4 May 2007
Winning Trends(HKTDC Enterprise, Vol 05,2007)
Hong Kong's sporting goods industry is expanding steadily as more markets around the world appreciate the health and leisure benefits of physical activity and sportswear is increasingly embraced by the casual wear market.
Already worth more than US$5bn in annual business, the Hong Kong sports sector is enjoying positive growth in key markets such as the EU, Japan and Canada.
In addition, high growth was recorded in important markets such as China, Italy and Japan, which registered 19.5%, 23% and 6.8% increases respectively over the previous year. Further, with huge increases in emerging markets like Korea, the UAE and India up 41%, 32.9% and 43.8% respectively, Hong Kong's sports market is expanding worldwide as affluence and leisure time grow.
"The Beijing Olympic Games in 2008 will push this sports fever even higher," believes TDC senior exhibitions manager Anne Chick, noting that World Cup fever in 2006 strongly boosted global sales of sporting goods. "For instance, sales of football team uniforms of all major sponsors skyrocketed, and it is estimated that more than 15 million footballs were sold all over the world," she explains.
If, as widely expected, the 2008 Beijing Olympic Games throws demand for sporting goods even higher, Hong Kong, as one of its venues, is perfectly poised to capitalise on the event.
According to a recent TDC industry report, Hong Kong companies export a diverse range of sporting goods to the world market, including sports equipment and accessories, sports apparel, and sports footwear, which account for 71.9%, 23.6% and 4.6% of the total respectively.
Sports equipment and accessories alone cover a wide range of products, such as sporting bags, bicycles, water skis, surfboards, skateboards, golf equipment, fishing and hunting requisites, and tennis and badminton rackets.
Many of these items are produced under OEM/ODM arrangements with overseas manufacturers and such premier brand holders as Reebok, Nike, Adidas, Umbro, Timberland and Quiksilver, the report notes.
A few Hong Kong manufacturers have attempted to develop their own brands backed up by R&D, with notable examples including Neil Pryde for windsurfing sails, Super-X for sportswear, and Nikko for camping gear and accessories.
The report describes one of the most interesting emerging trends in sporting goods as the convergence of casual and athletic designs that enable sports lovers to look smart and fashionable while exercising as well as keeping this athletic look for casual and leisure wear.
Nowhere is the crossover between sportswear and casualwear more apparent than in footwear, as exemplified by Hong Kong manufacturer of branded athletic and casual footwear Yue Yuen Industrial (Holdings) Ltd.
"Sports shoes have become much more fashionable and design now plays a vital role," explains Yue Yuen Industrial's executive director Steve Li.
He adds that as one of the world's largest branded athletic and casual footwear manufacturers, Yue Yuen produces for such international labels as Nike, Adidas, Reebok, New Balance, Puma, Timberland, Asics, Merrell and Rockport.
"There are now so many more shoe styles to choose from and the product lifespan is shorter, with colours and styles often changing with seasonal fashion trends."
Li says sports shoes now have a lighter look and use a wider range of material for uppers, such as leather, synthetic leather, fabric and PU. "R&D has become much more important and comfort and performance are still crucial factors," he maintains.
In addition, the bottom outer sole determines the performance of the shoe, with flexibility, functional engineering and durability key design criteria.
"Different types of rubber are now used, along with cushioning and airbags, which have helped design shoes to cater for specific types of sport," Li notes.
He describes the key industry segments as from "teens to 40-year-olds", with sports shoes' focused on such brands as Nike, and more casual shoes on lifestyle brands such as Rockport. "Marketing endorsements, such as NBA and other sports stars, also play a significant role in appeal, especially for the younger market."
Like many other Hong Kong companies, the US holds Yue Yuen Industrial's key focus. "The US is still our biggest market, but Asia and Europe are also important export destinations," he notes.
He adds that emerging markets such as mainland China and South America are developing demand. "For China, both international and domestic brand shoes such as Li Ning and Anta are becoming popular."
