China’s Outdoor Industry, Filled with Great Promise

—An Exclusive Interview with Mr. Frank Hugelmeyer， President CEO of American Outdoor Industry Association

On February 23， the 7th ISPO China is to open at China National Convention Center. With the development in the past 6 conventions， the scale of ISPO China is increasingly larger and larger， which has fully witnessed the rapid development of China’s outdoors industry in the last decade， sprouting， growing and rising. But what’s the trend of China’s outdoor industry? How do the foreign outdoors industry brands run in China? What can we learn from the western counties in this field? … Concerning some issues in the development of China’s outdoors industry， China’s Foreign Trade made an exclusive interview with Mr. Frank Hugelmeyer(Hereinafter short for F.H.)， President CEO of American Outdoor Industry Association， who shared his view point on China’s outdoor industry with us.

CFT: How do you comment on the development of the outdoors industry in China in the last decade?

F.H.: Over the past ten years， the outdoor industry in China has been in its early formative stage and has been building to a future that is filled with

great promise. The past decade has seen more National Parks created， ski areas constructed， and the introduction of mountain biking trails and urban hiking paths. As more Chinese enter the middle class， the need and desire for outdoor infrastructure and leisure activities will only grow.

Strong and expanding outdoor cultures have followed the last two global industrial revolutions. Europe witnessed a broad expansion of its mountain ski resorts in the 1920’s to 1940’s and America began to significantly embrace its outdoor industry in the 1950’s to 1970’s. As China shifts from a production economy to a consumer economy， I expect that we will see many more Chinese pursue outdoor sports.

However， compared to Europe and America， there are very few specialized retail outlets in China that provide the

technical service， training and sales for the products that require the more advanced outdoor skills， like climbing， paddling， skiing. This apparent lack of specialty retail is a challenge and an opportunity.

CFT: Compared with the outdoor industry in the US， what do you think the difference between China’s outdoor industry and the US’ outdoor

industry?

F.H.: America has a more mature outdoor industry at this point in time. In the U.S. annual outdoor product sales for all channels of retail and outdoor sports activities is US $48B. The U.S. has over nine different channels of retail distribution that serves the outdoor market. More than 50% of all Americans pursue between one to six outdoor activities a year with the most popular activities being fishing， cycling， hiking， camping and paddling.

Across the nation， many U.S. cities and states focus key parts of their economic development strategies on outdoor recreation because it drives tourism， promotes quality of life and health and wellness. Most significantly， the U.S. federal government’s environmental policy protects large tracts of wilderness and open space， manages millions of acres of forests and ensures very clean air， land and water so that Americans have a strong desire to play outside.

CFT:According to what you learned， how did the American outdoors brands run in China? What do you think the most challenging factor for them to expand in China?

F.H.: Most brands gravitate towards two strategies when entering the Chinese market. The largest companies form subsidiaries within China and establish their own retail stores. Nike， Adidas， The North Face， Columbia Sportswear come to mind as some brands who are pursuing a direct strategy.

Smaller brands are partner with distributors who are already based in the country. The challenge is that many Chinese distributors are also retailers. If a small brand chooses the wrong partner， their product can end up in only a handful of retail locations. I also know of several brands that are currently considering entering the market through online retail partners only.

Besides choosing the right strategy and distribution partners， the biggest challenges in entering the market are the packaging and labeling requirements that are required by China or the consumer.

CFT: The income of most people in China are still low relative to the high price of outdoor gear and apparel， and besides， most of the outdoor lovers mainly gather in big cities such as Beijing， Shanghai， Shenzhen or other large provincial capital cities. In most of the second-layer and third layer cities， outdoor sports is still a little strange to people. How do you comment on this? How do you comment on China’s outdoor market?

F.H.: It is true that the initial market growth will originate from the wealthier citizens living in cities. At first， they will be the consumers that have more time and money.

However， many second and third layer cities have a unique opportunity to develop the great recreation and natural areas that are located nearby and become a gateway recreation community. The urban outdoor recreationists will always visit the top quality natural areas and second and third tier cities that take advantage of this trend will realize real economic growth. There are many， many rural communities across America and Europe that have benefited from positioning themselves as a gateway city to recreation. As the local wealth increases due to the tourism， the gateway citizens will find that they are able to enjoy a close by

natural resource more often and more affordably.

CFT: To what extent do you learn about the China’s domestic brands in outdoor gear and apparel? What do you think their advantages and disadvantages?

F.H.: One of the great advantages China has is that it is the center of outdoor products manufacturing worldwide. This will enable the necessary products to be rapidly and widely available to the consumer at an affordable price. Already we have seen several good technical domestic brands emerge in China that also manufacture products for European and American brands. These manufacturer-created brands have the ability to create a very efficient and profitable vertical structure. If these domestic Chinese companies invest in product and brand development like all great brands， I see few disadvantages. The biggest obstacle domestic Chinese brands will need to overcome is the real or imagined belief that American brands are of a higher value and quality.

CFT: What do you think are the factors most influencing the development of China’s outdoor industry? What would be the barriers? What’s your advice for the development of China’s outdoor industry?

F.H.: China and its local communities need to recognize that outdoor recre

ation will be a major economic engine if it is treated as a priority. The cities that fully embrace and promote the active outdoor lifestyle will have a great advantage and head start over the communities that do not. In Europe and America， the early cultural hubs for the lifestyle and industry now attract most of the top companies， talented employees and tourists.

At the moment， the biggest barrier in China to realizing a strong recreation economy is the air and water quality in the cities. On my last trip to Beijing， I was in a hotel across from the Bird’s Nest Olympic Center and I could not see the stadium. Outdoor athletes and adventurers aspire to see great landscapes. Landscapes are an integral part of the overall outdoor experience and essential to growing a strong outdoor recreation economy. Poor air quality simply does not inspire people to go outside and play.

China possesses some of the most amazing land and waterscapes in the world and they should not be hidden behind a cloud. Obviously， the manufacturing economy is very important to China but it cannot exist at the expense of losing the outdoor recreation and adventure tourism economies and their tremendous benefits. By choosing to lead on environmental issues in the future， China can realize the benefits of a very strong manufacturing base and a great outdoor recreation industry.

CFT: You must have attended the ISPO for several times. How do you comment on the ISPO? What’s your expectation for the 7th ISPO?

F.H.: ISPO China reminds me of the very exciting early days of Outdoor Retailer， which is the leading show in the U.S. There is a great energy and passion at the ISPO China show. You can just feel the entrepreneurial spirit and potential in the exhibit halls.

At ISPO China， Outdoor Industry Association will launch a breakthrough global environmental assessment for developing outdoor products. The tools will help outdoor companies reduce cost， waste， energy and water when they produce products. The leading experts in sustainable development for U.S. outdoor companies like REI， Timberland and Patagonia will be presenting the new tool for the Asian market. GreenBiz.com named the OIA Eco Index as one of the top ten most hopeful green developments of 2010 and we are very proud to be sharing it with our Chinese partners.