultants, Chinese athletes, and dug into a variety of Western Chinese business cases to find out which brands are in China, what’s the potential, who actually participates in action sports and what obstacles brands face.
Eric Lai of Converse and snowboarder Wang Lei of Burton
Some brands were more forthcoming about activities in China than others. It seems like China is a new frontier and brands didn’t want to get too specific about their plans and strategies.
However, by talking to a wide variety of people, I was able to get a fairly good idea of what is happening on the ground.
Today we discuss how brands do business in China whether that means going direct, through a joint venture or a distributor.
On Day 2, we dive into the complex retail landscape and talk to brands like Quiksilver, Oakley and Vans that have stores in China now.
On Day 3, we talk about localization and share examples of corporate brands that have succeeded and failed in China.
On Day 4, we look into Chinese youth culture and ask people there if action sports are resonating there.
Lastly on Day 5, we will explore what action sports brands are doing to introduce their culture and sports in China, obstacles they face and what the potential for business in China really is.
First off, a little background. The People’s Republic of China is a single party state ruled by the Chinese communist party. Beijing is the capital of the PRC. Greater China also includes Hong Kong (formerly under British Rule until 1997), Macau, as well as the island of Taiwan, which is controlled by the government of the Republic of China (ROC). The status of Taiwan continues to remain unresolved, and is widely recognized by many international organizations as “Chinese Taipei.”
In 1979, China started a series of economic reforms and today, China has the second largest GDP, and is the fastest growing economy in the world.
Nike was the first of the major athletic brands to start selling to China decades ago, and has made a more recent push with Nike SB. Its current Chinese operation is over $2 billion in revenues.
Outdoor brands (running, hiking) followed Nike, and Quiksilver and Burton are said to be the first brands in the action sports realm to sell products to China in the early 2000s.
In the last few years, Vans, and Oakley have set up offices in the country. Converse has been in China for over a decade and recently started pushing its skate products.
Skullcandy has an office for production and operations in Shenzen, and Billabong has limited distribution and a presence in Hainan. Sanuk is in the process of expanding distribution in mainland China. There are also several smaller skate companies that have been selling to China through distributors for years.
“Out of 100 action sports core brands, I’d say about 50% are there,” said Jackie Subeck, CEO of Footprint Worldwide, a company that works with Western musicians, events and large action sports brands in China.
Brands take different approaches to enter the Chinese market, and strategies change rapidly.
One model that was popular a decade ago is the joint venture, which pairs a foreign company with an existing Chinese company that knows how to deal with the government and has an existing network of retailers to sell products to.
Quiksilver entered China in 2003 through a Joint Venture with Glorious Sun Enterprises Ltd., which they are still a part of today. Cathey Curtis of Quiksilver, front left, and Frank Messman of Black Box (with microphone) at an action sports conference in China organized by the Wabsano Group.
“We wanted to find a partner that had a very strong stake in retail,” said SVP of Roxy Marketing, Cathey Curtis, who is the former general manager of Quiksilver’s joint venture in China.
Glorious Sun Ltd. owned Jeanswest stores in China and Australia already. They quickly helped Quiksilver negotiate real estate, licensing deals, accounting and legal red tape.
“Even garment testing and product labeling legal requirements for Chinese retailers is challenging,” said Cathey. “Having a partner that intimately knows how to navigate these types of issues was very helpful in helping us getting in.”
Cathey said having an existing network of hardworking local Chinese citizens was also a huge benefit. “Our partners are hardworking, smart, can negotiate like crazy and are very positive people who want to do a good job, so working with them was great.”
Entering a JV can be tricky though. “You are basically getting married to someone and getting married to someone in China is a big decision,” said Eli Kislevitz who used to work for a Chinese skateboarding and snowboarding distributor and retailer called Wild Rampage, and now does marketing for Skullcandy in China.
See Page 3 for which brands are going direct to market
Most people I interviewed said the most efficient way to get to market in China is to set up an office directly. “It’s easier to control your brand’s DNA and messaging,” said Bryan Batson, of the China Business, which works with brands like Jamba Juice as well as leading pharmaceutical and aerospace companies in China.
