Overview

• Increasing awareness of health and beauty has led to the popularity of indoor exercises such as yoga, pliates, kick boxing, aerobic and Latin dance. New products and clothing such as yoga mat/block, fit ball, rubber bands and yoga/dance outfits have been developed. Meanwhile, more children are taking part in sports classes. Thus, formerly a traditional domain of males, sporting goods extended its clientele to include more females and children.

• Technology has become a more pronounced changing force in the industry. Sporting equipment has been developed with technology features attached, like MP3/ipod sports shoes, the “iGallop” and mini stepper. Sportsgears are increasingly designed with the help of the latest sports science, with the application of new materials to enhance performance.

• Hong Kong companies export a diverse range of sporting goods. Major categories include sports equipment and accessories, sports apparel and sports footwear. In the first eight months of 2009, the EU and the US were Hong Kong’s largest export markets with a share of 33.8% and 28.9%, respectively.

• Many of Hong Kong’s sporting goods are exported under OEM/ODM arrangement with overseas manufacturers and brand holders. Big OEM/ODM manufacturers include Yue Yuen, Win Hanverky Holdings Limited, Symphony Holdings, Hembly Int’l Holdings Limited and Sino Golf Holdings.

• Crossovers of casual design and athletic design have become more evident. Young people nowadays wear athletic apparel and footwear even though they are not doing exercise. Therefore, sporting goods companies such as Puma and adidas joined hands with famous fashion designers (such as Jil Sander and Stella McCartney, respectively) to introduce separate lines of fashion sportswear to target the youth market.
  

Hong Kong companies export a diverse range of sporting goods to the world market.  Major categories include sports equipment and accessories (64.9% of the total), sports apparel (27.9%) and sports footwear (7.2%). Sports equipment and accessories cover a wide range of products, for example, sporting bags, bicycles, water-skis, surf-boards, skate-boards, golf equipment, fishing and hunting requisites, and tennis and badminton rackets. 

Hong Kong is one of the world’s leading suppliers of sporting goods. The production bases of Hong Kong’s sporting goods industry have largely moved to the Chinese mainland. Hong Kong’s sports apparel manufacturers receive strong support from ancillary industries. Sportswear production benefits greatly from a strong presence of clothing industry in Hong Kong. Indeed, the production of other sports gear is well served with a variety of quality threads, fabrics, zippers, labels and other components at reasonable prices. Easy sourcing of materials and components adds competitive edge to Hong Kong’s sports goods sector.

The majority of Hong Kong sporting goods are exported under OEM/ODM arrangement with overseas manufacturers and brand holders like Reebok, Nike, adidas, Umbro, Timberland and Quiksilver. Only a few Hong Kong manufacturers have attempted to develop their own brands backed up with R&D undertakings. Notable examples include Neil Pryde (windsurfing sail), Super-X (sportswear) and Nikko (camping gear and accessories). Some Hong Kong companies serve as agents/distributors of foreign sportsgear/sportswear companies and being the sponsors for local sports team.

Performance of Hong Kong's Exports of Sporting Goods^

^ Since offshore trade has not been captured by ordinary trade figures, these numbers do not necessarily reflect the export business managed by Hong Kong companies.

Many Hong Kong sporting goods are exported under licensing and contract manufacturing arrangements with overseas manufacturers and brand holders such as Nike, Puma, Umbra, Quiksilver and Wilson. Buyers usually provide production specifications and product designs. Yet, Hong Kong manufacturers are increasingly devoted to product design and development, engineering, modelling, tooling and quality control, so that they can generate higher value along the supply chain.

Sales Channels

As mentioned, a few large local manufacturers export products bearing their own brand names. For example, the “Nikko” knapsacks and “Neil Pryde” sails are well known in overseas markets. It is common practice for these manufacturers to appoint overseas distributors to promote sales. A good distributor is a valuable source of market information and can be helpful in advising Hong Kong companies on appropriate pricing strategies. However, Hong Kong companies are advised to ensure that their potential partner is well established in the market, supported by warehousing and product handling facilities, and with good knowledge of the dynamics of the local market. On the Chinese mainland, sporting goods are channelled through shopping centres in first-tier cities and specialised retail stores in second- and third-tier cities.

Other distribution methods include selling to discount stores, speciality stores and traders. There are large discount chain stores in the US, such as Wal-Mart and Target, which buy from Hong Kong exporters. Large speciality chain stores selling sporting goods in the US include Sportmart and Sports Authority. In Europe, Decathlon, Intersport and Go Sport are the big players.

The Super Show in the US and ISPO in Germany are the world-class trade fairs for sporting goods. The latter is going to hold a trade show called “Sports Source Asia” in Hong Kong, in October 2009. Hong Kong Trade Development Council (HKTDC) is one of the organisers. Practitioners are encouraged to join trade missions and exhibitions organised by the HKTDC. Besides trade fair, HKTDC also organises from time to time study or match-making missions for Hong Kong manufacturers, many of whom are OEM manufacturers, to visit specific markets for establishing new business connections.

Retail consolidation is one of the biggest issues facing the sporting goods industry. Retailers are transforming into super size stores with “shoppertainment” format. Manufacturers are dealing with fewer, but more powerful retailers such as Wal-Mart or large specialty chains such as Sportmart and Foot Locker. These sporting goods retailers, in turn, put increasing pressure on manufacturers for better deals. They also shift the inventory risk to manufacturers.

Industry Trends

Generic sporting goods tend not to be influenced by changes in favour of particular sports, though they are still highly affected by fads and fashions. A “life cycle hypothesis” is proposed to describe the boom and bust in the specialised sporting equipment market. As people grew older, they prefer fishing, golf and exercise equipment, as opposed to more strenuous football and tennis etc. Stiff competition has led to industry consolidation in the international arena. Converse was acquired by Nike earlier; the Hockey Company was acquired by Reebok in 2004, with the latter subsequently acquired by adidas in summer 2005. Luxury brands have entered into the sporting goods business by introducing sneakers and sporting accessories.

