Recent business news related to China may be focused on trade wars with the US but look behind the cacophony of political bickering and the drama of trade tariffs, and there lies the gleaming tracks and ripened fields of China’s robust and rapidly growing sports and fitness industry.
China’s General Administration of Sport and National Development and Reform commission expects total consumer spending in China’s sports and fitness industry to hit US$221 billion in 2020, and observers are predicting that the valuation will triple by 2025.
“Eleven years after the 2008 Beijing Olympics, the sports industry is not slowing down in China anytime soon,” says Echo Li, Vice President, Corporate Partnerships – Greater China, Lagardère Sports. Li has spent the last three years in China helping the company identify opportunities for companies looking to grow their brand presence or product category in the world’s most populous nation through the medium of sports.
The sports marketing agency is a long-term partner with over 100 European football clubs, three FIFA associations, and two major US professional sports leagues, and manages more than 250 of the world’s most renowned sporting talents with access to more than 60,000 rights-holders.
Over the past 27 years, Lagardère Sports has been taking that expertise to China, helping brands and sports associations within and outside of China build a bridge between each other through sponsorships, investments and collaborations.
Says Li’s counterpart, Adrian Staiti, Executive Vice President - Global Partnerships, Lagardère Sports: “European rights-holders need somebody on the ground in China to help them understand the language and cultural nuances, and connect with the right people to build the brand they brought to China. On top of building the brand, how can rights holders monetise that asset over time?”
“And vice versa, Chinese brands need international input, experience and relationships to help them with their foreign investments in sport.
“Both sides need help with the bridging because of cultural differences and of the ways of doing business differently. Luckily we’re uniquely equipped to bridge that gap.”
Li adds that brands looking to connect with Chinese consumers have a unique opportunity to do so through the world of sports. Three avenues of opportunity stand out thanks to the government’s focus on these categories, says Li, namely in traditional mainstream sports such as basketball and football, mass community participation events such as marathons, and the new world of esports, or professional competitive electronic gaming.
The question brands should keep in mind when sponsoring these events, say Li and Staiti, is “What is it that I’m doing as a brand to enhance the sporting experience for fans?”
The last two years have seen an exponential rise in the number of community and mass participation events. And Li says this uptick is in part led by the Chinese government’s aim to put healthcare at the forefront of the population with its Healthy China 2030 initiative.
“Around four years ago, there were around 20 different marathon events around China. And up to a couple of years ago, there were 400. Today, there are over 1,200 running events across the country,” says Li.
And this presents opportunities for brands either in sports retail, health or leisure to support the countless mass fitness events across the country.
While China’s overall growth forecast and private consumption growth has remained, this has largely been affected by a dip in consumer spending on housing and on cars.
On the other hand, sportswear as fashion and functionality among fitness enthusiasts and consumers is in demand. The Economist Intelligence Unit says private consumption in clothing and footwear, health, and leisure are poised for strong growth beyond 2020. Amid the government’s spending to rapidly expand its sports and fitness industry to surpass US$722.5bn in value by 2025, US investment bank Goldman Sachs forecasts that sportswear sales will reach US$36.7bn by 2020, a 53.8% jump over 2015 sales.
“The socioeconomic position of the middle class continues to evolve as fitness becomes more important because people care about how they look and are looking at healthier living and lifestyles,” says Staiti.
So for brands looking to earn some brand love amid this movement, Staiti says that it’s not just going in with sponsorship money and waiting for magic to happen, but to be proactive in adding value to the fans and organisers with concepts, experiences and activation ideas for the long-term.
“I think many of the Chinese brands appreciate help in figuring out where to invest, what’s a good asset, what’s the right package, the right deal, the right amount of money, the right territory, and that’s the insights we provide,” says Staiti. “Much of the focus is now on the added premium content and use of IP that comes with the traditional elements of sports sponsorship packages.”
Basketball and football
Staiti and Li are also seeing a pivot towards domestic investment in local sports teams and leagues, with basketball and football being the two main sports beyond swimming and gymnastics that will make it big beyond China.
“There’ll be a fundamental shift at some point in the next 10 years or so that we’ll see more investment pouring into domestic sport, and domestic leagues like the Chinese Basketball Association (CBA) league and the Chinese Super League (CSL), the national basketball and football teams. The domestic esports leagues, in fact, are already world-leading,” said Staiti.
Football, for example, is getting the biggest push from the government in its ‘Chinese Football Mid-to-Long-term Development Plan (2016-2050)’ to qualify again for the World Cup, host a World Cup and unabashedly, win the World Cup.
Staiti says, “It’s years away, but the domestic sport assets are beginning to elevate themselves to global status. China’s ambitions to be a sporting powerhouse and desire to change the CBA of what it is now to more of an NBA-type of experience is seeing support from the government, so brands should watch out.”
One arena where China already dominates is electronic games. With 564.8 million players, it has the highest number of players in the world. It’s unsurprising then that the Chinese government recognises esports as an official profession in China. Earlier this year, China's Ministry of Human Resources and Social Security (CMHRSS) made 'esports operators' (event organisers or producers) and 'esports professionals' (those who compete professionally) official among its list of national professions.
“Some of the top-ranked teams in the world of one of the most popular games, League Of Legends, played daily by 27 million active players, are from China,” says Staiti. Chinese teams, like the South Korean teams, are dominating the esports arenas, he adds, “So I’m banking on League Of Legends and Honor of Kings in China to continue with that clout and following.”
According to a PwC report, China will soon overtake South Korea, by 2020, to become the second largest player in esports after the United States. Tencent’s data platform, Penguin Intelligence, estimates that the number of esports users in China – those who watch esports tournaments and have some knowledge of esports – will exceed 350 million this year.
Underscoring China’s esports ambition, the city of Hangzhou is harbouring dreams of becoming the esports capital of the world. Last year, the local government opened a US$280m esports town complex which will be the home venue of its League Of Legends pro team and league.
All this comes ahead of the likelihood of esports becoming a demonstration sport at the Paris 2024 Olympics.
For brands hoping to reach millennials in China, says Li, mobile and social would be the way. “Chinese millennials are living, communicating and interacting, spending 12 hours of their lives on their mobiles each day,” she says.
Adds Staiti: “If brands are still putting up ads on highways hoping to reach out to young people, they’re going to have to embrace new things.”
Brands therefore will need to know how to enter the world of esports to find opportunities to connect with audiences. “That’s where our team comes in to help brands analyse, evaluate and design the best strategy. It’s more than meets the eye,” says Li.
She adds: “When a brand sponsors any sports asset, they’re qualified to enter the match. Now they need to run. It’s not done, they’ve only started the race.”