Going direct, though, is costly, and building relationships, which is crucial to doing business in any country, takes time.
“Every one thinks China is cheap, but if you are trying to set up a flagship or offices in Tier 1 or Tier 2 Cities, it’s not,” said Bryan. “Real estate alone is a big challenge, as people quote price per rent in square meters per day, rather than per month, rent is rising fast and companies are having a tougher time projecting costs.”
Nike entered China when costs were cheaper, but is also at an advantage in terms of its size.
A Vans store in China
According to Eli Kislevitz who has been working with brands in China since 2002, the Nike office in Shanghai has at least three floors in one of the most expensive buildings in Shanghai.
“That’s like owning four floors of the Empire State Building. Nike’s products will be in the most remote city in the world where there are no white people but there is the swoosh,” he said.
Similar to Nike, which has a main office and distributors that touch different markets in different parts of the country, Mitch Whitaker, GM of Action Sports Asia for Vans/Reef, said Vans also has a regional office in Hong Kong that covers all of Asia Pacific as well as offices in Shanghai, Beijing, and Guangzhou.
Prior to having its own office, Vans sold a limited amount of its products to China through a distributor in Hong Kong.
Because it is owned by VF Corp., Vans was able to utilize an existing infrastructure that was set up by other VF brands. The Lee brand has been in the territory for over a decade and The North Face brand transitioned its distributor model to a subsidiary model around 2006/2007.
Vans went direct in China in 2008, with early success leading to over 250 stores by the end of 2010.
Oakley is another brand that set up its own offices in China. Oakley started going direct after the Beijing Olympics in 2009 with a full team.
Burton, who entered China in 2002 with Wild Rampage as its distributor, started going direct around 2006.
Many brands have approached China by using a distributor model. For smaller brands, entering with a distributor is often the easiest way to gain entry to China.
Wild Rampage is a distributorship owned by a U.S. skateboarder named Joe Eberling who came to China in the early 1980s and was a former sales manager for Nike China in the 1990s. Wild Rampage distributes several skate and outdoor brands including Circa, Smith, Osprey, Osiris, Sector 9, Zero, and Fallen. Joe also owns one of the few traditional skate shops in the country, Icon X in Shanghai, as well as an online site.
Chinese parents watching a skate Icon X skate contest
“I’d strongly recommend that all brands go direct in China if they have the scale to make a multi-million-dollar investment, a highly capable and experienced team of operation, sales and marketing people with local knowledge in China, and if they have 10-year timelines,” said Joe.
“If a brand can’t meet these criteria, they should find a partner who is capable and a match for the brand’s company culture, then sign a fair, long-term contract and let them do their thing.”
Frank Messman, CEO of Black Box Distribution, partnered with Wild Rampage and allows them to buy product at factory cost plus a relatively small mark-up, similar to most international distributorship arrangements. “The business relationship is managed by us in the U.S., but we deliver directly from our vendors’ Chinese based factories to our partner in Shanghai.”
While the relationship is working out well for now, Frank says no matter how you enter the market, China is a tough market to crack.
“The traditional model for smaller companies of just picking a distributor and offering them standard distributor pricing is just not going to work. Setting up your own deal is also not realistic – even some of the largest multinationals have stumbled doing that. The best answer is somewhere in between and just depends on the comfort level you get with the company or people you end up working with as well as your own appetite for risk,” he said.
One of the biggest reasons Frank said traditional models don’t completely work is that there is no obvious wholesale distribution channel or channels like there is in most developed countries.
Tomorrow, we delve into the retail landscape in China and talk to several brands and people with Chinese experience, including Vans, Quiksilver, Oakley, and Glenn Brumage of the Wabsano Group.
The retail landscape is complicated in China, and brands I spoke with have taken a variety of tactics to enter stores.
The wholesale core channel is extremely limited. There are less than 100 core skate shops in China, according to Mitchell Whitaker of Vans.
