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WeChat: More Than Messaging And Payment (3)

WeChat is also gradually upgrading itself as an entrance to internet.

Scanning a QR code is as common as using WeChat.

Businesses are using QR codes as the beginning of a customer relation; government departments/agencies are using QR codes as a way to provide/introduce/reserve many services.

And most of these websites or alternatives or websites are happening in Tencent’s ecosystem/domain. (or Alibaba/Baidu/JD/Toutiao/Weibo/Meituan’s domain)

Few people are creating their own website nowadays in China. For example, when we can find a restaurant’s website in US, usually in China we find it on WeChat/Ele(alibaba)/Meituan/Dianping(Meituan).

And when people are used to it, search engines are going to give away their position as the entrance of internet.

And when people forget how to type a web address, internet is more disconnected and is just comprised of a few closed bubbles – not exciting.

WeChat: More Than Messaging And Payment (2)

The previous post discussed around how WeChat has made life in China different in terms of eating in restaurants, buying bubble teas and more.

WeChat has also become the primary working station and personal cloud for many people.

One background – email is not that popular or useful in China. Many corporates give employees email accounts, but unlike in the US, email is just not a pervasive thing in China.

In the US, people use Gmail or Outlook and the cloud services provided by Google or Microsoft. In China, the equivalent of cloud storage is not Baidu Cloud, which provides the first 15GB free, but WeChat. People just send files as attachments in emails. And if he/she needs to CC other people, just send it in a group chat. It is a very smooth experience of sending files and discussing in a certain group of people.

The only inefficient part is probably editing files. But it is very common to use WeChat on PC so that files could be downloaded and edited. For most people, WeChat works perfect well to organize work. And it’s free.

So yes, it is just like Slack.

Meanwhile, however, files are not actually stored in or accessed through the cloud. They are local and taking up storage space in phones. So for Tencent, it is not managing an ever-expanding cloud usage and needs to think about charing fees; and for users, there is no limit in storage and they can use it as free forever, as long as they enough room in phone storages. I think it is very common for a person’s WeChat to take over 10G space in the phone.

In addition, it is more efficient to search through the files as they are grouped by groups. You go into a group chat’s history to find files, instead of searching the entire gmail for them.

On a side note, WeChat history has been very useful as a poof for nearly everything. A screenshot of chat history could be as powerful as a signed contract (not legally; but one can post it in moments or Weibo, and it seems more personal or embarrassing; so to avoid this, one usually takes a yes in WeChat seriously)

WeChat: More Than Messaging And Payment (1)

It’s time to talk about WeChat’s development after I have spent more than two month catching up in China.

This series will try to summarize several things WeChat has already been doing great and what it could possibly do in the foreseeable future.

First of all, restaurant mini-programs/official account.

The most significant feature to me is probably the ability to order on a digital menu via a QR code. All you need to do is to seat down and scan the code (with the information of table number usually) that is sticked on the table. One can totally make an order and wait for food without any help from the restaurant (saving lots of labor and waiting time). In addition, since everyone on this table can scan the code, they will share the same page and see each other’s ordering, which is extremely helpful as they are mostly shared plates.

What is more, usually it also makes users to follow the restaurant’s official account in WeChat in a very smooth way. Sometimes it’s mandatory. It is particularly beneficial for restaurant chains (and milk tea / coffee chains) that have multiple locations and marketing campaigns.

Then, depending on the frequency of customer’s visits, chains usually have their membership system in WeChat official accounts or mini-programs. That way, an WeChat account is essentially a Facebook or gmail account in the US. Complex reward and membership programs can be implemented in WeChat by chains, such as McDonald’s.

Besides ordering, WeChat provides a way for consumers to take a number to wait for a table before arriving at the restaurant.

The booking/waiting environment is a little different here in China. While booking a table at a specific time is common in the US, restaurants in China mostly only have a queue system. Most people will need to go to the restaurant first, take a number and wait for an hour or more in prime time. This is actually good for the shopping mall as people need to stay here longer, either generating other purchases or making the mall look more popular.

Also, on WeChat one can order ahead, which is especially helpful in beverage chains like Hey Tea. Hey Tea has long been “featuring” its super long line to order. As Starbucks in China just announced its order-ahead-and-pick-up feature “Fei Kuai” in a few cities this summer, its competitors have been able to do this at least one year earlier on WeChat.

Not to mention the payment step, which WeChat has been doing for years.

