Peak strategic layout PE surrounded by urban institutions optimistic

How did the second-tier sports brand known to the second and third-tier cities rush into the first-tier cities?

The second tier sports brand including Anta, 361 Degrees, Xtep and Peak, also known as the “Jinjiang Corps” (because its brands all started and developed in Jinjiang). As the famous sporting goods production base in the country, Jinjiang started as an OEM production base for international brands such as Nike and Adidas.

The Jinjiang BINGTUAN started from the foundries of Nike and Adidas, gradually cultivated a complete industrial chain and developed its own brand. So far, Jinjiang shoe enterprises represented by Anta have landed on the capital market according to the Li Ning model, while Peak has entered the Hong Kong stock exchange with the support of international PE institutions such as Sequoia Capital, Legend Capital, and CCB International. At the same time, its strategic layout has also moved from second-tier cities to first-tier cities.

Surrounding cities in the countryside

　 "At present, there is no difference between a big sports brand and the big sports brand. Our NBA players are all wearing our shoes. We are also narrowing the gap in design," Xu Zhihua said.

The gap between domestic sports brands and foreign brands in terms of comfort and quality is very small. The only difficulty at present is the brand. Xu Zhihua said that domestic consumers still have superstitions about foreign brands, but fortunately this kind of superstition is gradually being broken. "In the first quarter of 2009, domestic brand Li Ning has surpassed Adidas, and the era of Chinese brands will soon come." Xu Zhihua said.

Since its inception, Peak has been positioning itself as a brand strategy that is high and high, and CCTV and Hunan Satellite TV are the starting points for advertising. In terms of endorsements, it has launched comprehensive cooperation with the NBA. In terms of marketing strategy, Peak has adopted the category of “country surrounding the city”. Strategy, first cut in from the second and third tier cities, and then gradually infiltrate the first-tier cities, and gradually increase the unit price and some product positioning.

On March 16, 2010, following the successful listing in Hong Kong in September last year, Peak Sports announced the 2009 annual financial report for the first time. The report shows that in 2009 Peak achieved sales of 3.095 billion yuan, a year-on-year increase of 51.6%; net profit increased by 67.1. %, up to RMB 628 million.

In one year, how did Peak achieve a 67.1% growth in net profit? This is thanks to Peak's strategy of infiltrating from the second-tier and third-tier cities to the first-tier cities. Unlike most of the tricks to improve profitability by cutting costs, Xu Zhihua disclosed that the reasons for the increase in Peake’s profits are mainly due to the increase in unit price of products, while the advantages in cost reduction are not obvious.

"From the current strategy, we have a lot of room for improvement in gross margin. In 2009, Peak's gross profit margin increased by 4.8% from the same period last year to 37.5%. This year it will also increase one or two points on this basis. The final gross profit margin It will reach about 40%." Xu Zhihua said.

In terms of new research and development efforts, Peak has also significantly increased its code. Currently, it has three product design centers in the United States, Beijing, and Guangzhou, and it may be added to Korea, Japan, or Italy in the future. "R&D is the soul, and it is very important for the contribution rate of sales promotion." Xu Zhihua said. Peak's investment in research and development has reached a proportion of about 1%, and this part of the investment refers to the cost of scientific researchers.

Advanced City, and then go abroad

Nike and Adidas, because of their brand advantages, competed in major markets in first-tier cities. Peak and other Jinjiang Corps can only concentrate on winning second-tier cities, and then concentrating their advantage on the first-tier cities. Anta, Peak and so on are currently some of the most competitive brands that compete with international brands in first-tier cities. At the same time, Peak has not forgotten to play the marginal effect of sponsoring international events such as the NBA, and actively entered the international market.

It is reported that Peak’s current overseas sales account for one-tenth of its total revenue, and there is still room for improvement. However, the domestic market has not yet stabilized, and its pace of entering overseas can only be at an exploratory stage.

According to market research firm ZOU marketing, the compound annual growth rate of domestic basketball shoes from 2009 to 2013 is 15%. How to gain a firm foothold in the increasingly competitive domestic market is a challenge for Peak, and its huge advertising, Marketing expenses also put pressure on its profit growth. Among domestic brands, its popularity is lower than that of Li Ning, Anta, Kappa, Xtep and 361 degrees, ranking sixth. From the brand battle, Peak’s combat mission is not easy, so the burden on its brand investment will not be reduced quickly.

According to Hong Kong's Huiye Securities analysis, due to relatively low brand awareness, it is necessary to give distributors higher discounts, which will have an adverse effect on the profitability of Peak. In addition, as the franchise network expands, it also increases its accounts receivable, which is a negative factor for cash flow.

Although faced with many of the above unfavorable conditions, Peak still has a million store plan. Xu Zhihua disclosed that based on the current more than 6,200 stores, Peak will achieve the scale of 10,000 stores within three years. Its sales director Lin Bilian said that in 2010 Peak will add about 1,000 sales outlets and 100 basketball supplies stores. In addition, its market coverage has gradually expanded. In addition to the basketball field, it has quietly entered a wider range of sporting goods, such as running shoes, tennis, and football.

In response to pressure from distributor discounts, Peak is trying to change the direct wholesale sales model for franchisees and distributors and strengthen control of retail terminals. “We need to extend the industrial chain to retail terminals so that we can have more advantages in bargaining power, risk resistance, market flexibility and initiative,” Xu Zhihua said.

However, once it was extended to the marketing front line, it was a huge challenge for Peak's operations management and supply chain system. Although it has completed the ERP system, Peak adopted the strategy of gradually acquiring and participating in some distributors to obtain integrated retail terminals. effect.

However, from the perspective of capital market performance, Peak’s strategic expansion has been initially recognized by the market. Compared with the issuance price of HK$4.1/share on the day of listing, the stock price of Peak’s 6.36 Hong Kong dollar has now risen by more than 50%.

However, according to its chief executive Xu Zhihua, "The current share price does not fully reflect the value of the company's rapid growth." Xu told reporters during an exclusive interview with the newspaper, including the previous PE investment institutions, are optimistic about Peak's rapid growth. Regarding the period just after the lock-up period, will the PE institutions take the opportunity to cash out, Xu said, “We just opened the board of directors. Several directors Shen Nanpeng, Wu Zhanghong, and Zhu Linan said they are optimistic about the value of Peak and will not consider exiting in the short term. ”

However, Sequoia Capital and Lenovo Investment have a high reputation in the investment community, but their value-added services for Peak are no better than those of CDH and Li Ning. In addition to Li Ning, Ding Hui also invested in and promoted the casual apparel brand Belle International, which has rich resources and investment operation experience in the apparel field.

While Sequoia Capital and Legend Capital continue to hold their shares, they can provide Peak at the business level with value-added services. Can they continue to help them achieve their goals from Cinderella through Peak's “going to town” and “going abroad” strategies? The transformation of the princess has yet to be considered.