Joe Eberling runs one of the core shops, Icon X. There is also a Vans store run by Fly in Shanghai that was recently converted to a partner concept store, similar to its partner store with Thalia Street, as well as a handful of other small core skate shops in first and second tier cities.
“All core shops are truly small businesses,” said Joe. “Their combined wholesale purchases are less than $2 million.”
Glenn Brumage of Wabsono, a licensing, consulting and manufacturing firm that has been promoting action sports in China, is in the process of setting up multibranded action sports shops in the country now.
The Vans Dragon Sk8 series produced by Wabsono.
“As we began promoting participation, it became obvious that the most glaring gap in the market for skate, surf and snow brands was the lack of true, multi-brand shops.
“The current trend of mono branded stores is understandable considering who entered the market early and how they’ve focused on their brands but that doesn’t make it right for the market as a whole,” Glenn said.
“You have to be cognizant of the fact that we’ve taken over 50 years to reach the collective emotional connection we have to action sports and that the local skate, surf and snow shop plays a major role in teaching it. It is my personal view that the first step is multi branded specialty stores selling the stoke regardless of the brand where mono branded stores must obviously be focused on the next step, which is their own brand development.”
For now, with no PacSun, Zumiez or Journeys type environments, single-branded stores are the most common way for apparel and footwear brands to showcase products.
Also called “shop in shops,” “concept shops” or “brand boxes,” the monobrand store concept was popularized by Nike as, “a solution for getting out of the state-owned athletic equipment stores,” according to Joe Eberling, who ran sales for Nike China in the 1990s.
“They were pretty grotty and unappealing, and it was a way for them to get into the more fashionable department store channel, which was where most consumers with money preferred to shop,” said Joe.
Inside a Vans store in China
Shop in shops range from 500 to 1,500 square feet and have three walls, and display only the brand’s product.
According to Matt Morgan, the Action Sports Category Manager for Vans who has lived in China for over seven years, Chinese people prefer monobrand format stores because, “They can feel confident they are getting the real deal regardless if it is high fashion or low fashion products.”
While numerous studies show that Chinese value real products, especially branded luxury products, over fakes, counterfeiting is a challenge in China.
“As soon as a brand reaches a certain level of popularity there will be plenty of factories churning out counterfeit product and often there is also factory leak product out there (basically spill-over product sold out the back door of the factories that are officially contracted to produce the real deal),” said Frank Messman, CEO of Black Box Distribution.
“Last year when I did a retail tour in Shanghai and a few other cities, I saw plenty of counterfeit Fallen and Zero product so the volume of counterfeit product in the marketplace from larger brands such as Vans and Nike must be huge.”
See Page 2 for more about the challenges of retail in China
Besides counterfeit products, in China there are complete fakes of entire stores. Fakes of Ikea and Apple retail stores were discovered in Kunming, a southwestern province of China, not too long ago.
The monobrand format is a good solution for conveying a brand story, but it makes distribution for small brands, or brands that just make footwear or only one category, tough.
Malls that host the shop in shops put a lot of pressure on brands to have a full selection of apparel and footwear, said Joe Eberling.
Shop ownership is also complex. According to Mitch Whitaker of Vans, brands either manage them directly or use a dealer/franchisee to manage them. Then they agree to minimum sales volumes at an agreed upon commission rate.
Shop in shop leases are also shorter than U.S. leases.
“They typically last between a year and 18 months and you have to be invited in,” said Cathey Curtis, formerly GM of Quiksilver in China. “If you don’t perform, your lease will not be renewed.”
Because leases are short term, the investment is short term and your shop in shop needs to be transportable.
“Because you need to control capital costs, it’s important to create movable fixturing systems, making it more challenging to tell your full brand story,” said Cathey of Quiksilver.
Mitch Whitaker, GM of Action Sports Asia for Vans/Reef, third from right, with Vans staff in China.
In contrast to shop in shops, many brands also have stand alone stores.
At Quiksilver, Cathey said there was a big difference in size and layout between a shop in shop and a stand alone store.
“For Quiksilver, a shop in shop size may be 600 to 1,200 square feet, however a stand alone shop can be as large as 7,000 square feet,” she said.
