BEIJING - About 40 sporting goods stores
do business in a clump right outside the gates of
the Wuhan Institute of Physical Education in the
giant Yangtze River city's college quarter. The
mostly single-room stores on both sides of Luoyu
Road, an arterial street in Wuhan, try to
out-price one another on international brands such
as Adidas, Li Ning, Spalding and Wilson.
The institute's 7,100 students, with
average budgets of 200 yuan (US$24.96) to 400 yuan
per semester, use the stores for class-related
equipment and clothing. "For most students here,
it's quite suitable, and you get students from
other universities here, too," said Fan Jiaben, a
Wuhan native majoring in gymnastics
at the institute.
But not every merchant gets rich. Students
prefer bigger stores, some three floors high,
which offer warranties and professional service.
But low-budget consumers get their basketballs,
tennis rackets, shoes and jerseys at the smaller
shops, which get the merchandise at discounts from
agents and try to out-price the bigger stores.
"People with money buy specialty goods,
but people such as students have lower income,"
said Zhou Benwei, duty manager at the one-room,
two-year-old Shengyang Sports store. "We get by,
but it's pretty competitive."
The sporting
equipment alley in Wuhan provides a useful
snapshot of the winning and losing sides of
China's $15.5 billion sports industry, which was
created in the 1980s when China's economic reforms
began, and accelerated in 1994 when the sports
minister required the country's professional
sports leagues to support themselves financially.
On the winning side, urban Chinese, from
student athletes to retirees who keep in shape
practicing martial arts moves in their yards, are
spending money on sports. Stores, gyms, fitness
centers and sponsored athletic events are earning
money in China as the government promotes
international sports awareness ahead of the 2008
Beijing Olympics.
Nike, for example, reports that its
footwear revenues were up 19% to $284.1 million in
the third quarter of 2005 in the Asia-Pacific
region, largely because of its 24 years of China
sales. Nike's Asia-Pacific apparel revenues
increased 6% to $199 million and equipment
revenues grew 6% to $49.2 million.
But not
everyone spends. Beijing Guo'an football (meaning
soccer) matches at home sell about one-third of
their 60,000 seats at season ticket prices of a
mere 30 to 50 yuan. Auto racing teams do not make
money, although team sponsors get media exposure,
said Tan Ying, driver and organizer with the
Beijing racing team Super Car Club.
Also
on the losing side is the fact that sporting goods
stores in Wuhan and elsewhere will not always say
where their equipment comes from, a clue that the
goods may be knockoffs.
Still, outside
analysts like what they see. "This is an industry
in an initial, robust phase of development. More
investment funds are clearly coming into the
sector," said Charles Martin, president of the
American Chamber of Commerce China. "Companies are
experimenting with different business models. It
remains to be seen which model will prove to be
successful and if the timing is right."
More people working out, playing
ball An increase in personal income
following the economic growth of the 1990s has
left the average Chinese city dweller with enough
disposable income for exercise. For older people,
that may mean buying martial arts swords and
loose-fitting clothes. For their children, it may
mean gym workouts, swimming or a personal fitness
trainer. Their grandchildren play basketball and
climb mountains.
Sporting goods were worth
several billion dollars in China last year, with
the market growing fast, a China-based sporting
events consultant found in a study last year.
Younger people spend most of the money.
They buy health club memberships at from 1,000
yuan to 16,000 yuan per year and pay personal
trainers up to 250 yuan per hour. Chinese people
worked out for health and fun at the same time,
giving fitness centers plenty of business, said
Brian Bucsit, an American-born trainer with the
Beijing-based Evolution fitness center, a
foreign-Chinese venture. He normally has 15 to 20
people on his schedule.
About 50,000 gyms
operated in China last year, and health clubs were
worth about $3.3 billion. "There's a new health
club opening every day. Every new building has one
either adjacent to it or in the basement," Bucsit
said. "So I just see the industry getting bigger
and bigger."
Business at the Kaike
Yansheng Sporting Goods store outside the Workers'
Stadium in Beijing came in waves, and especially
from athletic teams, said a staff member surnamed
Zhang. She said people in Beijing cared more about
staying fit. "Business should get better and
better because people are talking more about
working out and staying fit," Zhang said.
Chinese officials also call basketball the
nation's most popular sport. Other top sports are
table tennis and football. Volleyball has a
following among older sports fans because the
women's national team has done well since the
1980s.
US sporting equipment maker
Spalding, which has been in China 11 years, says
China has become its biggest market after the US.
