What Is The Level Of FILA Sweeping The Chinese Market?

FILA, which is the main sport and leisure, is almost everywhere in the streets of China. Anta, which owns Anta in mainland China, Hongkong and Macao, has become the benchmark of many domestic brands. How to replicate the success of FILA has also become a topic of great concern in the industry.

In the past few years, if you find the most successful sports and leisure brand in the Chinese market, FILA will definitely be the answer of most practitioners. From the third quarter of 2016, Anta first disclosed that the growth rate of non major brands (FILA accounted for the majority of them) grew by 60%-70% over the same period last year. The 100 year old Italy brand swept the whole country's second tier market in the next three years. By the end of 2018, it had become a giant with 1652 stores and annual sales of more than ten billion yuan.

Behind the success of FILA, Anta has been interested in the cultivation and persistence of multi brands in the past 10 years. Its strong operation and channel capabilities are also regarded as the key to FILA's success. And when the FILA market has sprung up in the domestic market, not only Anta itself has been more determined and expanded its multi brand strategy, more domestic brands have joined in this lineup.

However, when we sum up the success of Anta's multi brand strategy, we must also be soberly aware that not only in the Chinese market, FILA has also gained double growth in the past few years, which has important relations with the whole sports and leisure trend, its product positioning and brand accumulation for many years. In a sense, the success of FILA in China today is difficult to replicate solely by brand operation and channel construction.

Behind all this is the vigorous development of FILA in the world in recent years.

FILA Korea, FILA global and FILA China

Italy brand FILA, which was born in 1911, has been vested in Korea Companies for 12 years.

Before being bought by Korean subsidiaries, FILA was popular in the 90s of last century with golf, tennis, fitness, yoga, running and sports life. According to data reported by Forbes in 2008, FILA sales in the US reached a peak of 687 million US dollars in 1997. But after that, the attempt of the brand to enter the luxury retail sector, the failure of many investments and the intensification of market competition led to the gradual decline of FILA in 2000.

In 2003, the US hedge fund Cerberus Capital Management acquired FILA brand from Italy at a price of 351 million US dollars. But this did not reverse the overall situation of FILA in the US and the global market. In 2007, FILA had only US $61 million sales in the US, with a loss of US $42 million.

But FILA Korea has been selling well. In 1999, Yonhap reported that FILA sales in Korea were third in the world, second only to the US and Europe. According to Yonhap reported in 2003, the average annual sales growth of FILA in 1991, which was established in 1991, rose by more than 30%, with a 2002 gain of 207 billion 400 million won (at that time the exchange rate was $166 million 740 thousand) with a profit of 26 billion 500 million won. In 2003, FILA Korea's sales reached 381 billion won (at that time exchange rate of US $367 million), and it is expected to reach 450 billion won in 2004.

With the acquisition of FILA global in 2003, it is still not improving, and FILA Korea, thriving in its own business, has moved to acquire the parent company's mind. The management led by Gene Yoon-soo, head of FILA Korea, first acquired the $130 million stake in FILA Korea Companies held by its parent company in 2005, and became an independent company to pay royalties to FILA headquarters.

In 2007, FILA Korea bought the global brand ownership of FILA brand at a price of 400 million US dollars, and it was "shrimp swallowing whale" with the rare Asian branch buying the brand global group at that time. This is a typical "bottom up" acquisition. After all, the FILA listed on the NYSE had a market value of $1 billion 500 million in 1996.

Yoon is very clear that the North American market is important for the brand's global development. So in 2007, he hired 1998-20003 Jon Epstein, who was president and CEO of FILA, as president of North American business and responsible for brand development, sales and marketing in the world.

As early as 2007, Yoon and Jon Epstein positioned the brand as a sports leisure brand with fashion as the guide and sport as inspiration, aiming to target young people aged 18-34 at the core of urban life.

In 2008, they announced the North American market reconstruction plan: adjusting the product line, establishing a strategic goal of focusing more on women's business, closing nearly 20 poorly performing direct stores, and retaining only one direct store in New York. Jon Epstein said at the time, "our focus is on wholesale sales and strong retail partnerships." Through the turbulence of brand low and acquisition, Jon Epstein patched up the relationship with retailers and persuaded them to give FILA a chance to become partners and let FILA's goods be put on shelves again.

FILA's products can now be distributed in luxury retailers such as Barneys, Zumiez, veteran Department Store Sears and popular retailers such as Urban Outfitters, and so on.

To reduce debt and to better develop the global market, FILA has sold its European, Middle East, African and India subsidiaries, transforming the original group directly into the long-term licensing of FILA brands in these regions, which are managed by local companies, charging their own licensing fees and possible sales commission. This includes cooperation with the Chinese market.

In August 2007, BELLE group took the operation power of FILA in China with 370 million yuan, but the development was not smooth and the loss was serious. In 2009, Anta bought FILA China from BELLE for 332 million yuan. At the same time, Anta needs to pay a certain percentage of fees to FILA Korea every year.