For Vans retail in China, though, Mitch Whitaker said there is not a huge difference between size and layout.
“A shop in shop at Vans typically has three walls and an open front while a stand alone includes a front door,” Mitch said.
“The terms of the arrangement may be different however (such as paying a lease versus straight commission). A flagship store on the other hand comes fully loaded.”
For accessory companies like Oakley and even Skullcandy, distribution can also be complex.
An Oakley shop in shop
Just as there are limited multibranded core shops, there is not a developed multibrand electronics channel, according to Eli Kislevitz who currently works in the production and operations office of Skullcandy.
“Best Buy came in and has to restructure really fast. There are two big domestic consumer electronic stores, but they have only been in operation for a few years. They also trying to figure out how to make it work,” he said.
Skullcandy has been available in the market since 2006 and currently sells products in Hong Kong and mainland China through Apple Stores as well as authorized re-sellers/retailers.
For sunglasses, Alan Peng, Brand Director for Oakley in China, says Oakley has shop in shop concepts, but that it also sells through similar channels like they do in the states. They are in 80 Lens Crafters China doors (Lens Crafters is owned by Oakley parent company Luxottica), 130 optical shops that carry sunglasses and optical frames, in the city of Sanya through a partner, through about 50 Trek cycling doors, 30 snow doors, and are in the midst of directly opening up golf, military and e-commerce with distribution partners.
Like Oakley, most brands I spoke with that have a presence in China have different ownership arrangements with vendors.
See Page 3 for how many stores different brands have in China
Vans ended 2010 with about 250 stores and today has nearly 400, mixed between owned and franchise run.
Sanuk, which has also been selling to China for four years through a distributor from the Philippines, currently has about 20 Sanuk shops in Taiwan. According to Founder Jeff Kelley, Taiwan has a combination of shop in shops and stand alone stores.
“Taiwan has been killing it for us,” said Jeff. Sanuk also sells products in the shoe district of Mong Kok in Hong Kong as well as throughout Guanjou.
“We will be working with (new owners) Deckers’ existing distributor to expand Sanuk in Greater China in the near future,” Jeff said. “Our plan is to open stand alone and shop in shops just as we have in Taiwan.”
Cathey said when she left China to move to a new job with Roxy in the U.S. nine months ago, Quiksilver had about 65 stores in China.
Billabong has some limited distribution in China and a small presence in Hainan, according to John Mossop, a spokeman for Billabong.
“We remain in the very early testing phase for the China business and the focus is on the development of the right seasonal assortment for what is a very unique market. We are encouraged by the early sell through and continue to see China as a tremendous future market, but we intend to build a solid understanding of the opportunity before committing in a more significant way.”
Converse has about 1,700 stores in the country (mostly showcasing its lifestyle products), and Nike has more stores than most international brands in China.
According to an article this year in the China Daily, Nike has over 7,000 retail stores in the country, and is expanding rapidly to lower tiered cities. Nike President Charlie Denson said the company will continue to invest heavily in China and that they plan to double sales in China by 2015 by expanding distribution to second and third-tier cities. Currently, Nike’s annual revenues in Greater China total $2 billion.
“We will move West,” said Denson.
When Quiksilver entered China in 2003, no other action sports brands had a major presence there.
Quiksilver’s Cathey Curtis said Nike had been there a while, Adidas was on their heels, and luxury brands were having a lot of initial success so it was a good time for Quiksilver to go there.
Cathey said the brand started in mainland China, opening its first stores in Shanghai.
“We went to mainland China in 2003, and saw this enthusiasm for new brands, western brands, Korean brands… anything new and different. At the time, the first generation of the “One Child Policy” were entering their twenties,” she added.
Within a year, Quiksilver brought back their license from Hong Kong. “We went to Hong Kong because we realized there was low hanging fruit and a consumer that related to the brand more easily. Cathey said their Hong Kong stores were immediately successful. Other parts of China were going to take more time, though, she added.