Series E-2: Sportswear Market Competitive Landscape

Competitive Landscape – Companies

Nike and Adidas have been the unchallenged leaders in the China market for years. This can be explained by (1) their early entrance to the China market, (2) their higher ASPs than major domestic brands, and (3) significantly higher exposure in Tier 1 & 2 cities, where per-capita consumption power is higher than in the rest of China. Their dominating position is also in line with their global market share. [1]

Among domestic companies, Anta is the only local company that has enjoyed a notable market share gain over the past few years, and its position as the leading domestic sportswear company has been further deepened with the help of the Fila brand. Li Ning, once the leader among domestic companies, is still in the recovery stage, after the Company underwent a major management change in 2012-2014. 361 Degrees and Xtep are usually considered second-tier domestic brands. The market share of Xtep, however, has dropped due to its restructuring. [1]

Competitive Landscape – Brands

Generally, since the 2011 downturn, domestic companies have been struggling with various internal problems. The downturn was mainly due to inefficient channel management, leading to excessive inventories at the distributor level. At the same time, foreign companies took more market share by executing precise marketing strategies, offering superior products, and not being too aggressive in pricing. It took domestic companies years to regain their growth momentum, under various reform initiatives such as ramping up product designs, improving inventory monitoring systems and implementing radical changes in their management systems. [1]

Anta is a very rare domestic company that gained market share (in terms of retail sales value) over the past few years. However, Anta gained market share mainly because of Fila, an Italian brand which Anta acquired in 2009. The core Anta brand is also growing, albeit at a slower pace. Li Ning, Xtep and 361 Degrees have been somewhat flat over the past few years, but they are domestic brands that are doing relatively well. For smaller domestic brands, such as Erke and Peak, the market share loss is more serious. [1]

By and large, the market share of top five foreign brands, Nike, Adidas, New Balance, Skechers and Fila, increased rapidly. In contrast, the market share of the top five domestic brands, Anta, Li Ning, Xtep, 361 Degrees and Erke, modestly while other brands losing market shares fast. The market of China sportswear has become more concentrated. [1]

[1] http://www.chinastock.com.hk/ewebeditor/uploadfile/20180709142620143.pdf

Series E-1: Overview of Chinese Sportswear Industry

The industry faced a downturn in 2011 and recovered in 2014. According to Euromonitor, the sportswear market achieved a CAGR of 12% between 2013 and 2017, and in 2017, the market size of sportswear in China reached RMB212.1 billion, accounting for 46% of the total sporting goods market[1].

 

Source: Euromonitor, CGIS Research

 

According to Euromonitor’s latest report on China Sportswear, the 2018 market size is RMB264.8 billion. Meanwhile, US Sportswear, market size is USD117.1 billion in 2018, about 3 times larger (using 1USD = 6.9RMB). (Euromonitor[2],[3], screenshots)

 

 

The industry can be furthered categorized into Sports Apparel and Sports Footwear, which are sized at RMB116.2 billion (44%) and RMB148.6 billion (56%) respectively. Footwear is the faster growing category compared with apparel. (Euromonitor2, screenshots)

 

 

Both footwear and apparel can be further divided into three product types: performance, outdoor and sports-inspired. Sports-inspired products, especially footwear, have been the largest product category over the past few years. Sports-inspired products refer to products with elements of both fashion and sportswear. Typical examples include Nike’s Converse and Adidas Originals1,2.

 

 

 

[1] http://www.chinastock.com.hk/ewebeditor/uploadfile/20180709142620143.pdf

[2] Euromonitor “Sportswear in China” COUNTRY REPORT | APR 2019

[3] Euromonitor “Sportswear in the US” COUNTRY REPORT | FEB 2019

Series D-5: Anta’s acquisition of Amer in 2019

Amer Sports Oyj is a Finland-based company engaged in the manufacture, sale and marketing of sports equipment, apparel and footwear to the sports equipment industry. The Company is organized into three business segments: Outdoor, Ball Sports and Fitness. Its products are marketed through such brands as Wilson, Salomon, Precor, Atomic, Suunto, Arc’teryx, Louisvillle Slugger, ENVE Composites, DeMarini, Peak Performance, Sports Tracker and Armada. The Company operates internationally in over 30 countries through a number of subsidiaries, notably Queenax. The Company’s main market areas are the Unites States, Europe and Japan[1].

 

Amer Sports’ net sales in 2018 were EUR 2,678.2 million (2017: EUR 2,574.6 million). Net sales increased by 7% in local currencies. Organic growth was 4%[2].

