Written by | Mitsui
Editor | Li Kexin
Vision | Shao Chen
Top Sports is the largest sportswear agent in China and has the domestic sales agency rights for 11 internationally renowned sports brands.
Topsports’ main brands are Nike and Adidas, other brands include: Puma, Converse, Vance, The North Face, Timberland, ASICS, Onitsuka Tiger, Skechers and Li Ning.
Topbo has been cooperating with Nike since 1999, and in 2004 it became the largest Nike cooperative dealer in China. Topsports started to cooperate with Adidas in 2004, and in 2012 it became the largest buyer of Adidas in the world.
In fact, most of the Nike and Adidas stores we see in our daily life are most likely to be operated by agents such as Taobo. Only a few stores in first-tier cities and seasonal discount stores in various places are directly operated by the brand. In addition to Taobo, Shengdao, Faya, Ruili, etc. are also agents of Nike and Adidas in China.
The method of distinguishing directly-operated stores and agency stores is also simple. You can rely on the shopping bags presented by the merchants when shopping. If the shopping bag logo is Nike, it proves that it is a brand-directed store, and the rest are the logos of major agents.
According to Taobo’s unaudited annual results for the year ended February 28, 2022, Nike and Adidas, two of which accounted for 86.5% of its total operating income, and because they contributed more than 80% of its revenue, Taobo and the two brands The relationship between one prosperity and one loss is destined to be maintained for a long time.
01.
Road running, basketball, sneaker
Many new trends in sports culture help
From Nike, Adidas to Taobo, their development context is closely related to the ups and downs of the development of domestic sports culture.
In 2019, my country hosted the FIBA Basketball World Cup. The Chinese team lost to Poland and Venezuela, and the Chinese men’s basketball team also missed the Tokyo Olympics. The chain reaction of this event led to the Chinese men’s basketball team entering the history of men’s basketball for a period of time in the future. of the darkest hour.
But Sai Weng lost his horse, how could he know that it was not a blessing.
Although the results were not satisfactory, the social attention of basketball in China reached a peak in 2019. Yao Ming, chairman of the Basketball Association, drafted a series of reform plans, striving to improve the status quo of Chinese basketball in the next 10 years. In addition, non-governmental basketball events and activities continue to be popular, and a large number of events that are loved by young people have emerged for a while. Such as: Hupu Passerby King, Sina 3v3, Anta is going crazy, Li Ning against the army, etc.
During this period, the popularity of marathons in China has also risen sharply, and marathon events are being held all over the country. Road running and basketball equipment are the main force of Nike brand sales, and the vigorous development of the two has played a crucial role in the development of Taobo.
It can be confirmed that the revenue and net profit of Nike Greater China in fiscal year 2020 both increased, and in the fourth quarter of fiscal year 2020 as of the end of May, Nike Greater China market revenue increased by 1% year-on-year to 1.647 billion US dollars, It is the only region in the world where Nike has achieved sales growth.
According to the annual performance report of Taobo as of February 29, 2020, the revenue of Nike and Adidas, the two main brands, increased by 4.4%, and the two accounted for 87.5% of its total operating income. During the reporting period, the company’s total revenue was 33.69 billion yuan, a year-on-year increase of 3.5%.
▲The composition of Taobo’s FY2020/02 fiscal year’s performance and revenue, picture source: Screenshot of Taobo’s financial report
With the help of the basketball World Cup, Taobo launched the official cooperation with the NBA. China is the largest overseas market for NBA officials, and NBA officials have long had the idea of expanding overseas NBA souvenir sales.
The two hit it off instantly. At the end of 2019, the first NBA flagship store in China landed in Wangfujing, Beijing. This store also surpassed the NBA flagship store on Fifth Avenue in New York and became the largest NBA flagship store in the world. The establishment of this store aims to further spread NBA culture in China and provide Chinese consumers with a channel to purchase official NBA souvenirs.
Due to the long-term production of counterfeit goods in Putian, China, and the proliferation of long-term counterfeit goods in China, overseas channels for NBA-related souvenirs have never been opened. It’s not that the Chinese people have insufficient spending power, but that the market is mixed, and it is difficult for consumers to distinguish the authenticity. Taobo’s move has successfully opened up overseas official channels for NBA-related products, laying a solid foundation for the development of sporting goods and sports collectibles in China.
In recent years, the sneaker culture in the United States has continued to spread in China, which makes Topbo see new development prospects again.
At the end of 2020, the world-famous sneaker feast sneakercon landed in Shanghai, attracting sneaker lovers from all over the country, which made sneakers, a North American sports subculture, developed in China. Platforms such as Douyin and Station B have successively emerged many sneaker up owners, sharing sneaker wear, evaluation, etc. on a daily basis.