As one of the first action sports companies to enter China and having been there for several years, I asked Cathey what the biggest lesson she learned about doing business in China.
Besides where and when you enter the China market, what you enter the market with is critical to success in the country, she said.
Cathey said for an apparel brand, having the right product assortment is critical.
She remembers her Chinese counterparts didn’t like army green or mustard yellows and preferred brighter tones. She also said it was really important to educate consumers that Quiksilver was a year round brand. Quiksilver’s winter products always did extremely well in China.
At Oakley, Alan Peng said the brand altered product for the Chinese customer, mainly the fit. “The product is different in China, as we try to offer more Asian fit SKUs and next year we will have an entire sun/RX frame China collection,” he said.
Tomorrow we look at how mainstream brands have succeeded by localizing products and discuss how to relate to the Chinese consumer
Action Sports in China – localization is key
Outside of action sports, there are dozens of case studies of big American brands that went into China and immediately failed because they did not tailor their products for the Chinese market.
“You have to understand that what they think is cool isn’t always what we think is cool,” said Glenn Brummage of Wabsono, a licensing, consulting and manufacturing firm that has been promoting action sports in China. “We will look at a product and think it might be lamest product ever and they can sell the living sh*t out of it,” he said.
When Kraft entered with the Oreo cookie, for example, Chinese people said they were too sweet, too round, too expensive and they preferred wafer like cookies. Kraft went back, changed its recipe and also launched new Oreo products like Oreo Wafer Sticks, Oreo Wafer Rolls, Oreo Soft Cakes and Oreo Strawberry Crème. After the changes, Chinese consumers ate about 42% more Oreo cookies making China the world’s largest Oreo market outside the United States.
Yum! Brands, which owns KFC, is another example of a company that after localizing and changing its product, found success in China. In a study by the Harvard Business Review, KFC changed its recipes, expanded its kitchens, added more spicy and complex Chinese entrees like shrimp and fish burgers on fresh buns and congee, a popular rice porridge for breakfast.
The company also upped prices and revamped the look of its restaurants as well as kept the stores wholly owned rather than franchised so they could have better control. In smaller cities in China, it is considered a special treat to attend a KFC for dinner.
Besides localizing products, communicating to Chinese consumers about your brand in a way they can relate is key to success.
Miriam Deller of Core Power Asia, an action sports public relations and marketing firm in China.
“If you don’t know the Chinese consumer’s behavior and tastes, you can spend a lot of marketing dollars for no results,” said Miriam Deller, who owns Core Power Asia, an action sports Chinese PR, branding and media firm, which works with brands like Burton in China.
“I think the biggest challenge trying to market in China is first understanding what your brand means to your local consumer,” said Mitch Whitaker of Vans.
“You really have to be careful when making assumptions and make sure you are looking through their lens, not yours. If you are leveraging brand assets that have no local relevance, or trigger a different meaning than was originally intended, your impact will be very minimal or even negative,” he said.
Some brands add a Chinese name to their existing English brand name. “The translation isn’t a problem but pronunciation of Quiksilver does seem a little bit difficult for some people in China, and that’s why we have come up with a Chinese name with a Mandarin pronunciation similar with Quiksilver.” said Martha Ong, Marketing Director for Quiksilver Glorious Sun Ltd. and a native Chinese citizen.
“It is very common for a lot of brands, even the luxury brands, to have a Chinese name in China as a lot of those names are hard to pronounce as well,” Martha said.
See Page 2 for other challenges reaching youth in China
Action Sports in China – localization is key
Eli Kislevitz, who has worked with several brands in China, and now is working for Skullcandy.
“The biggest obstacle and mistake I see is people in Orange County looking at the market like they do in Orange County,” said Eli Kislevitz now at Skullcandy in China, who has seen many brands struggle in the country.
“Although influenced by other cultures, Chinese young people love their country,” said Cathey Curtis. “We need to respect and understand that to build a business in China, you need to be respectful of their culture and work closely with local Chinese team members to make sure your brand appeals to the people there,” she said.
Since action sports brands mainly target youth, brands need to understand that kids grow up differently in China than in the U.S.
