Domestic Campaign Brand Resumed "Protracted War" Quietly Started.

This is a protracted war.

A month after the closure of most of the stores due to the outbreak, several domestic sports brands issued their own voluntary announcements recently, saying that stores outside Hubei and their own factories are expected to achieve full recovery by the end of February.

As the basis for resuming economic activities after the end of the epidemic situation, with the improvement of the epidemic situation, the recovery of all trades and professions is no longer in sight. But for the vast majority of industries due to the stagnation of the epidemic, real "resumption" is a complex process. It is not as simple as shouting a slogan and pressing a button.

Sporting goods retail industry is also a member of the tide of reemployment. Most of the offline stores have been shut down for a month or so. If we continue to "get out of the money", the situation of domestic sports brands will not be much different from that of Xibei oat village and Meizhou Dongpo. It is also facing the crisis of life and death.

Source: 361 degrees

For the local manufacturing industry, the current resumption is a process from raw material supply, production, sales and capital recovery to the whole chain. This is not the case of an enterprise. It needs the whole industry chain upstream and downstream and consumers to fully restore their normal economic activities.

Grain and grass: capital reserves to meet challenges

The first step before resuming work is first to live, which requires sufficient "grain and grass", that is, the support of cash reserves.

During the epidemic period, the shops and factories under the domestic sports brand line were almost completely suspended, but they still had to continue to bear many costs, including the wages of employees and the rent of physical shops. This is almost a pure burning process, which greatly tests the capital reserves and cash flow of enterprises.

According to the results of Anta, Lining, XTEP and 361 degree four domestic sports shoes and clothing companies listed in the first half of 2019, Anta's monthly staff cost reached RMB 300 million yuan, while Lining was 120 million yuan, while the other two XTEP and 361 month average staff costs reached 42 million and 60 million respectively.

In terms of the visible rental cost (including store and equipment related rental expenses), the average rental cost of Anta in the first half of 2019 was about 87 million yuan, while Li Ningguang spent 53 million of the month on rent. XTEP and 361 degrees are all using exclusive agency mode to run physical stores, and store rents are basically borne by agents. The pressure of brands themselves will be smaller.

It can be seen that the downtime's direct economic pressure on the brand. There are no offline revenues, nor can factories produce new products. Several major domestic sports brands only feed thousands of employees and thousands of shops, and at least cost hundreds of millions to hundreds of millions of dollars per month, which does not include other expenditure items and the soft cost that is difficult to measure directly according to price.

Under such a huge cost pressure, the amount of book cash flow is the direct reason for deciding how long these sports brands can support. According to the earnings data, the cash and equivalents held by the above four domestic sports brands at the end of last week (up to June 30, 2019) were: Anta 8 billion 200 million, Lining 4 billion 700 million, XTEP 4 billion, 361 degree 1 billion 600 million.

From the book figures, the cash reserves of sports brands are still adequate, but if we consider the financial costs faced by enterprises before and during the resumption of work and the cost of interest bearing debts on the books, the long-term stoppage for several months will probably be unacceptable to anyone.

　 Preparing for war: overall coordination and internal strength

The resumption of production in factories is only the beginning of the whole process of resuming work. Before the market really restores its purchasing power, the gradual resumption, resumption and remanufacturing are more like a process of practicing hard work for a long and arduous struggle, and in this process, two conditions must be satisfied, both of their own conditions and market conditions.

The first is their own conditions. In the current situation, masks have become the first requirement for enterprises to start work. All over the country, the first requirement for enterprises to return to work is "all employees must wear masks." According to lazy bear sports, under the call of the state, a number of domestic sports brands began to transform their own shoes and garment production lines into mask production lines in early February. After the production of these masks, some of them are purchased and sold by the state for epidemic prevention throughout the country, and the other part will be used to protect the normal production activities of their workers.