 

Amer brand portfolio

 

Wilson is the number one equipment brand across more sports than any other brand. The company’s core sports include tennis, baseball, basketball, American football, golf, volleyball, soccer, softball, badminton, and squash;

 

Salomon has created a vast range of revolutionary new concepts in bindings, boots, skis and apparel for both alpine and nordic skiing and brought innovative solutions to footwear, mountaineering, hiking, trail running, and many other sports;

 

Precor designs and builds premium commercial fitness equipment for workouts that feel smooth and natural.

 

Atomic manufactures products which are perfectly tailored for ski racers and freeskiers, crosscountry skiers and backcountry skiers, beginners and World Champions alike.

 

Suunto has been at the forefront of design and innovation for dive computers, instruments and sports watches used by adventure seekers all over the globe.

 

Arc’teryx is a technical high-performance outerwear and equipment company based in North Vancouver, Canada.

 

Louisville Slugger is the Official Bat of Major League Baseball (MLB) ® and the #1 bat in MLB. Since 1884, Louisville Slugger bats have been a part of every post season run, World Series Championship and the most historic moments of the game.

 

Located in Ogden, Utah, ENVE Composites is a manufacturer of handmade carbon fiber bicycle rims and components.

 

DeMarini is an American manufacturer of baseball bats and other sports equipment headquartered in Oregon, United States.

 

Peak Performance is a Sports Fashion brand founded in Åre, Sweden 1986.

 

Sports Tracker is the original sport and fitness application for running, cycling and every-day training.

 

Armada Skis is known as the athlete-focused ski brand with athlete-driven, design obsessed and technologically superior products. Armada is headquartered in Park City, Utah.

 

Acquisition & tender offer

 

In September 2018, Anta announced that, together with the private equity firm FountainVest Partners (“FountainVest”), it has submitted a non-binding preliminary indication of interest to Amer Sports Corporation (“Amer Sports”), a sporting goods company whose shares are listed on the official list of Nasdaq Helsinki Ltd., to acquire the entire share capital of Amer Sports at a cash consideration of EUR40.00 per share (the “Possible Acquisition”), subject to a number of conditions[3].

 

In December 2018, A consortium led by China’s Anta Sports (2020.HK) made an offer to acquire Finland’s Amer Sports (AMEAS.HE) in a deal that values the company at 4.6 billion euros ($5.23 billion). The consortium includes Tencent, FountainVest Partners and Anamered Investments, , which is owned by Canadian billionaire Chip Wilson, founder of yoga apparel company Lululemon Athletica Inc.[4],[5]

 

According to the proposal, (i) Anta will indirectly through Anta SPV own 57.95%, (ii) FV Fund will own 21.40% (and FountainVest SPV will indirectly, and Tencent will indirectly through Tencent SPV, in each case as a limited partner in FV Fund, respectively own 15.77% and 5.63%), and (iii) Anamered Investments will own 20.65% of the shares in the Offeror by way of equity contribution to the share capital of JVCo.29

 

The final result of the tender offer was announced on March 12, 2019. With the shares tendered in the offer representing approximately 94.98 percent of all the shares and votes in Amer Sports, Anta has satisfied all of the terms and conditions of the tender offer, which entitles the Chinese company to complete the purchase.[6]

 

To finance the acquisition, Anta entered launched syndication of a five-year €2.2bn (US$2.51bn) loan with Bank of China, Citigroup and JP Morgan as joint global coordinators[7].

 

[1] https://www.reuters.com/finance/stocks/companyProfile/AMEAS.HE

[2] https://s3-eu-west-1.amazonaws.com/amersports-wordpress-exove/uploads/20190207140601/Amer-Sports-Financial-Statements-2018.pdf

[3] https://www1.hkexnews.hk/listedco/listconews/sehk/2018/0912/ltn20180912023.pdf

[4] https://www.reuters.com/article/us-anta-m-a-amer/chinas-anta-sports-led-group-buying-finlands-amer-sports-for-5-2-billion-idUSKBN1O60VR

[5] https://www1.hkexnews.hk/listedco/listconews/sehk/2019/0204/ltn20190204723.pdf

[6] https://www1.hkexnews.hk/listedco/listconews/sehk/2019/0312/ltn20190312492.pdf

[7] https://www.reuters.com/article/anta-sports-kicks-off-china-ma/anta-sports-kicks-off-china-ma-idUSL3N1ZB31Z