“A lot of the high school kids spend their time studying and reading,” said Martha Ong of Quiksilver.
Exams that grant entrance to certain colleges are of primary importance for high school kids, and students in most Tier 1 and Tier 2 cities attend school from 8:30pm to 5:30pm. After school they usually have study sessions or take piano lessons, and often spend weekends studying.
Also, because of the one child policy, there is often extra pressure on students to perform.
“That one kid will often have to support all those parents and grandparents when they grow up so that adds some pressures,” said Bryan Batson, President of the China Business Group.
School and studying leaves little time for skateboarding, surfing and snowboarding.
Tomorrow we look at action sports and marketing to the youth culture in China.
By SHELBY STANGER
December 08, 2011 06:30 AM
Editors note: Other stories in this series include an overview of the market, a closer look at the retail landscape in China, and why localization is key.
During my research, I got different answers about the size of the action sports market in China.
Joe Eberling of Wild Rampage estimates action sports wholesale revenues in China are still less than $100 million.
Snowboarding has been in China awhile because it is an Olympic sport, but is still small, according to Eli Kislevitz, who has worked with several brands in China.
“The snow season is four months a year max, and 99% of the market is concentrated in an area similar to the size of upstate New York and New Hampshire,” he added.
Nanshan is the most accessible mountain (near Beijing) with the most developed terrain park in China created by Mellow Parks, a company with a large hand in China snowboard development.
There are also three indoor snow domes; Beijing, Shanghai, and Shenzhen.
Miriam Deller of Core Power Asia, a consulting marketing firm that deals with action sports in China and who is married to a top Chinese pro snowboarder, said snowboard participation increases 30% a year.
A variety of brands in addition to Burton have done “Learn to Ride” days to get Chinese involved in the sport.
Red Bull, Oakley and Burton have also sponsored several snowboard contests over the years.
Surfing is also a small sport in China, mostly limited to Hainan, the island where the International Surfing Association will host the Hainan Riyue Bay International Surfing Festival presented by Quiksilver in January.
Brendan Sheridan, who runs Surfing Hainan, a surf school and shop he opened in 2007, said, “Every year the number of Chinese surfers seems to double.”
Right now though, the market is miniscule.
The surf in Hainan, where the ISA will hold a contest in January sponsored by Quiksilver.
“Chinese are slow to get into surfing because there are a few cultural barriers,” Brendan said. “Most people don’t want to get a tan (the sign of a manual laborer) and even coastal residents rarely swim. But there is definitely interest. Western surf brands do not have much of a presence in China yet, so most people here are largely unfamiliar with the brands,” he added.
With the ISA hosting a contest in Hainan next year, President Fernando Aguerre is hoping to not only show the world how fast the sport of surfing is growing, but he wants to help give Chinese youth access to surfing as a sport and a chance to eventually compete with the world’s top surfers.
“This event will mark a ‘before and after’ in the history of the country and of Chinese surfing,” he said.
The Chinese media has taken a big interest in the ISA’s plans, with over 100 media members attending press conferences, including correspondents from CCTV, the large broadcasting network in the country.
See Page 2 for details on China’s skateboarding scene
Continued (page 2 of 2)…
Because access to mountains and waves is limited and can be expensive in China, many point to skateboarding as they key sport action sport to focus on in China. Cathey Curtis said Quiksilver always had success when using skate imagery at events.
Ryan Sheckler at the Woodward opening in Beijing.
Skateboarding is fairly new though. In a 2009 article in the China Daily Newspaper, Han Minjie, who owns the Flystreetwear Shop, one of China’s most iconic core skate shops and who is considered the godfather of China’s growing skateboarding community, said there was about 40,000 to 50,000 active skateboarders in China in 2009, a number that is growing steadily.
Neal Hendrix, a pro skateboarder and the brand Manager for Woodward, started coming to China in 2006. He said there is a growing skate scene in the main cities of Shanghai and Beijing as well as a group of core skaters in Shenzen, an area where many international skaters have filmed ads and movie parts.
