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Sporting Goods Industry in Hong Kong

Overview

  • A healthy urban lifestyle has led to the growing popularity of gyms, wellness centres, health clubs and workout classes. This has seen demand emerge for new product lines, including smart fitness equipment and fashionable, functional sportswear. Also noteworthy is the sustained growth from the female and children consumer market.
  • 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 the first half of 2019, Hong Kong’s sporting goods exports grew by 2%, with the US and the EU accounting for nearly half of the total.
  • Many of these 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 Sino Golf Holdings, Tak Po Group, Win Hanverky Holdings, and Yue Yuen.

Industry Features [1]

Table: Industry Features (Sporting Goods)
Table: Industry Features (Sporting Goods)

The major categories of Hong Kong sporting goods exports include sports equipment and accessories (61.7% of the total), sports apparel (22.7%) and sports footwear (15.6%). 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.

Although they have largely relocated their production bases to the Mainland China, 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. A variety of quality threads, fabrics, zippers, labels and other components, all are widely available 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 Adidas, Fila, Nike, Puma, Reebok, Timberland and Umbro. Only a few Hong Kong manufacturers have looked to develop their own brands. 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 local agents/distributors for foreign sporting goods companies, such as Co-Service Sports Equipment Company, GigaSports, Marathon Sports, Sportshouse and The Overlander.

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

Table: Performance of Hong Kong Exports of Sporting Goods
Table: Performance of Hong Kong Exports of Sporting Goods
Table: Performance of Hong Kong Exports of Sporting Goods (by Category)
Table: Performance of Hong Kong Exports of Sporting Goods (by Category)
Table: Performance of Hong Kong Exports of Sporting Goods (by Market)
Table: Performance of Hong Kong Exports of Sporting Goods (by Market)

Many Hong Kong sporting goods are exported under licensing and contract manufacturing arrangements with overseas manufacturers and brand owners, such as Adidas, Converse, Decathlon, Jako, New Balance, Nike, Puma, Reebok and Timberland. 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 their 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 speciality 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 rise in the number of sporting events and fitness centres is expected to continue, encouraging more people to participate in various sports. Asia Pacific and other emerging markets, such as India and China, will most likely be the growth regions because of their rising 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 Chanel, Gucci, Hugo Boss and Moncler Grenoble 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 hiking, fishing, golf and exercise equipment, as opposed to the more strenuous sports, such as kickboxing, football and tennis.

With the exception of capital intensive products, sporting goods are like other consumer goods, with R&D and marketing figuring highly in the value-added part of the process. Many businesses, including Hong Kong manufacturers, look to off-shore their physical production to the Mainland China, 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 have also looked to strengthen their R&D capabilities. For example, Platysens, an HKSTP’s Incu-Tech start-up, is marketing its pioneering app-based bone conduction headset that provides swimmers with real-time audio feedback during training.

Endorsement deals with sports stars, as well as sponsorship and licensing agreements with sports events are important factors in making sports products/brands a success. In line with this, sporting goods companies have often become the sponsor of sports stars, teams and tournaments, launching limited-edition and/or customised products such as T-shirts and accessories. Close connections with sports stars and coaches prove a resource that provides a competitive advantage. Feedback on products from such individuals can help direct R&D activities.

With the rise of e-sports, sports brands are sponsoring teams to take part in worldwide leagues and tournaments such as Tencent League of Legends Pro League (LPL). Home to the largest and most passionate e-sports fan base, China has become a major host of e-sports competitions such as the LOL Worlds 2020 China Championship which reportedly attracted off-line audiences of more than 80 million in 2017.

Internet and social media have become increasingly indispensable for sales and marketing of sports appeal, when most sports brands engage their customers on corporate social media. Facebook, with 2.3bn active users, remains the most popular social media worldwide, followed by Youtube (1.9bn) and Instagram (1bn). Social media users are increasingly receptive to in-app shopping, making IG and Facebook shops a more viable marketing tool for sports brands. Examples of popular IG shops selling sports fashion in Hong Kong are Shoes Kid, Take Me With You and Skechers. On the other hand, Youtubers and key opinion leaders (KOLs) are becoming more influential on consumption behaviour.

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 by clicking here.

Trade Measures Affecting Exports of Sporting Goods

Many sporting equipment items must meet 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 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 the 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

Modern technology continues to drive the industry, with designers seeking new fabrics and technology applications. Examples here include the world’s very first graphene (the strongest material on Earth) running shoes and shape-shifting, NASA-inspired sports bra using a gel-like solution.

On the supply side, 3D-printing is challenging the old production model. Nearly all leading sports brands are moving fast to creating 3D-printed sports shoes to better cater to the growing made-to-order demand at a shorter production lead time. The ability to create performance-enhancing and personalised 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.

Fitness and wellness have become an integral part of modern life, as is reflected by the growing popularity of aqua fitness, camping, dancing, hiking, kayaking, kickboxing, martial arts, skating, and yoga. This has encouraged the industry to develop new sports equipment, such as yoga blocks, woven fabric straps/rope, steel cable rope, resistance tube, and half ball. As sports lovers want to look smart and fashionable when exercising, while people also wear athletic apparel and footwear in daily life to look active, the best-selling sports outfits are athleisure wear which combine sportswear with leisurewear. Since the demand for stylish sportswear is now almost as important for men as for women, some female-focused athleisure brands are tapping the men’s wellness opportunity. A good example is Gap’s launch of Hill City which features premium, high-performance activewear for men.

Upcycling is increasingly a buzzword in the sporting goods industry, with some manufacturers signing up to voluntary certification labels such as Bluesign® and the Global Organic Textile Standard (GOTS) and promoting their commitments to ecological and social practices such as the utilisation of recycled materials and non-plastic ingredients.


[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: Jenny Lam
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