Sports goods market in second-tier cities in China
Sports goods market has already been well developed in big cities like Shanghai while in the second-tier cities; it is still undergoing a rapid development. Then what’s the market in the second-tier cities and how to develop them?
What’s a second-tier city in China?
The China sports goods market can be mainly divided into 3 parts: the first-tier city market, the second-tier city market and rural market. The first-tier cities refer to those big cities like Beijing and Shanghai, the market of which has already been well developed. Second-tier cities refer to those prefectural level cities whose population is less than 2 million. This market here is the most promising market now in China. Rural market is also developing rapidly, but confined by the low consumption power, it is still a relatively small market.
Status quo of the market
1. Huge potential market in second-tier cities
Now there are about 600 cities categorized as second-tier cities in China and major growth of urbanization like population and finance in China will come from these 600 cities.
According to the age, young people and old people spend most on sports goods. With the influence of “family control” policy, a young person from China usually has 7 elders (grandparents and parents) in his family and Chinese are famous for their generosity at expense on their kids. As a result, the young people have fewer problems buying sports goods as they like. On the other hand, Chinese are also filial to their parents which means they would like to sponsor their parents in buying things like sports goods. The future increase of population in the second-tier cities in China will also result to the increase of these two groups of people.
Then the increase of personal income will also be reflected on the consumption. For example, the average annual income per capita in Suzhou has been increasing at 16% for several years. The disposable income per capital has exceeded $6,800 in 2012.
Beijing Olympic Games also boosts people’s passion for sports. What’s more, a series of big sports events in the following 3 years like National Games of China and Games for university students also help more people to enjoy sports.
2. Character of the market
Increasing demand for higher class sports goods
Since the increase of income and deeper understanding on sports goods, people from second-tier cities in China begin to consume higher class sports goods. But there are not so many brands starts marketing there. So the task for these brands is to spread their brand in the second-tier cites to offer those potential customers more choice.
No special choice
Many people seem still choose the same kind of sports good since they don’t know how to tell the difference between two. Now it is also changing since more and more people get information from web or friends, they begin to select special goods according to their special needs. So to give them professional advice or consultancy can be a good solution.
High demand, low consumption
As mentioned before, the market is now developing very fast, but people are not so willing to pay on sports goods, compared with people from the first-tier cities with similar income. They are probably more sensitive to price. What you can do to persuade them to buy your products? There are many solutions. For those price sensitive people, discount can be an effective solution to increase your sales as well as popularity.
Major marketing strategy
1. Traditional marketing strategy
The traditional marketing strategy is to open stores. With this strategy, local brands like Lining have developed from nobody to the no.2 in the market, only next to Nike. However, Lining and other brands who rely their sales on stores are facing some problems:
So far, 70% of sports goods stores, which is over 40,000, are located in 600 second-tier cities in China. It has developed very fast in the recent few years. For example, the number of Nike stores in Linyi, a city with 2 million habitants in Shandong has increased from 6 in 2008 to at least 15 in 2011.
If there can be anything worse than the over saturated market, the increasing cost will be the answer. From 2009, both rent and house price has increased greatly in second tier cities. The rent in some cities like Zigong in Sichuan has even increased 3 times in 2 years. Together with rent, other cost like labor cost, transportation cost has also increased.
To open a new store still has its effect. For example, it offers customer a direct way to experience the brand and goods. In second tier cities, where some people don’t get used to get information from web, it works.
Difficulties sometimes mean opportunities. For instance, some companies already realize that and begin to promote their brand to get bigger margin via opening stores. However, those companies, such as Addidas who plan to open 1,500 new stores in 5 years, have usually developed China market for a long time and strong financial support. It can be predicted that the competition will only become more and more tense.
2. Online marketing
Facing the challenge of the new situation, sports goods makers are seeking for new marketing tools. They find online marketing and probably discover that it works efficiently. That may explain why online marketing developing very fast now in China.
Reach customers more easily
Number of netizens in China has reached 600 million in 2011. What’s more important is most of them are young! Those young people are the most important target market for sports goods makers. More and more people would like to check everything online before they make the purchase decision. It is said that 90% of the purchasers in China would Google what they want to buy before they start to list.
More efficient influence
On internet, you can find some forums, bbs or professional website about your products. People will discuss and put their opinions on the products they have seen. What you need to do is to interact with them and lead them to think in a positive way about your product. It’s not over. The advantage of online marketing is other people will also see it and get influenced by it. Again, most netizens in China are young; they are active online which means they can get influenced more by what they see online.
This advantage is quite easy to understand. The cost of hiring some online marketers or professional marketing companies is much lower than opening a real store. However, it can influence more people and build your brand way more convenient because what you need online is only to speak instead of building, decorating and exhibiting.
What strategy you will take to develop your business in second-tier cities of China?