If there are skateboarding stigmas, many said it often stems from overprotective parents, though Joe Eberling says skateboarding is perceived differently in China.
The Woodward street course in Beijing.
“If there is a cultural difference it’s about the image of skating. In the West, skating is positioned as a rebellious, anti-social activity. In contrast, skating in China is a highly social activity, with kids who skate saying they got started to meet people and stick with it because their friends skate.
“We’re having tremendous success getting new people on-board by showing images of beginners with big smiles on their faces learning to skate with their friends nearby.
“Also, Chinese parents spend a lot more time with their kids, and they like to see structure and measured progress, so supporting any organizations that are offering group classes with levels and badges for accomplishment will do a lot toward getting more kids hooked on skating,” he said.
In 2005, SMP launched the largest skatepark in the world. It’s about 130,000 square feet.
Young kids get ready to race on skateboards at an Icon X event.
Woodward also opened a facility outside Beijing in May of 2010 where there used to be an older government resort.
Brands like Vans use the facility to bus in kids from Beijing, and they host skate nights where there is usually a barbeque, music and kids skate for free.
Tomorrow, we look at what brands are doing to increase Chinese action sports participation and what the potential for action sports really is.
Action Sports in China – increasing participation
Editors note: Other stories in this series include an overview of the market, a closer look at the retail landscape in China, why localization is key and how brands are trying to increase participation.
Most brands I interviewed have been trying to increase brand presence by introducing Chinese kids to their sports.
It is a tactic Nike used when it first entered the country with basketball. According to a 2004 Time Magazine Article, when Nike entered China the first step was getting the swoosh recognized. After that, Nike outfitted top Chinese athletes and sponsored all the teams in China’s new pro basketball league in 1995. Back then, a pair of sneakers cost about twice as much as one month’s salary, so Nike decided to change Chinese culture.
Terry Rhoads, then director of sports marketing for Nike in China told Time, “We thought, ‘We won’t get anything if they don’t play sports.’ “ Time said Rhoads used basketball as Nike’s ticket, donating equipment to Shanghai’s high schools them paying them to open their basketball courts to the public after hours, and putting on Nike tournaments as well as founding the city’s first high school basketball league, the Nike League.
Through the 1990s, sales increased 60% a year. “Our goal was to hook kids into Nike early and hold them for life,” said Rhoads, who now runs a Shanghai-based sports marketing company, Zou Marketing. Nike also started bringing players like Michael Jordan for visits.
Brands I spoke with have been using a variety of tactics to introduce action sports culture to consumers.
Jackie Subeck, CEO of Footprint Worldwide, which works with Western musicians, events and large action sports brands in China.
“Learn to Ride” days have been successful, according to Jackie Subeck who has been working with Oakley on a program where they bus in university students to a local indoor mountain, provide food and Oakley rental equipment and teach them to ride.
Burton has also been doing learn to ride programs for years.
Brands are also hosting various events to increase participation and awareness of action sports.
The Wabsono Group has been hosting a series of amateur skate contests called the Baby Dragon Skate series with guest pros who put on demos.
Wabsono also took surfers including Wingnut Weaver and Mary Osborne to a tidal bore to showcase surfing in the main city of Hangzhou, Zehjiang, China as part of the “Surfing China Festival,” “China Action Sports Expo” and the first annual “China Action Sports Retail Summit.”
Oakley puts on the Oakley/Shaun White Air and Style Beijing where they bring Shaun White to the city and also host a concert.
Billabong and Quiksilver are also hosting surf contests on Hainan.
Nike hosted an event in Shanghai recently where they had basketball superstars like Lebron James at a skateboarding demo in the middle of the city.
Mikala Jones surfing a tidal bore in China in an event organized by the Wabsono Group.
Converse has made a stronger skate push recently hosting a movie premiere in Beijing with a miniramp for pro riders, free tattoo artists, bands, and a chance to design your own T-shirt.
“Even people who don’t get skateboarding thought it was a really cool event,” said Eli Kislevitz from Skullcandy who attended.
