If there is one thing that China’s smaller cities do not lack, it’s sportswear stores. The average fourth-, fifth- and sixth-tier Chinese city – everyone defines their tiers differently – has a high street with multiple Chinese sportswear retailers lined up in a row. Do these towns really need more running shoes?
Adidas certainly thinks so and its latest greater China sales – up 15 per cent in 2012 – seem to indicate that it’s right. The German sportswear brand, currently number two by sales behind Nike, has expanded into 350 more Chinese cities in the past 18 months, to 900 in total. Of the 800 stores opened last year, 400 were in lower-tier cities. The goal is to have 1,400 cities buying Adidas by 2015.
How low can they go? Colin Currie, Adidas greater China managing director, says China’s smaller cities still have plenty to give: “consumers in lower-tier cities have a lot more time to participate in activities that do not cost a lot, like running,” he says, adding that “there is not so much choice in lower-tier cities in apparel so it’s ok to wear sportswear for going to work or even a wedding”.
More sophisticated big city Chinese consumers would, like their counterparts in the West, almost certainly eschew a tracksuit as wedding attire. But in China, sportswear – especially foreign sportswear – is viewed as almost a luxury good: an aspirational rather than a practical buy, as the admen would say.
And that’s where another sportswear shop on the high street may make perfect sense: buying a pair of shoes from one of China’s multitude of virtually interchangeable sportswear brands, who have severely fragmented the market and cannibalised each other’s margins, just does not have the same cachet as buying Nike or Adidas. And though famous foreign brand logos have begun to lose their overwhelming appeal in big cities, the smaller cities are still mad keen on them.
Multinationals, take note: all of you are counting on China’s lower-tier cities to deliver the growth that is no longer possible in the near-saturated big cities. Let’s see how Adidas fares, in cities where many residents are just a few steps away from farm and field. If Adidas can make it work, there may be hope for the rest of you.