On February 9, Xtep International announced a significant financial initiative, proposing a share placement and bond issuance to raise 1 billion Hong Kong dollarsThis funding is aimed at further developing Xtep's main brand and the DTC (Direct-to-Consumer) business model for Saucony, enhancing brand promotion and product assortment.
In today's diversified and fiercely competitive sports goods market, the advantages of the DTC model are becoming increasingly prominentBy selling directly to consumers, brands can better grasp consumer needs, deliver personalized products and services, strengthen brand loyalty, and enhance operational efficiency and profit marginsThis approach serves as a key to unlocking market potential.
Results from Anta’s notable DTC transformation provide strong evidence of the enormous growth potential within the industryData shows that since 2020, when Anta began actively pursuing its DTC transformation, various financial indicators have risen steadily year-on-yearFor instance, in the first half of 2024, revenue reached 16.08 billion yuan, surpassing the entire 2020 revenue of 15.75 billion yuanDuring this period, gross margin increased from 44.7% to 56.6%, and inventory turnover days dropped from approximately 122 days to 114 days, revealing significant potential.
Moreover, Saucony's success in China serves as a valuable example and source of experience for Xtep.
As one of the world's top four running shoe brands with a history of 125 years, Saucony was acquired by Xtep in 2019 and has since been actively expanding its presence in the Chinese market, mainly through the DTC model since 2020.
Over the past five years, the professional sports division, which includes Saucony, has experienced rapid growth, achieving a compound annual growth rate of over 100% in revenue from 2020 to 2023. By 2023, this division reached a break-even point and continued to demonstrate resilience into 2024.
Xtep plans to further promote Saucony’s brand strategy and continue launching flagship stores and concept stores with enhanced imagery to align with the development of its apparel and lifestyle product matrix
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This will aid in bolstering its competitive edge and influence in the market, accelerating its market share capture in the mid-to-high-end segment.
From brand positioning to digital operations, from store strategies to community building, Saucony’s successful experiences in the DTC model offer comprehensive insightsThis will assist Xtep's main brand in accurately and efficiently implementing its DTC strategy, expediting the realization of this model's value.
In the fiercely competitive sports goods market, Xtep, as a renowned brand, is actively strategizing a series of initiatives to solidify its position and achieve sustainable growthA pivotal element of this strategy includes gradually reclaiming distribution rights from retiring dealers, reflecting profound strategic considerations.
Historically, dealers played a crucial role in Xtep's sales systemHowever, with changing market environments, some dealers have differing operational strategies and market sensitivity due to their personal growth plans or retirement intentionsBy reclaiming these distribution rights, Xtep can deeply optimize its retail channel structurePreviously, the dispersed sales channels were plagued by delays and inaccuracies in information transfer and market feedbackBy directly controlling the sales terminals, Xtep is now able to obtain first-hand market information promptly, ensuring timely and precise market insights.
Following the successful launch of the 160X series products, which generated strong market reactions and reshaped brand perception among consumers, Xtep is capitalizing on this momentum
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The series has attracted considerable attention from running enthusiasts and professional athletes due to its exceptional performance and innovative design, enhancing the brand's reputation and market shareBuilding on this foundation, Xtep is vigorously developing the DTC model following the reclamation of distribution rights, which undoubtedly brings additional strategic resources and data assets to the brand.
The DTC model enables Xtep to forge closer connections with consumers, driving greater interaction between the main brand and a range of product linesThrough multi-channel communication, both online and offline, Xtep can delve deeper into consumer needs and preferencesFor example, through online platforms, Xtep utilizes big data analytics to understand consumer browsing history, purchasing behaviors, and feedbackThis aids in comprehending preferences for various styles, materials, and functionalitiesMeanwhile, offline stores allow for direct interaction with consumers, gleaning their opinions on product comfort, aesthetics, and more.
Another significant advantage of Xtep's DTC model development is enhanced market responsivenessWhen market trends shift or when consumer demand for certain products suddenly rises, Xtep can quickly and accurately optimize its product mixIf there's an upsurge in demand for lightweight and breathable sportswear, Xtep can adjust production schedules promptly, increasing output for such products and ensuring timely market releaseThis swift responsiveness not only fulfills consumer demands but also substantially bolsters consumer loyaltyFeeling a brand's high regard for their needs and swift actions encourages consumers to become loyal users, continuously purchasing Xtep products.
From an operational perspective, developing the DTC model enhances Xtep's operational efficiency
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