The X Games Asia has been in China since 2007. The X Games features mostly international athletes in skateboarding and BMX rather than local Chinese.
See Page 2 for the athlete dilemma
Action Sports in China – increasing participation
There are not yet a lot of pro riders in China that can compete at an international level. Being a professional athlete in China, is also vastly different than being a pro in the U.S.
Oakley’s Air & Style event featuring Shaun White
“In China, this market is still very much owned by the government. Therefore, when it comes to sponsoring athletes, it’s not as easy to gain access to specific individuals because there may be outside pressure to take the entire team as a whole,” said Alan Peng of Oakley.
Alan said Oakley has an entire team in China just to build athlete relationships and to work with various sports associations in the country.
“Often times, if a sport is deemed key for the government, it may become a big challenge for foreign companies to enter. Since China’s government opened up policy in the 1980s, the government continues to have high stakes and interest in local brands, and many athletes feel it may be their civic duty to be loyal to the government,” according to Peng.
In the case of X Games, there was situation recently where a Chinese BMX rider Shen Jian, sponsored by Vans, ran into a conflict with the Chinese government because of a sponsorship agreement.
According to the New York Times, the China Extreme Sports Association prohibited Shen Jian from competing at the X Games unless he wore a jersey emblazoned with the official Chinese sponsor’s logo. Since doing so would have nullified his Vans contract, Shen Jian refused to compete.
While the political landscape in China can make dealing with athletes a struggle, Alan Peng said, “More and more, the Chinese government is seeing great potential in sports, and therefore is investing into it. Still, it has a long way to develop,” Peng added.
Aside from the political landscape of sports, most people I interviewed agreed that the tipping point for action sports will come when China has a national hero that makes it big on an international level, like Yao Ming did for basketball, or Sofia Mulanovich did for Peru in surfing.
Skullcandy sponsored a Skate Deck Art exhibition in five cities. L to R: Andrew Guan of KickerClub.com, Shuang Long of Burton China, Burton team rider Wang Lei, Jungle Zhang, Skullcandy Core Marketing, and XuYing, sponsored SKDY skate team rider. Photo courtesy of Skullcandy.
Only time can help build national athletes though, and according to Jackie Subeck, most brands have already sponsored the best Chinese action sports athletes.
Beyond increasing core boardsports participation, developing brand awareness in China can be challenging.
“China is a very large country in terms of both population and geography so getting the message to your target consumer is a real challenge,” said Mitch Whitaker of Vans.
The majority of people I interviewed pointed to Vans as doing the best job in the action sports industry in China.
“We use all the traditional methods of marketing but we do put a different weight on how/where we spend our marketing dollars compared to other markets,” said Mitch. “Digital is an interesting area of growth in China with more than 400 million internet users and growing daily.”
What works today in China though, might not work in six months.
“One month here goes by faster than six months do in the states,” said Eli from Skullcandy.
See Page 3 for a summary of the Chinese market
Action Sports in China – increasing participation
The consensus after interviewing numerous people and brands about China is that the market is huge, it’s still untapped, it’s growing, but it is highly complex and there is no one recipe to success.
While the one child policy has made it seem like there is a surplus of kids that parents can spend money on, the reality is that as these kids grow up, China is predicted to have the largest aging population in the world.
If there was a common theme from what people told me, it’s that brands need to be cautious, respectful of Chinese culture, and recognize that doing business China is different than anywhere else in the world.
“The action sports industry is growing quickly, but it’s still going to be many years before it becomes a multi-billion dollar industry,” said Joe Eberling of Wild Rampage.
“It’s funny talking to many people from our industry in the USA who think that everybody on the planet knows their brand and their riders, and is just dying to get a pair of kicks because they just saw the latest video of a pro tre-flipping a 20-set. The reality is kids in China don’t know, and if they did, they might not even care.”
“Chinese have a 5,000-year history. They invented just about everything worth inventing in antiquity, and they have pride in what their ancestors have accomplished and in where their country is headed today,” he said. “They want to see home-grown talent and they want to be treated with respect. It sounds basic and it is, but humbleness is not always easy.”