Chinese Sports Apparel Brands Challenge Global Giants in Home Market

In the 12 months ended in May 2023, Nike sold over $7.2 billion worth of goods in Greater China¹, almost three times as much as it sold there a decade earlier, according to FactSet data. While such growth underscores the market’s importance to the world’s largest maker of sports shoes and apparel, it also masks a less flattering trend gaining momentum in recent years: Nike, along with global apparel brands such as Adidas, H&M, and Zara, have been steadily losing market share to domestic incumbents as Chinese consumers opt for domestic over global brands. Nike’s high watermark in China was 2021, when its $8.3 billion in sales in the region accounted for 18.6% of its global sales. By 2023 its Greater China sales had not only fallen by $1 billion, but they also accounted for only 14% of its global sales, a four-point drop in just two years. Figures for other global apparel giants in China tell a similar story (although not all companies break out their China sales separately).

Such loss of market share in China for global brands can be traced back, at least in part, to what Chinese refer to as the “Xinjiang Cotton Incident,” the March 2021 boycott by some of the world’s largest apparel makers of cotton sourced from China’s Xinjiang region which was allegedly harvested by religious minorities that were forced into labor camps by Chinese authorities. This event catalyzed Chinese consumers to substitute foreign brands with domestic ones. It didn’t hurt that, for years, domestic sports apparel manufacturers have been producing goods of comparable or higher quality to those made by multinational players.

Four members of the MarketGrader New China ESG Index–ANTA Sports Products, BIEM.L. FDLKK Garment Co., Xtep International, and Li Ning– have become clear beneficiaries of this trend, allowing them to gain market share from established international brands. We highlight two of them below.

ANTA Sports Products Ltd. (2020.HK)

MarketGrader Score: 72.0 (out of 100) / Sentiment: 8.9 (out of 10)

ANTA Sports, founded in 1991, is headquartered in the port city of Quanzhou in southern Fujian province. The company manufactures sports footwear, apparel, and accessories under three brands groups that include the Performance Sports Group led by the ANTA brand; the Fashion Sports Group represented by FILA, and the Outdoor Sports Brands comprising the DESCENTE and KOLON SPORT brands.

ANTA's annual revenue of 62.4 billion yuan² in 2023 surpassed Nike China's 52.2 billion yuan and Adidas China's 24.4 billion yuan, making it the clear leader in China's sports shoes and apparel market, something few thought possible half a decade ago. Its figures also compare favorably with other popular domestic sports brands, with the company’s annual revenue being 2.3 times that of Lining, 4.3 times that of Xtep, and 7.4 times that of 361 Degrees, three of its biggest domestic rivals.

ANTA has more than 12,000 stores nationwide, which have grown in importance since the pandemic forced management to reconsider its distribution model. Prior to August 2020, ANTA’s distribution strategy relied extensively on a wholesale distribution model, supplying products in bulk to regional retailers throughout China, which made it difficult for the company to react quickly to changing consumer tastes, which vary significantly by region. In 2020 the company implemented a Direct to Consumer (DTC) model, which it rolled out across 11 regions. The DTC model allows the company’s own retail stores to replenish and redirect inventories from the company’s logistics centers directly as they respond to on-the-ground changes in consumer preferences. Furthermore, by utilizing big data analysis provided by the company’s revamped digital platform, ANTA can analyze real-time operation data of all stores nationwide, achieving flexibility in inventory distributions among direct retail stores. Its digital-first approach now extends across the entire value chain, from product development and manufacturing to delivery.

Besides the transformation of its distribution model, ANTA has focused recently on elevating its brand by taking a page from Nike’s and Adidas’s playbooks and launching branded products with celebrity endorsers. In July 2023 the company unveiled 2016 NBA champion and eight-time All-Star Kyrie Irving as its basketball brand ambassador, followed by deals with renowned Ethiopian long-distance runner Kenenisa Bekele and renowned actress Yang Mi as ambassador for the company’s FILA brand. And as official sponsor to the Chinese Olympic team, ANTA should get a publicity boost during this summer’s Paris Olympics where it will also be the Official Sportswear Supplier to all International Olympic Committee (IOC) Members.

The company is now expanding further into new areas of sport fashion by partnering with niche professional outdoor and street fashion brands such as Japanese fashion brand BEAMS and British skateboard brand Palace.

BIEM.L. FDLKK Garment Co., Ltd. Class A (002832.CN)

MarketGrader Score: 72.3 (out of 100) / Sentiment: 4.9 (out of 10)

At its founding in 2003, Guangzhou-based BIEM.L. FDLKK aimed to be China’s top golf brand and within 10 years it had become the official sponsor of China’s National Golf Team. Today the company has crossed over into leisure wear and luxury apparel, it operates more than 1,000 stores around the country, and commands over 50% market share of China’s golf apparel market. While its sales footprint is still small relative to the market size (it reported USD 500 million in sales in the 12 months ended in May 2023)³, management’s goal is to grow its revenue 10-fold within a decade, which seems achievable considering that China’s sportswear apparel market trails only the U.S. by size.

A large part of the company’s success can be attributed to its ability to combine traditional elements of Chinese culture into its designs, while staying modern and focused producing high-quality garments over low-cost products. This has allowed it to compete effectively with global brands such as Lacoste and Ralph Lauren, from which it has taken market share in recent years. Having carved out a unique place among China’s middle aged male consumers, BIEM.L. FDLKK has become a direct beneficiary of the country’s trend toward domestic luxury goods over foreign brands.

In 2023 the company expanded further into the luxury apparel segment through the acquisition of two nearly bankrupt international brands, Cerruti and Kent & Curwen. France-based Cerruti, which produces men’s and women’s luxury apparel, suits and footwear, commands prices comparable to those of established international brands such as Burberry and Ermenegildo Zegna. Kent & Curwen, founded in 1926, is an established manufacturer of men’s sportswear in the UK, known for its university ties and cricket sweaters, giving the company a prestigious brand with which to press its advantage in its home market.