Until today, FILA has been the only direct operation and jurisdiction of the United States and Korea in the world.

According to the Korea Times, global sales in FILA increased by 26% to 544 million US dollars in the first half of 2010 from 431 million US dollars in the same period in 2009. Revenue from the US division increased from $36 million to $45 million.

At present, the market value of FILA brand owner FILA Korea (081660:KS) in the world is 41440 billion won ($3 billion 520 million). After its listing in 2010, FILA's share price remained relatively stable for seven years. After the listing of 16060 won, the highest price in the first seven years did not exceed 24300 won, but their share price rose sharply in 2018, and the share price rose 184% in 2018. From January 1, 2018 to now, the share price has risen from 17240 to 67800, rising to 293%.

Without considering exchange rate changes, in 2015, FILA Korea revenue was $689 million, which increased by 18.6% to 817 million US dollars in 2016, and then entered a high speed outbreak: in 2018, FILA sales reached 2 billion 495 million US dollars (29540 billion won), a 206% increase in two years. It can be seen that the development of FILA in China is in sync with its global outburst.

The birth of "exploding money"

Whether you like it or not, you have to admit that the Balenciaga Triple S launched by Paris in September 2017 has had a great impact on the fashion style of the past two years. This pair of shoes is inspired by the 90s retro style, thick bottomed round head and complex design. Although it was criticized for "ugly", it still swept the whole fashion circle. This kind of deliberate clumsy "Daddy shoes" style has gradually become a good idea for consumers in the past two years, and it has become one of the directions for all brands to introduce shoes continuously.

Whether in advance of the trend or fast track, FILA launched its Disruptor 2 in February 16, 2018, though inspired by FILA Disruptor in 1996, but it is also a typical popular "Daddy shoe" style nowadays. This is a model for brands to combine their past "cultural heritage" with the current popularity and quickly respond to the market.

As soon as the shoes were launched, they became explosive money - Dick Johnson, chief executive of Foot Locker, called it one of the hottest retailers. According to the fashion search platform Lyst, this pair of shoes is one of the most popular women's shoes in 2018, and is the second largest search product in the whole year. Celebrities from model Emily Ratajkowski, singer Ne-Yo to actor Fanning and so on are all wearing the Disruptor 2 of FILA.

In October 2018, Footwear News named it "2018 annual shoes". In the past five years, it has won the title of Yeezy Boost of Kanye West, Virgil Abloh's Off-White x Air Air 1, Rihanna as the design of the company, and Adidas.

Footwear News believes that FILA Disruptor 2's "winning reasons" include four points: 1. leading the trend; 2. global sweeping; 3. triggering the resonance between male and female consumers, attracting young people and their parents across the age gap; 4., there are some "cool" styles in their joint names.

Kayla Marci, a market analyst at Edited, a London based retail analytics company, said that the reasons for the rise of FILA's Disruptor 2 and Champion T-shirts are the same, "high recognition, social media influence and the return of retro style in 90s".

Talking about the reasons why FILA Disruptor 2 has become the main reason for the explosion, one of them is the price.

Compared to the $895 (6200 yuan) luxury Balenciaga Triple S, Disruptor 2 sells for 60-80 dollars (420-550 yuan), less than 1/10 of the former, which makes it easier for the public, especially for young people, to reach Disruptor 2 and have a smaller sense of distance. Compared to coconut and other shoes hype increase, Disruptor 2 almost readily available, it can appear in the high-end, middle end or even the middle and low end of the major channels, almost everywhere.

Under the sweeping style of daddy's shoes, celebrities and KOL leaders, together with the relative price of the people, have made FILA Disruptor 2 a booster for the rise of FILA.

Looking at the stock price of FILA in recent years, it can be found that the sharp rise in share price began in March 2018, which is exactly 2 months after the launch of Disruptor.

90s beloved of retro wind

In fact, before the launch of FILA Disruptor 2 in 2018, FILA was already in recovery. In 2017, FILA's revenue was 25300 billion won (about 2 billion 130 million US dollars), which was 2.6 times that of 2016's 967 billion won (US $817 million). This rapid development has been largely due to the rise of retro wind in 90s.

"The trend of retro trend in 90s is very hot, and FILA and Champion are at the center of this trend," said Matt Powell Matt Powell, a senior sports analyst at NPD Group, an American consulting firm. The spokesman for FILA Korea attributed the success of the company to the re interpretation of its brand history and tradition.

In the process, Yoon creates the FILA Heritage (Heritage) series as the key factor for the success of FILA.

The FILA brand is marked by three colors of red, white and blue. In the heyday of the 1990s, the products of FILA light lifestyle were expected to sell for about 500 million US dollars. But the millennial generation and the Z generation did not experience that era. They may not even know the existence of the brand before.

With the increasing demand for nostalgia, retro classic and iconic logo, FILA, Champion and Tommy Hilfiger have attracted people's attention again. What is worth mentioning is that the three brands that are developing new machines all take red, white and blue as the main design elements of the brand.