With capital intensive products as exceptions, sporting goods are like other consumer goods, where research and development and marketing are the mainland, Vietnam, Indonesia and Thailand. Hong Kong manufacturers have also largely off-shored their plants to low-cost countries. While international players focus their R&D on the use of new materials and design incorporating engineering, biomechanics and physiology, some Hong Kong manufacturers have also developed their R&D capabilities.

As regards marketing, endorsement agreements with sports stars and sponsorship and licence agreements with sports events are important factors for the products/brands to be success. Thus sports stars, teams and tournaments are often sponsored by sporting goods companies. Close connections with sports stars and coaches could provide a source of competitive advantage. Their feedback on products could help direct R&D activities.

Though the EU and the US remain the biggest markets, sporting goods manufacturers are keen on the mainland’s market. According to Euro Asia Consulting, in 2008, the Chinese sporting goods market was worth around Rmb 54 billion. The success of 2008 Beijing Olympic Games had further driven up the demand for sporting goods in the mainland. The Li Ning Group, listed in Hong Kong since June 2004, is one of the most successful local sporting goods enterprises on the mainland, which operates over 2,000 sales outlets and offers over 1,000 varieties of products. While international brands such as Nike and adidas are projecting their brand names as upmarket brands on the mainland, Li Ning tries to appeal to the grass-root level, creating a casual and popular brand image. Other popular local China brands include Kangwei, Gweat, Anta and Double Star.

CEPA Provisions

The Mainland and Hong Kong Closer Economic Partnership Arrangement (CEPA) came into effect on 1 January 2004, and all items can enjoy duty-free access to the mainland beginning from 1 January 2006 by meeting the CEPA rules of origin.  According to the stipulated procedures, products which have no existing CEPA rules of origin will enjoy tariff-free treatment upon applications by local manufacturers and upon the CEPA rule of origins being agreed and met. For more information about country of origin criteria, please refer to the Trade and Industry Department’s CEPA web page: http://www.tid.gov.hk/english/cepa/index.html

Trade Measures Affecting Exports of Sporting Goods

Many sporting equipment items are required to observe the safety and technical standards of the importing countries. For example, Japan has banned the use of a list of substances in consumer products under the Japan Green Procurement Survey Standardised Initiative (JGPSSI). In EU, the Registration, Evaluation, Authorisation and Restriction of Chemicals (REACH), entered into force in June 2007. Among others, it requires EU manufacturers and importers of chemical substances (whether on their own, in preparations or in certain articles) to gather comprehensive information on properties of their substances produced or imported in volumes of 1 tonne or more per year, and to register such substances prior to manufacturing in or import into the EU.

Ethical sourcing is a common practice for international sports companies in response to social demands for corporate social responsibility. Leading companies have introduced measures to monitor working conditions of workers in their factories and contracted factories overseas. For example, Nike has hired a team of employees to monitor the labour conditions of its contracted factories throughout the world. Reebok has introduced Reebok Human Rights Production Standard and Reebok Restricted Substances Policy and adidas has implemented its Standards of Engagement, and other companies have followed suit.

Product Trends

Hong Kong's sporting goods industry is expanding steadily as people appreciate health and leisure benefits of physical activity, while sportswear is increasingly embraced by the casual wear market. The best selling sports outfits nowadays combine sports activities with leisurewear, as sports lovers want to look smart and fashionable when doing exercise and people wear athletic apparel and footwear for casual or leisure purposes. A case in point is adidas, which collaborated with famous fashion designer Yohji Yamamoto to introduce a separate line of fashion sportswear carrying the brand name of “Y3”.

Modern technology is playing a role in the industry, with designers seeking new fabrics and applications, for example, sun-protecting and reflective fibres with synthetics blended into wool and cotton. Manufacturers of sports balls and golf equipment have upgraded the materials used on basketballs, volleyballs and footballs from rubber and PVC to high-end PU. The use of nanotechnology in sports apparel is also expected to become more widespread, dry-fit, coolmax and UV protection material are becoming more popular in sportswear. Apart from new materials, products have been developed with hi-tech devices attached, such as MP3/ipod sport shoes and pulse timer bras. Furthermore, new sportswears are increasingly designed with the help of the latest sports science, which enhances performance. Equipment for indoor “passive exercise” has been invented such as the iGallop.

Among different types of sporting activities, golf continues to be one of the high growth areas, although the rise in the number of players has been steady rather than dramatic in recent years. With golf averaging a 14% growth over the past few years, opportunities are becoming more promising for retail sales of golf equipment and specialist clothing. In Asia, the Chinese mainland and South Korea are seeing the greatest growth potential. According to China Golf Association, the mainland will need to develop 2,000 courses in the next eight years to service current demand.

Fitness activities have become a worldwide trend, and yoga, pilates, aerobic and Latin dance are gaining popularity especially among females. Sporting goods companies have introduced series of products (outfits and accessories) especially for yoga. Other new indoor sports equipment includes foam roller, balance disc, rubber bands/tube and fitball. As a result, women are an increasing prominent clientele of the industry, and companies have devoted more resources to introducing women sporting goods.

In the US, outdoor pursuits like hiking, camping, backpacking, rock climbing, kayaking and fishing, have also grown in popularity.  Nordic fitness, such as Nordic walking, which involves walking with the use of poles to optimise fitness, is expected gain popularity.  Gloves as an accessory will also benefit from the rising trend of Nordic fitness.