PEAK CEO Xu Zhihua: Domestic Brands Are Hard To Compete With ADI Nike In 5 Years.

　　 Adidas In the fourth quarter of 2010, the net profit of the quarter was only 7 million euros, down 64% from the same period last year. Nike 2011 fiscal year third quarter report also shows that the level of profitability is not as expected.

While the performance of sports brands such as Adidas and Nike declined, China's local sports brands Peak Anta, XTEP, 361 degrees, etc. are still growing at a high speed. Does this mean that Chinese sports brands or opportunities? In the face of rising costs and intensified competition in the two or three tier market, how should China's sports industry respond?

In March 28th, PEAK sports CEO Xu Zhihua interviewed reporters in Xiamen to explain how Chinese sporting goods enterprises should deal with more complicated competition pattern.

Reporter: during this period, many local sporting goods companies such as Lining, PEAK, Anta and so on are brewing up prices. If the bargaining power of Chinese sports brands is limited, will the price raise adverse effects on terminal sales?

Xu Zhihua: indeed, many Chinese local sporting goods companies are ready to raise their prices. Because of rising costs, retail prices will not go up. Judging from our overall assessment, this is an industry wide behavior and there will be no adverse issues.

Reporter: what do you think of some brands adopting "zero inventory" to speed up store expansion?

Xu Zhihua: PEAK does not adopt "zero inventory". Zero inventory means that dealers can return goods, orders are not responsible, the original system was completely broken, which is a huge "landmine" in business. As long as the distribution is done, if we go through the zero inventory mode, we will not succeed at all, because we do not know when the mine will explode.

Reporter: you wrote that in the next 3~5 years, China's sporting goods industry will maintain two times the annual growth rate of GDP. What is the basis?

Xu Zhihua: modern people pay more attention to health and participation in sports. This trend is irreversible, so the demand for sports goods will increase. China's current per capita consumption of sports goods is very low, so China's sporting goods industry is still a sunrise industry, the "explosion period" of this industry is before 2008, after that, it should be a stable growth period.

Reporter: there are professionals who say that in the next 5 years, China's sporting goods industry will be faced with a situation of fierce competition and price spoil. How do you judge this?

Xu Zhihua: competition is fierce. This is a typical characteristic of the early stage of the development of the industry. But the sporting goods industry has been out of date. At the same time, the sporting goods industry will not be as white hot as the competition in the home appliance industry. Because this industry has the characteristics of crowd segmentation, there are quite a few people, they not only look at the price, but also pay attention to brand ownership and emotional attribution, so the industry will not only spell price, not fight the brand and image.

Reporter: when the international brands of Adidas, Nike and other international brands mentioned the two or three line market in China, how did China's local brands defend their own camp?

Xu Zhihua: the first tier brands abroad are extending from the first tier cities to the two or three tier cities. The Chinese local brands are starting from the two or three tier cities, and now they want to go to the first tier cities. This is a normal phenomenon.

In China's two or three tier cities, we have a "base area" that can attack and defend, and provide us with a steady stream of "bullets". However, for some immature international two or three line brands, they do not have "base areas", and the competition in the first tier cities has become more intense.

For the competition with ADI and Nike, I do not expect to compete with domestic brands within 5 years. But competition is inevitable. In these 5 years, we need to improve the brand position of domestic brands among consumers. In addition, we need to improve product R & D, design capability and technology content. If we do well in these aspects, I think it will be hard to say who will kill the winner. Moreover, from the characteristics of the industry, it is impossible to see any brand eating phenomenon. The most likely result is still a win-win situation for all of us.

Of course, as competition intensifies, the threshold of this industry will increase, and small brands will slowly go out. But what is the future of the existing domestic brands? It is not easy to say that it may be eliminated, but not too much.