This series of favorable events gradually promoted and disseminated sneakers, a very small hobby in China, and started a large-scale germination of sports subculture in China. This is undoubtedly a heaven-sent opportunity for the development of Taobo.
In 2019, nike and the famous American rapper travis scott jointly launched an air jordan 1 sneaker. The template of the sneaker is the classic aj1. Nike changed the nike swoosh of the original shoe to an upside-down and supplemented it with a grimace designed by travis scott himself. This shoe was first exposed at ts’s personal concert. After its release, it was popular all over the world. The domestic sale price was 1299, while the secondary market price was as high as more than 1w.
Topbo took advantage of this opportunity to launch a successful marketing campaign.
Taobo has carried out online lottery and offline lottery activities in several large stores in China (users first draw lots online, get the qualification for the second offline lottery, and then go to the store to participate in the second lottery). The stores are mainly in Wuhan and Chongqing. Taobo flagship store, the shoe circle is known as the battle of Wuhan and Chongqing in history.
Shoe dealers and enthusiasts from all over the country head to the draw. On Douyin, there have been many videos of starting a trip for a pair of shoes. According to Hupu netizens, before the offline second draw starts, a second draw can be sold for 500 yuan or more (the offline second draw has a high chance of winning the lottery). With the popularity, many people took this opportunity to start getting to know the largest nike agent in China.
But at the same time, Taobo’s biggest competitor in the future is planning to start a revolution in the domestic sports equipment market.
At the same time as the rapid development of Taobo, the drug app is also developing quietly. In 2020, the drug app was officially renamed Dewu, and at the same time, it began to gradually transform from a sneaker secondary market trading platform focusing on sneaker identification to a sports trend e-commerce. At that time, the new crown pneumonia epidemic swept the country, and offline shopping in various places was blocked. Under the situation of uncertain development of the epidemic, people began to choose online shopping, and Dewu eroded the business of many offline sports stores at this time.
After successfully defeating competitors such as Nice, Taobao Cool City, Bullfighting, and Check, Dewu has almost monopolized most of the domestic sports shoes and clothing e-commerce market and has become Taobo’s biggest competitor.
02.
The epidemic is not the main cause.Nike and Adidas
With the help of sports culture, Nike, Adi, and Taobo have gone through a long honeymoon period, but now they are relying on Nike and Adi, and they seem to be less well-informed.
According to the FY2020/02 financial year results, Taobo’s profit and revenue both fell. During the reporting period, the total revenue was 31.88 billion yuan, down 11.5% year-on-year. In the same period last year, the total revenue increased by 6.9% to 36.01 billion yuan; net profit was 24.5 100 million yuan, a year-on-year decrease of 11.7%.
Taobo’s official commentary stated that due to “the comprehensive interference of multiple factors such as repeated domestic epidemics and supply shortages caused by disturbances in the international supply chain”, the revenue declined.
During the whole year of 2021, due to the impact of the Omikron virus, offline consumption places will be severely hindered. The uncertainty and repetition of the epidemic has led to a series of consequences such as layoffs, economic downturn, and offline store closures. In addition, epidemic prevention and control requires people to avoid contact as much as possible. Many stadiums are closed, and the consumption of sports equipment such as football and basketball in my country is increasing. The main force fell into a short trough at this stage, so it is reasonable for Topbo to decline in this fiscal year.
Because Taobo’s main sales channel is offline stores, although Taobo actively took countermeasures, launched the Taobo sports APP, and increased wholesale business to downstream retailers, which offset the revenue loss to a certain extent, but the overall effect was still effective. Very little.
More importantly, Nike and Adidas, which contribute more than 80% of revenue, have become the key reasons for the shrinking of Taobao. During the reporting period, the two major brands have decreased by about 3.85 billion yuan, which is the most obvious decline except for e-sports revenue. 12.3%.
▲The composition of Taobo’s FY2022/02 fiscal year’s performance and revenue, picture source: Screenshot of Taobo’s financial report
In the past three years, the global epidemic has been one after another, and Nike’s global supply chain has been seriously affected. Vietnam, Indonesia and China are currently Nike’s most important shoe and apparel production factories, with production accounting for 51%, 26% and 21% respectively in 2021.
Affected by the epidemic, it has become normal that the normal operation cannot be started. In addition, the cost of manpower, transportation, and raw materials has risen, and the production efficiency has dropped significantly in the past three years.
This directly affects Nike’s performance. According to Nike’s financial report, since the second quarter of 2021, Nike’s domestic sales revenue has declined for two consecutive quarters, down 20% and 5% year-on-year respectively.
But more importantly, with the transfer of Nike’s foundry, Nike’s reputation has also been challenged to a certain extent, and this will also be a potential risk that will affect Taobo in the long-term in addition to the epidemic factor.
