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Sporting Goods Industry in Hong Kong

Overview

  • Increasing awareness of the importance of health and fitness has led to the growing popularity of indoor exercises, such as yoga, Pilates, kick boxing, aqua fitness, Latin dance and even climbing walls. This has seen demand emerge for a number of new product lines, including skidless yoga mats, rubber bands, barbells, hip scarves and finger cymbals. There has also been an increase in the number of children participating in sports classes. Long a traditionally male domain, the sporting goods sector now also caters to women and children.

  • Hong Kong companies export a diverse range of sporting goods. The major categories here include sports equipment and accessories, sports apparel and sports footwear. In January-May 2017, the US and the EU were Hong Kong’s largest export markets with a share of 26.0% and 25.2%, respectively.

  • Many of Hong Kong’s sporting goods are exported under OEM/ODM arrangements with overseas manufacturers and brand owners. Hong Kong’s leading OEM/ODM manufacturers in this sector include Yue Yuen, Win Hanverky Holdings Ltd, Symphony Holdings, Sino Golf Holdings, Taikoo Sportswear Ltd and Stallion Sports Ltd.

Industry Features [1]

Table: Industry features (sporting goods)
Table: Industry features (sporting goods)

Hong Kong companies export a diverse range of sporting goods on a global basis. The major categories include sports equipment and accessories (68.1% of the total), sports apparel (24.4%) and sports footwear (7.4%). Sports equipment and accessories cover a wide range of products, including sporting bags, life-jackets, water-skis, surf-boards, skate-boards, golf equipment, fishing and hunting requisites, and tennis and badminton racquets.

Hong Kong is one of the world’s leading suppliers of sporting goods. Although they have largely relocated their production bases to the Chinese mainland, Hong Kong’s sports apparel manufacturers still receive strong support from a number of ancillary industries. Sportswear production benefits greatly from the strong presence of the clothing industry in Hong Kong. Indeed, the production of sports gear is well served through a widely-available variety of quality threads, fabrics, zippers, labels and other components, all at reasonable prices. This easy sourcing of materials and components adds a truly competitive edge to Hong Kong’s sports goods sector.

The majority of Hong Kong sporting goods are exported under OEM/ODM arrangements with overseas manufacturers and brand owners, notably Reebok, Puma, Fila, Nike, Adidas, Umbro, Timberland and Quiksilver. Only a few Hong Kong manufacturers have looked to develop their own brands, a move backed up with R&D undertakings. Notable examples, though, include Neil Pryde (windsurfing sails), Super-X (sportswear), Re:echo (outdoor gear and clothing) and Nikko (camping gear and accessories). Several Hong Kong companies act as agents/distributors for foreign sportsgear/sportswear companies, often sponsoring local sports teams as part of their promotional activities.

Performance of Hong Kong’s Exports of Sporting Goods [2]

Table: Performance of Hong Kong's exports of sporting goods
Table: Performance of Hong Kong's exports of sporting goods
Table: Performance of Hong Kong's exports of sporting goods (by categories)
Table: Performance of Hong Kong's exports of sporting goods (by categories)
Table: Performance of Hong Kong's exports of sporting goods (by markets)
Table: Performance of Hong Kong's exports of sporting goods (by markets)

Many Hong Kong sporting goods are exported under licensing and contract manufacturing arrangements with overseas manufacturers and brand owners, such as Nike, Puma, New Balance, Reebok, Timberland, Umbro, Quiksilver and Wilson. Typically, buyers provide the production specifications and product designs. Hong Kong manufacturers, though, are increasingly becoming adept at product design and development, engineering, modelling, tooling and quality control, allowing them to generate higher value along the supply chain.

Sales Channels

A few large local manufacturers, as mentioned earlier, export products under their own brand names. “Nikko” knapsacks and “Neil Pryde” sails, for example, are well-known in overseas markets. Meanwhile, more  young designers have started their own businesses by creating own brands such as “Miss Runner” to sell fashionable yet high-performance sportswear at affordable prices around the world. It is a common practice for these manufacturers to appoint overseas distributors in order to help 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 should ensure that any potential partner is well-established in the market, supported by warehousing and product-handling facilities, and possesses a good knowledge of the dynamics of the local market. On the mainland, sporting goods are channelled through shopping centres in first-tier cities and specialised retail stores in the second- and third-tier cities.

Other distribution methods include selling to discount stores, speciality stores and traders. For instance, large discount chain stores in the US, such as Walmart and Target, buy from Hong Kong exporters. The large speciality chain stores selling sporting goods in the US include Sports Authority, while the big players in Europe include Decathlon, Intersport and Go Sport.

The International Sportsmen Exposition (ISE) in the US and ISPO MUNICH in Germany are the leading trade fairs for sporting goods. As well as staging trade fairs like Hong Kong Sports and Leisure Expo, the HKTDC also organises study or match-making missions for Hong Kong manufacturers, many of which are OEM firms, to visit specific markets in order to help building new business connections.

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

Industry Trends

The rising number of sporting events is expected to encourage more people to participate in various sports. It is expected that Asia Pacific and other emerging markets, such as India and China, will be the growth regions because of the rise in disposable income and improving living standards.