Its market share grows 3-12% annually and its
revenues rise 20-25% per year. Basketballs sold
better than other equipment at the 20,000 Spalding
outlets around the country, said Thomas Lee, vice
managing director of Spalding's China agent,
Starlike International Ltd Shanghai.
"Globally speaking, Chinese basketball is
pretty advanced," Lee said.
Although
basketball star Yao Ming and the National
Basketball Association (NBA) are hip in China -
the NBA's China revenue rose 50% in 2004 - these
two rages were only "bright spots," Lee said. He
said sales of Spalding basketballs grew because of
personal income generated by China's "stable"
economy.
Equipment for just about every
sport imaginable is sold in China, but not every
seller earns money. Despite an interest in the
extreme sports after the Chinese X Games in 1998,
few related businesses had opened over the past
two years, and many that opened previously had
failed, said Cortney Smith, owner of Bungee
International, a Shanghai company that specializes
in the design and construction of extreme rides.
Extreme sports gear such as 880 yuan ice
axes, 1,600 yuan mountaineering boots and Everest
tents for more than 2,000 yuan exceed the average
household budget in a country where the average
urban per capita income was 10,493 yuan last year.
Lack of brand-building awareness had put
Chinese sporting goods companies on the defensive,
the events consultant's study found. The study
said one exception was Li Ning, which has an 8.7%
(but declining) market share.
Trademark
violations a challenge As is true for many
other manufactured-goods industries,
counterfeiting is a serious problem for sporting
goods. Shopkeepers asked about the source of their
name-brand sports merchandise said it was funneled
through manufacturer representatives or that they
were not the right person for comment.
From 60 to 90% of sporting goods - higher
than the average for other types of merchandise in
China - were knockoffs, the consultant study said.
It added that trademark violations stopped sports
merchandise from turning a profit.
"Counterfeiting is endemic and a huge
challenge for both domestic and international
brands in China and worldwide," the study said.
"Trademark protection and enforcement is
notoriously poor, and in the medium term this is
unlikely to change."
Martin of the
American Chamber of Commerce called trademark
violations "a major problem" for American sporting
goods brands. Knockoff Spalding equipment was five
times more common than legitimate equipment, said
Lee, the company representative in Shanghai. He
said the company was particularly concerned about
the 15% of knockoff balls that looked as good and
performed as well as legitimate ones. "This is
very serious," Lee said.
The consultant's
study said Beijing was fighting extra hard to keep
its Olympics logo in legal hands and called the
fight a "benchmark" for future cases. Vendors on
Beijing streets are already selling knockoffs of
the "Five Friendlies", which are four cartoon-like
animals and an Olympic torch caricature approved
in November as official mascots for the 2008
Games.
Public events generate fans,
sponsors Super Car Club's Tan Ying, an
on-road and off-road racer, said the estimated 100
Chinese people with racecar licenses did not
normally make money from events. Races, including
a publicity-oriented 400-meter dash, were staged
routinely in China because team sponsors earned
money from media exposure, Tan said. Foreign car
manufacturers are the chief sponsors of Beijing
teams.
"The potential market is big. I
always consider racing a media method, a method of
advertising," said Tan. "For racing teams or
drivers, they get no profit."
Sporting
events, which are increasingly routine and
international, may be discounted or free to the
fans - or at least to TV viewers. Athletes often
are wage-earning performers trained at
government-run institutes as national property.
Local governments also organize competitions.
Auto racing's emphasis on sponsors is
common for Chinese sports. Chinese and
international brands have found payback from
paying event organizers in exchange for getting
their names on cars, hot air balloons and stadium
walls.
"In the West, sports are driven
from the core of the participant. Their driving
passion is for the sport and the pursuit to be No
1," said Smith of Bungee International. "In the
East, sports are driven by big business ad dollars
and government permits to hold the event. The end
result is that budding sports don't easily stand
up on their own.
"I see huge impact for
the 2008 Olympics, because this will spark the
drive of the sportsman within China," he said.
"Many will realize the affection for hero worship
and choose to look at sports as a career move."
Promisingly, China's sports sponsorship
market was already the world's fifth-largest
despite a bumpy start because of low merchandise
and media revenue, the event consultant's study
said. The 2008 Olympics would set a precedent with
$1 billion in sponsorships, it said, with Chinese
sponsors spending an average of $100 million
apiece for eight of the top 10 slots.
Siemens Mobile, backer of China's national
football team, is among the highest-profile
foreign sponsors. Chinese brands include China
Mobile, Li Ning and the China Sports Industry
Corporation, an event management company.
