Peak's Strategic Channels Divided by Investors

When the advent of 2013, the domestic sports brand maker Peak suffered a series of “blows.” First, it voluntarily disclosed that in the first 10 months of 2012, more than 1,000 stores were closed, and the number of companies that have disclosed information in the industry was the highest. . Since then, Sequoia Capital, which has spent many years with it, has significantly reduced its holdings and expressed doubts about its future performance.

As a leading sporting goods brand in China, Peak has emerged from Jinjiang, Fujian, and has gradually grown into a company with the most complete and successful internationalization of domestic sports brands. However, in the domestic market, it is suffering from channels and performance. The divergence of strategies from the company's internal channels may have amplified the time and scope of the pain.

Was greatly reduced

Peak suffered an industry problem. The major sports brands have had a hard time, but Peak's problems are even more severe.

On December 17, 2012, according to the stock data of the Stock Exchange, Peak Sports was reduced by 5, 400.47 million shares on off-site of Sequoia Capital China on December 12 with an average price of 1.27 yuan per share, involving 6858.6 In ten thousand yuan, the position was reduced from 6.22% to 3.65%.

Following Sequoia Capital and Advantage Capital’s first round investment in Peak Capital in 2007, Peak also received nearly 60 million U.S. dollars from Sequoia Capital China Fund, CCB International, and Legend Capital’s three private equity investment institutions in 2009. investment. After the financing, the three strategic investors accounted for about 24% of the shares.

“The substantial reduction of Sequoia Capital reflects its concerns about the prospects for Peak and even the entire sportswear industry.” Some industry analysts say Sequoia Capital is the first to taste the Peak project. Based on this, Sequoia Capital subsequently led several projects in the consumer and service industries. However, in the past two years, the sporting goods industry has encountered the increasingly fierce competition of homogenization, poor channel control, and difficulties in digesting inventory. As a result, investors such as Sequoia Capital have lost confidence in continuing to wait.

From the semi-annual report, Peak's financial data are not satisfactory. In the first half of 2012, Peak's net profit fell by 43.3% to only 240 million yuan. The average turnover of stores and the average turnover per unit of retail space fell by 30% and 34.3% year-on-year, respectively, and the average inventory turnover days were also 49. The days increase to 86 days.

“In a way, Peak has encountered an industry-wide problem. The major sports brands have had a hard time, but Peak’s problems are more severe.” The above analyst said that the domestic sportswear brand 2013 The situation of the quarterly orders shows that the amount of orders including Anta, Xtep, and Peak declined at different levels year-on-year. Among them, Xtep orders fell 15% to 20%, Anta fell 15% to 25%, Peak fell as much as 20% to 30%.

Channel strategy differences

There were more than 1,000 stores closed in three quarters, indicating that the company had a big problem in controlling the channels.

In addition to the disappointing financial data, Peak's number of stores also shrank significantly. It recently disclosed that as of October 2012, it had 6,739 retail outlets authorized to operate in the country, a net decrease of 1067 compared with the end of 2011.

“There are more than 1,000 stores closed in three quarters, which shows that the company has encountered a lot of problems in the control of the channels.” Zhang Bingliang, general manager of Shanghai Sigma Consulting Co., Ltd. said that among domestic sports brands, Li Ning and Peak in 2012 The number of stores is very alarming, while Anta is relatively strong because of the channel control, the number of shut-downs is less than the first two.

“Being so many stores, apart from the background of the industry downturn, there is a big relationship with Peak’s senior management on the channel strategy.” People close to Peak executives told the “China Business” reporter that under the background of the industry’s cooling trend, All brands are optimizing channels, and Peak is no exception. The team headed by Peak CEO Xu Zhihua hopes to use this time to improve the channels.

Zhang Bingliang said that the current domestic sports brands, channels are still to join the main, and belong to the brand business is very weak control of "pseudo-affiliation." Brand owners have also become aware of this problem and hope to start from the standardization of franchise stores and establish a more flat and vertical management, with a view to strengthening the brand's control over franchise staff and funds.

However, this is also not easy. A domestic clothing brand had hoped to establish a provincial branch before, to achieve the control of the dealers, but the distributors were dissatisfied with the practice of the clothing brand, temporarily "change flag", transferred to the competition clothing brand, leading to The clothing brand dealer changed the shop card in the province's franchise stores overnight, and lost tens of millions of yuan in sales.

The above source said that Xu Zhihua early realized that the franchisees were ineffective in controlling their losses. Since 2011, they have started to strengthen their control and established branches in various places. They have also achieved some results. However, the transition will inevitably lead to a short-term decline in performance, which caused the company's dissatisfaction with the "conservatives" headed by Chairman Xu Jingnan and is pacifying dealers. "This kind of tossing back and forth has also led to the departure of a number of Peake managers. The decline in the number of stores and performance is inevitable," the source said.

As for the above statement, the reporter called the headquarters of Peak, but did not receive a response.

The way out of sports brands

Peak's 2012 mid-year report showed that total performance fell 28.5% year-on-year to 1.61 billion yuan, but overseas markets still maintained a good momentum of growth.

In the sports brand, Adidas experienced a long period of hardships such as taking power and closing stores after passing high stocks after 2008. However, in the context of declining consumer spending, high inventory levels, and sharp drop in number of stores, adidas has been recovering. It has not only eliminated some dealers with less willingness to cooperate, but also penetrated into more third and fourth-tier cities. Also let the business start to rise. The published data shows that in the first half of 2012, sales revenue in Greater China increased by 12% year-on-year.

Zhang Bingliang said that another brand that can be used for reference is Anta. As early as 2001, it started a network repo operation and currently controls a considerable percentage of terminals. In addition, the independent distributor system in its channels allows the company and distributors to have more close contact with each other. Under the premise of stabilizing the terminal, Anta is a relatively light-weight company in sports brands.

The newly appointed Vice Chairman of Li Ning's board of directors, Jin Zhenjun, also said in an interview with the media that he is trying to have a dominant order meeting and change the previous order model led by distributors. It even compared Daphne’s model and said, “Daphne was mainly a direct-operated store, and the distribution was determined by the headquarters, and it was later proved to be the most efficient.”

Jin Zhenjun joined Li Ning as a partner of the private equity fund TPG Group, which currently owns 13% of Li Ning. It is worth noting that TPG helped Daphne to overcome the transition to a successful case. In 2009, TPG made fundamental adjustments to Daphne’s operating model and transformed it from a representative of industry and commerce to a retailer. Therefore, most people generally place high hopes on TPG's participation in the transformation of Li Ning.

Zhang Bingliang stated that Li Ning’s channel transformation is nothing more than learning from Daphne, raising the proportion of direct-operated stores, increasing the right to speak in distribution channels, and making management flat. In fact, this is also the future trend of the entire sports industry. After experiencing a new round of high-speed stores after 2008, the homogeneity between sports brands was too severe and the industry competition was extremely fierce. It was difficult for brands to restrict the behavior of dealers. Each brand owner needs more efforts in the future to control the channel.

Another trend is that sports brands need to “go global” in a timely manner and actively look for a bigger stage. Peak's 2012 mid-year report showed that total performance fell 28.5% year-on-year to 1.61 billion yuan, but overseas markets still maintained a good momentum of growth, reaching 12.2% of total turnover. In terms of breakthroughs in overseas markets, Peak has already gone ahead of its domestic counterparts.