Generic sporting goods tend not to be influenced by changes in the popularity of particular sports, though they are still highly vulnerable to changing fads and fashions. Luxury brands such as Moncler Grenoble and Gucci have entered into the sporting goods business by introducing their own sneakers and sporting accessories. A “life cycle hypothesis” has been proposed to describe the boom and bust in the specialised sporting equipment market. As people grow older, they prefer fishing, golf and exercise equipment, as opposed to the more strenuous sports, such as football and tennis.

With capital intensive products being the exception, sporting goods are like other consumer goods, with R&D and marketing figuring highly in the value-added part of the process. These have seen many businesses, including Hong Kong manufacturers, look to off-shore their physical production to the Chinese mainland, Vietnam, Indonesia and Thailand in order to lower their production costs. With international players focusing their R&D on the use of new materials and generating designs incorporating engineering, biomechanics and physiology, several Hong Kong manufacturers also looked to refine their R&D capabilities. For example, Platysens, an HKSTP’s Incu-Tech start-up, has recently presented its pioneering app-based bone conduction headset that provides swimmers with real time audio feedbacks during training.

With regard to marketing, endorsement agreements with sports stars and sponsorship and licencing agreements with sports events are important factors in making products/brands a success. In line with this, sporting goods companies have often become the sponsor of sports stars, teams and tournaments. Close connections with sports stars and coaches prove a resource that provides a competitive advantage. Feedback on products from such individuals could help direct R&D activities.

CEPA Provisions

Following the implementation of the third phase of the Mainland and Hong Kong Closer Economic Partnership Arrangement (CEPA III) in January 2006, all products of Hong Kong origin can be imported into the mainland at a zero tariff. According to the stipulated procedures, products that have no existing CEPA rules of origin will enjoy tariff-free treatment upon applications by local manufacturers if comply with the CEPA rules of origins. For more information regarding country of origin, please refer to the Trade and Industry Department’s CEPA web page:
http://www.tid.gov.hk/english/cepa/tradegoods/files/mainland_2017.pdf

Trade Measures Affecting Exports of Sporting Goods

Many sporting equipment items are required to observe the safety and technical standards of the importing countries. Japan, for example, has banned the use of a list of substances in consumer products under the Japan Green Procurement Survey Standardised Initiative (JGPSSI).

In May 2012, the European Chemicals Agency (ECHA) published an updated version of the EU’s Guidance on Registration in the framework of the REACH Regulation. Hong Kong manufacturers may recall that the initial Guidance on registration was published in 2007, and it has been subsequently corrected or amended on several occasions. The restructuring involves the division of the document into two separate parts:

  • Part I focuses on the explanation and clarification of the registration requirements,
  • Part II provides practical information for registrants.

Ethical sourcing is also a common practice among international sports companies, in response to societal demands that businesses have corporate social responsibility (CSR) policies. A number of leading companies have, for instance, introduced measures to monitor working conditions of workers in their factories and in contracted overseas factories. Nike, for one, has a team that monitors the labour conditions of its contracted factories throughout the world. Adidas has implemented the Adidas Group Restricted Substance List, and other companies have followed suit.

Product Trends

Hong Kong’s sporting goods industry is expanding steadily as people more readily appreciate the health and leisure benefits of physical activity, while sportswear is also increasingly being embraced by the casual wear market. The best-selling sports outfits combine sports activities with leisurewear, as sports lovers want to look smart and fashionable while exercising, while people also wear athletic apparel and footwear for casual or leisure purposes.

Modern technology is now playing a distinct role in the industry, with designers seeking new fabrics and applications. Examples here include sun-protecting and reflective fibres with synthetics blended into wool and cotton and cooling materials made by high-density polyester fibres and xylitol. Manufacturers of sports balls and golf equipment have also upgraded the materials used in basketballs, volleyballs and footballs, shifting from rubber and PVC to high-end PU. The use of nanotechnology in sports apparel is also expected to become more widespread, with dry-fit, coolmax and UV protection materials becoming more popular. Recently, the research team of MIT has created a new form of performance fabric that combines biomaterials research with textile design to improve fabric breathability and speed up sweat evaporation. The ability to create new product technology and other performance-improving features is a key driver in the sporting goods market. In particular for those sports with fairly stable participation rates, innovative products are the motivations for consumers to replace their old products.

Overall, fitness activities have become a worldwide preoccupation. Rock climbing, yoga, Pilates, kick boxing, aqua fitness and Latin dance are all gaining popularity, especially among female consumers. As a result, many sporting goods companies have introduced a series of products (outfits and accessories) to cater this segment. A case in point is the Hong Kong-based activewear label ‘Miss Runner’, which has been embracing wearable art into performance sportswear to target female consumers. Other newly introduced indoor sports equipment includes foam rollers, balance discs, rubber bands/tubes and fitballs. As a result, women are increasingly becoming an important part of the industry’s customer base, with companies devoting resources to introducing women’s sporting goods.

The popularity of outdoor activities is expected to continue to grow. The popularity of outdoor activities also reflects the environment-related trend and more people want to experience nature. In the US, several outdoor pursuits, notably 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 also expected to show substantial growth in future years.

 


[1] Industry statistics refer to production in Hong Kong only. They exclude swimwear, headgear and other sports wear.

[2] As offshore trade has not been captured by ordinary trade figures, these numbers do not necessarily reflect the export business managed by Hong Kong companies.

Content provided by Picture: Louis Chan
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