Chinese-owned Shide Corporation, a chemical and
manufacturing company, has also made a name by
adding its name to its hometown football club in
Dalian, which has one of the few profitable
football teams in China.
The China balloon
tournament attracts fans and sponsors by holding
events for free in public places. When 50 to 200
competitors take to the skies at five China
competitions this year, spectators would see
brands such as Epson, LG and Bank of China on the
sides of the hot-air balloons, said Gao Zhong,
vice general manager of the tournament. He called
sponsorships "an increasingly effective" way to
offset tournament costs.
Tournament
sponsorships worked the same way as an
international car race, Gao said. "We hope we can
be the F-1 in the sky," he said.
The
Formula One Grand Prix came to Shanghai in 2004
and 2005. Other international events staged in
China include the China Tennis Open and the Tennis
Masters Cup. The masters took place in 2002, 2003
and 2005 in Shanghai. The China Open began in
Beijing starting in 2004.
Foreign brands
such as Kodak and Coca-Cola believed sponsorships
were effective in China, especially as Olympic
partners, said Mark Thomas, managing director with
the Shanghai-based sports brand management firm
S2M Group, which has 10 core clients. Chinese
brands were "at the start of a learning curve" in
realizing sports could help publicize their names
globally, he said.
Thomas also cautioned
against any brand staking too much on the 2008
Olympics. "The industry should prepare for
post-2008," Thomas said. "No one should just get
into sports for the Olympics."
But
sponsors are picky. ClubFootball, a Beijing
organization whose professional British coaches
trained Chinese international school students and
their Chinese neighbors, had not found enough
long-term sponsors, said club general manager
Keith Bradbury. Chinese and foreign brands
underwrote one-off events, he said, but sometimes
they could not measure the payoff.
Football fought for attention in China for
lack of dedication, Bradbury said. "The folks that
go [to matches] don't have a very high disposable
income, and there isn't the loyalty of the
European markets," he said. Chinese football
league scandals had also soured the sport, he
added, although the league was "steadying the
boat" this season.
Bradbury suggested the
city of Beijing, which backs sporting events,
dedicated more land to football pitches to raise
the sport's profile. Some housing developers build
sports facilities, but outsiders are either not
allowed to use them or cannot afford admission.
Media: China Central TV ... and the
rest Today, China Central TV (CCTV)
controls most sports broadcasts in China. The
nationwide, state-run television network
broadcasts major international events such as the
Olympics and the football World Cup. All video
feeds from sporting events in China go through
CCTV broadcasting centers before reaching foreign
viewers.
Advertisers liked CCTV's
all-sports Channel 5 because its coverage of major
events reached the biggest possible Chinese
audience, said David Wolf, president and CEO of
the Wolf Group Asia, which specializes in media
research. Channel 5 reaches more than 100 million
people per day and does 80% of the country's
sports advertising. The target consumers are
usually younger men.
Shanghai TV and
Chinese cable networks also covers sports. ESPN
and NBC game coverage sometimes reached China by
accident, Wolf said.
But the rest of
China's media, including 2,137 newspapers and as
many as 9,000 magazines and an Internet with more
than 110 million users, did not offer much to
foreign brands or investors hoping to reach
Chinese sports fans, the event consultant's study
found. Lack of online purchasing limits the
Internet's potential. Foreigners are not allowed
to broadcast by radio. IPTV and wireless media are
still small.
The Chinese print media
allowed foreign investment, but the returns were
not as high as broadcasting, the consultant said.
Foreign publications must be imported into China
and checked by censors before being mailed to
subscribers or sold at major international hotels
- the only outlets allowed.
However,
foreign companies hoping to reach Chinese
spectators could hold publicity events with a
sports angle and send related press releases to
Internet news portals or to local papers,
including dedicated football publications, said
Jia Ji, client service supervisor with Xinhua PR
Newswire in Beijing. She said these media were
popular with young people.
"If a sports
company is our client, we distribute [promotional
material] through all the media, especially print
media and the websites," Jia said. She recommended
creative publicity, such as interactive contests,
connected to closely watched competitions. "I
think a lot of people will look at it, like it's a
bet - who will win?
"The other thing is to
advertise on TV, but [the client company needs] to
have a big budget," she said.
Wolf
forecast improvements in the quality of TV
broadcasts as Chinese media learned from foreign
sports channels. Better broadcasts should prompt
more spending on the quality of Chinese venues and
athletes, he said, creating a "virtuous cycle."
"It's going to be a tremendous education,"
Wolf said. "We're going to see a significant bump
up in the quality of programming and the quality
of production."
Ralph Jennings
is a Beijing-based foreign correspondent.
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