To maintain competitive pricing in this aggressive market, Yue Yuen Industrial operates manufacturing facilities on the Chinese mainland and in Vietnam and Indonesia. "It is important to diversify the manufacturing base and each country has its own strengths," notes Li. "For example, while China has higher labour costs material is more readily available, whereas Vietnam and Indonesia have lower labour costs but material often needs to be imported."
Li sees competition as mainly coming from other large Hong Kong manufacturers with facilities in the Pearl River Delta area, such as KTP Holdings Ltd, Symphony Holdings Ltd, Pagasus and Kingmaker, as well as from such Taiwan companies as Feng Tay.
Regardless of the location, however, all these companies use the modern technology that is playing a key role in the industry's development, with designers seeking new fabrics and applications such as sun-protection and reflective fibres with synthetics blended into wool and cotton.
In addition, manufacturers of sports balls and golf equipment have upgraded the materials used on basketballs, volleyballs and footballs from rubber and PVC to high-end PU.
Looking ahead, the TDC report anticipates the use of nanotechnology becoming more widespread in all types of sports apparel for men, women and children.
It also notes that futuristic products with attached hi-tech devices have already been developed - for example MP3/iPod sports shoes and pulse-timer bras - and are positioned to spread across all major sports and fitness activities.
Of all sports, the report says that golf looks set to continue to be one of the major high-growth areas for sports products, with a 14% increase in retail sales over the past few years. Fitness activities have also become a global trend, with yoga and aerobic/Latin dance gaining popularity, encouraging sporting goods companies to introduce outfits and accessories such as yoga mats and dance outfits.
With sporting goods clientele expanding rapidly from its traditional male base to include more women and children, there has also been an increase in new indoor equipment, such as foam rollers, balance discs, rubber bands/tubes, fitballs and Masai Barefoot Technology for shoes.
There is also a continued growth in the popularity of outdoor pursuits like hiking, camping, rock climbing, kayaking and fishing in major markets like the US, notes the report.
All these factors create tremendous opportunities in retail sales of specialised equipment and clothing. However, even generic sporting goods that tend not to be influenced by such changes remain steady sellers - although even these are still highly affected by fads and fashions, the report observes.
Another key development driving the Hong Kong sporting goods industry is the "life cycle hypothesis", which theorises that as people grow older they prefer fishing, golf and exercise equipment as opposed to more strenuous sports like football and tennis.
While major markets for sports goods remain the US and the EU, which are also Hong Kong's biggest sporting goods export markets, sporting goods manufacturers are keenly eyeing mainland China with its high growth and market worth an estimated RMB 65bn in 2004.
The report describes the fitness drive sweeping across the mainland as exacerbated by the 2008 Olympic Games fever, and fueling demand for sporting goods and sporting goods manufacturers.
Hong Kong-listed Li Ning Group is one of the most successful local sporting goods enterprises in China, with more than 2,000 sales outlets and in excess of 1,000 product varieties. While international brands such as Nike and Adidas are projecting themselves as upmarket brands on the mainland, Li Ning appeals to the grass-roots level by creating a casual and popular brand image.
International industry barons have offshored their physical production to China, Vietnam, Indonesia and Thailand - reacting like other consumer goods sectors where R&D and marketing are processes with the highest value-added.
Hong Kong manufacturers have also largely offshored their plants to lower wage and lower land-rent countries, including neighbouring Guangdong Province on the Chinese mainland. Some Hong Kong manufacturers have also developed R&D capabilities, emulating major international players who focus their development efforts on the use of new materials and designs incorporating engineering, biomechanics and physiology.
Hong Kong companies are also increasingly appreciating the value of marketing, with endorsement agreements with sports stars and sponsorship and licence agreements with sports events proving crucial factors in product success.
Sports stars, teams and tournaments sponsored by sporting goods companies not only boost product sales, they also offer competitive advantages by providing feedback from these professionals which can often help direct R&D initiatives.
With sports fever increasing annually, and the 2008 Beijing Olympic Games now close on the horizon, Hong Kong's sporting goods industry looks all set to continue its winning streak.
TEXT BY SANDRA JENNER