Compared to new brands, the most important asset and advantage of these brands is their history. At the right time, the brand heritage is combined with the aesthetic interest of the new era. This not only gives brand and product new vitality, strengthens the brand's thickness, but also has more topics and stories. More importantly, they will arouse more curiosity and concern among young people, so that they can introduce themselves to young consumers and reduce the risk of sales failure.

In 2018, FILA signed a lifetime contract with Grant Hill, a famous resident of NBA. Both sides worked together in 90s. In 1997, they signed a 7 year extension of 80 million dollars at that time.

Hill's first generation of signature shoes in FILA sold more than 1 million 500 thousand pairs of GH1, and is also the sales record of the first generation of signature shoes after AJ1. After the two sides signed a lifelong contract, FILA promised to introduce Hill's signature shoes. And signing with the old stars, the introduction of re engraved signature shoes, no doubt can combine brand history with contemporary feelings.

CNBC believes that Champion and FILA take advantage of the public's obsession with the 90s and improve their brand strategy, focusing on the advantages brought by their Centennial tradition.

Compared with Nike and Adidas, FILA and Champion have a smaller body size, but brand tonality is relatively unique among young people, which helps their growth speed lead the industry. "Young consumers want to wear unique products, made by unique brands and sold in unique retailers." Matt Powell said.

On such a basis, they use Milan fashion week, social media and joint names to do marketing, giving great results and energy to help brands look more cool among young people. Since 2016, the number of Instagram fans in Champion has increased from 200 thousand to about 6 million. FILA has 2 million 140 thousand fans in the US, Instagram.

According to the report of the British fashion platform Depop, which was welcomed by the millennials, FILA became one of the 25 largest brands in the UK in 2018. From July 2018 to August, the global search volume of FILA brand increased by 34%, while 2000 different sellers around the world sold at least one FILA product on the platform in August 2018.

FILA said that its Heritage series has grown exponentially in recent years and has become the main driver of brand growth. In 2018, its sales increased by 146%. Over the past four years, the business of Heritage has doubled every year.

Matt Powell (Matt Powell) said, "(FILA leap) comes from old shoes and retro costumes."

What is the next step?

For any brand, it is necessary to have a sense of crisis in a favourable situation. Harsh capital markets are keen to see the rapid growth of the brand, and may also relentlessly leave when growth declines. The trend of fashion circles is elusive, and the trend of old shoes, retro and big logo is likely to be abandoned by consumers in the future.

When FILA becomes a brand that can be seen everywhere on the street, its growth will be even more difficult, and the young group's need for maverick makes it easy for them to follow the new relatively small brand.

Matt Powell believes that although the upsurge of daddy shoes may disappear, the trend of retro style pursuit in 90s is bigger and can be developed for a long time. "There are hundreds of products that allow this retro style to last for some time. "Powell said.

The style of old man's shoes is very likely to be "out of date" in the future, so they can't expect the thick bottom shoes represented by Disruptor 2 for a long time and need more new products to lead the market. For FILA, the key is how to further integrate the brand heritage with the new Zeitgeist and trend, so as to maintain the existing consumer groups and open up new crowds.

In January of this year, FILA announced the launch of a high terminal brand FILA Fjord in collaboration with Danish designer Astrid Anderson (Astrid Andersen). FILA Fjord emphasizes the natural, practical, high-end and sustainability of the overall style. This is an attempt to combine FILA's traditional Italy style with Nordic style. Anderson, designer, hopes that FILA Fjord can break the association of FILA's sportswear. FILA Fjord is more about fashion color than sports and leisure.

In the previous interview, FILA global chairman Gene Yoon said, "in the past few years, the fashion industry has great interest in FILA. Sportswear is becoming more and more important for fashion industry, because this is also the trend that consumers are pursuing.

In July, FILA brought the retro style into the field of outdoor sports, and launched the FILA Explore series, which is divided into four categories, including Canyon, forest, mountain and so on.

The new series and sub brands are new attempts under the current development situation, and have the opportunity to explore new development space for the brand.

For FILA, there is another challenge coming from management.

Unfortunately, in early 2019, FILA North American president Jon Epstein died suddenly because of heart disease. This position was taken over by the former CEO Jennifer Estabrook in April. The latter worked for 12 years in FILA North America, and experienced several changes in FILA. After the announcement of the appointment, Yoon said, "Jennifer has the capability of industry insight, financial and operational command, and enthusiasm for the brand, and believes that it can lead FILA into disciplined, fast and comprehensive global growth."

However, Jon Epstein is regarded as one of the iconic management figures of FILA. His sudden death may bring some uncertainty to FILA.

Starting from Korea and buying FILA world, Gene Yoon, which has led FILA to recovery, is already 74 years old. Now it has been over 30 years to manage FILA, Korea and FILA, which has more than 1 billion 800 million dollars. He has proved his ability and strategy to operate FILA brand in 30 years, both before and after the acquisition. It can be said that no one knows the past and present of this brand better than he does, and with the elderly who may retire soon, who can take the lead? FILA's future will be the next problem that FILA will face in management.