According to a shoe and apparel industry owner in Putian, who told the power plant that after the Nike production line was transferred to Southeast Asia, due to cheap labor and poor workmanship, the quality inspection requirements have also dropped a lot. “Nike started to make environmentally friendly products a few years ago, using recycled materials for shoes. , the glue is also environmentally friendly, so the degumming is serious.”
On the other hand, Adidas’ performance is also relatively sluggish. Greater China, the “engine”, will have a turning point in fiscal 2021. Taking the fourth quarter of 2021 as an example, in the context of global total revenue growth, Adidas has experienced negative revenue growth for three consecutive quarters in Greater China, down as much as 24.3% year-on-year, resulting in a 1.3% year-on-year decline in its profit margin.
From January to March 2022, the decline in Adidas Greater China was even more tragic, extremely weak, and revenue decreased by 400 million euros (about 2.85 billion yuan), a year-on-year drop of 34.6%. Greater China has fallen from Adidas’ second-largest market to third in terms of revenue.
Topsports is more aware of the risks of relying heavily on Nike and Adi. Under the strong performance of Chinese local brands Anta Sports and Li Ning, Li Ning was first reflected in Topsports’ annual financial report. Last year, Li Ning’s revenue soared by more than 50%.
03.
Store optimization, lottery promotion, unwilling to lie flat
Facing the rapid development of Dewu and other online e-commerce platforms, while expanding online shopping, Taobo is also continuing to optimize offline stores.
The financial report shows that in 2021, Taobo’s offline stores will decrease by 311, while the total sales area will increase by 5.4%, which indicates that Taobo’s stores have begun to change from more to more refined.
▲The number and scale of Taobo’s stores in FY2022/02, picture source: Screenshot of Taobo’s financial report
Taobo commented in the financial report that with changes in consumer experience and demand, more immersive perception is gradually replacing the traditional offline and online display of basic goods, and the role of offline stores is gradually changing from a place for selling goods to iteratively becoming a global one. A one-stop experience center. During the reporting period, the number of Taobo stores over 300 square meters accounted for 12.9%, a year-on-year increase of 3.5%.
In the past, a large shopping mall may have 2-3 Nike stores represented by Taobo, plus other brands, a shopping mall may have 7-10 Taobo stores scattered, now, Taobo merges these stores, many shopping malls There are Taobo Sports City, which brings together all brands and builds offline stores with a strong comprehensive sports atmosphere, highlighting the advantages of aggregating stores and facilitating consumer experience.
Hydrogen consumption believes that offline stores still have their own advantages on the track of future sportswear. Online shopping consumers cannot try it on, and the specific size and actual color cannot be determined. There will be a large number of returns in the later period, and the returned products after trying on will bring inconvenience to secondary sales, logistics expenses for returns and damage on the way. Rates also affect e-commerce platforms. The advantage of offline stores lies in the higher-quality shopping experience, better after-sales guarantee, and more intuitive product selection, which are exactly the direction Topbo is gradually improving.
It can also be seen from the financial report that Taobo has also increased its efforts in digitalization and user stickiness operations. Users can not only participate in the lottery of limited edition sneakers of Taobo Sports, but also launched a membership business, which is divided into ordinary members, gold members, black card members, diamond members and super members according to the consumption limit. Among them, the super member valued at 599 yuan includes a number of rights and interests: four free shoe washing services per year, four free courier services in the same city per year, full point redemption and priority to buy limited sneakers.
One of the most concerned is the priority to buy limited sneakers, which has successfully made many sneaker lovers and shoe dealers pay for them. Judging from the dozens of shoes that participate in the lottery every month, it is basically about five times a year to get the money back. To a certain extent, super membership may relieve Taobo’s sales pressure under the influence of the epidemic, but this is not a long-term solution.
In addition, the Taobo Sports APP has been connected to the Taobo Mini Program. During the reporting period, its private domain traffic sales accounted for 10-20% of the total direct retail sales (before VAT) of the store. The proportion of total in-store retail sales (including VAT) contributed by members was 96.4%, which continued to maintain a high level.
According to statistics, the United States is still the world’s largest sneaker market, accounting for 31.1% of the world’s sales, followed by Brazil, China, Russia and India, with China also accounting for 7.1% of the market. China’s current sneaker market is still in the stock market, with only 0.4 pairs of sneakers per capita, far lower than 3.4 pairs in the United States and 4.4 pairs in Japan.
In the post-epidemic era, it is unclear whether people’s consumption habits have changed, but for Taobo, this will be an excellent opportunity to reduce the number of stores, focus on building boutique stores, and focus on service and after-sales to wake up consumers. The offline shopping experience, which has been dusty in the heart for a long time, further attracts the customer group.
Hydrogen consumption believes that with the stabilization of the epidemic, the restart of major domestic sports events, and the positive development prospects of my country’s sports industry, the decline at this time may only be a small twist in the development journey of Taobo, but it cannot be ignored ” The hidden dangers of walking on one leg.