At present, the productivity of masks is gradually restored all over the country, and the shortage of masks has been greatly alleviated compared with the first half of February. But the resumption of work is not without a mask. According to the director of a sports brand, to the lazy bear sports, the factory's location is to prevent excessive population inflow in the short time due to the resumption of work. At present, a "batches of sub" reemployment method is adopted, that is, some enterprises first resume work, and the workers return to the post in batches of different periods, so as to reduce the risk of the epidemic.

After the approval of the relevant units and the arrival of workers, enterprises also need to re open the upstream and downstream channels of the long standing supply chain. During the epidemic period, the price of raw materials for some shoes and garments inevitably rose or even went out of stock. In addition, the domestic and overseas logistics channels had not yet fully recovered their timeliness. The recovery of the complete supply chain took time.

But it is not enough to have the above conditions. The resumption of work and recovery only means having the ability to provide new products to the market, but there is still a lot of market conditions to be satisfied to achieve the final sales.

According to the data disclosed in the earnings report, sales of Anta, Lining, XTEP and 361 degree four brands accounted for about 80% of the total sales, with the highest proportion of 361 degrees reaching 87%. Therefore, the full opening of offline stores is the first step to truly complete the "re sale", which is closely related to the development of various epidemic situations. With the gradual control of the recent epidemic, many sports brands have announced that stores in all parts of the country except Hubei province have basically resumed business by the end of February.

Compared to the opening of stores, the real problem is the recovery of traffic volume and the stimulation of consumers' purchasing power. Before the epidemic has yet to be fully controlled, most people in the country still strictly control the flow of people in hot commercial areas to avoid potential risks brought by crowd crowding. Although some large shopping malls have opened up to greet guests, there are only a few people and gradually recovering their purchasing power.

Even after the resumption of human traffic, consumer spending and consumer confidence may not be able to resume immediately. After the epidemic, the purchasing power that has been suppressed for a long time will be released to some extent, but people's consumption demand for sports equipment may not be in the forefront. Moreover, after a month's stoppage in many industries, consumers in their own businesses may lose a lot of money.

　 Charge: inside and outside the enemy is desperate.

From a longer term perspective, the "resumption" at this stage is just the preparation stage for this race. Until the day of the double release of the epidemic, it is time for each gun to start. And this race is both an opportunity and a challenge for the domestic sports brand.

Although the epidemic has brought a heavy blow to the sports retail industry, it is also a reshuffle in a sense. The cities that have been occupied by market competition have been relatively stable, and it is difficult for anyone to seize more market share from others. But after the end of the epidemic, families had to start a new round of horse racing. And in the "prepare for war" stage of better business, there is a chance to run faster in the "rush". This is an opportunity.

At the same time, the challenge is that international sports brands that won't compete with domestic brands to occupy the middle and low end market are also affected by the epidemic. They will also be involved in the competition with the strategy of clearing inventory and quickly returning funds.

Nike first announced the closing of nearly half of its stores in early February; Adidas, in a recent official statement, revealed that business activities in Greater China since January 25th dropped by 85% compared with the same period last year, while Puma CEO Bjorn Gulden also said that Puma sales in China in February were "almost zero".

Therefore, the international sports brand has been unable to sit still after the domestic sports brand has started online frenzy sale and discount for more than half a month since the beginning of February. Since February 17th, Nike has launched a "promotion of 50 percent off" sales promotion activities from the ole and factory stores in many parts of the country, while Adidas has shouted slogans such as "21 in February and 11.11 in Adidas". The annual discount of eleven pairs of students has been advanced to February. Brands such as Andrew and Puma also have 6-9 discounts.

From the online and offline channels of Nike and Adidas, it can be found that many popular products have even been priced at a price of 200-500 yuan, which is the price range for domestic sports brands to survive.

Therefore, the domestic sports brand is facing a very complicated situation. In the short term, it is necessary to resume work, resume production and re sale as soon as possible, so that the blood of enterprises can be restarted. In the long run, we must find a good opportunity and strength in market competition while ensuring our own survival. In the whole process, every link is interlinked, and which link fails, which may affect the overall situation.

No matter who will win the race, China's sporting goods retail market will be drastic change.