3 Dec 2018
Sportswear Spinoff Gives Hong Kong Suppliers New Route Into Russia
Following the launch of the Demix retail chain, Sportmaster is said to be looking to source 1,300 own-label lines.
With Russia's largest sporting-goods chain committed to opening outlets dedicated to selling its own-label merchandise, new opportunities are said to be opening up for Hong Kong-based manufacturers. Sportmaster, the Moscow-headquartered retailer in question, already sources from 120 suppliers across Southeast Asia, including companies with production facilities in Vietnam and China. This latest move is seen as signalling its intent to expand both its own-label offering and its supplier base.
Europe's third-largest sportswear and sporting accessories chain, and the 10th largest globally, Sportmaster currently operates 475 outlets across Russia, Ukraine, Kazakhstan and Belarus. It also has seven joint-venture stores in China, a market it entered in 2014. Starting life as the Russian distributor for many of the world's most well-known sports brands, including Nike, Puma and Speedo, the company later moved into operating branded franchise outlets in its core markets for some of its key suppliers, notably Columbia and Weekender.
Keen to build on the success it had with retailing third-party brands, 10 years ago it launched its first own-label range – Demix. Buoyed by its success, further proprietary brands followed, including Delmare, Joss, Nordway and Outventure. None of these, however, ever quite managed to match the sales volume of its first foray into the own-label world.
Indeed, it has been the continuing success of the Demix brand that has persuaded the retailer that the time is now right to establish it as a direct high-street presence. Competitively priced and enjoying a high level of consumer recall, the Demix range currently extends across 2,200 product lines, representing some 5% of the retailer's total inventory.
The final decision to spin-off Demix as a distinct retail chain followed the success of a 2017 promotion that saw the brand outsell both Nike and Adidas in the Russian market. Essentially, the promotion repositioned Demix, shifting it from being largely perceived as an inexpensive option for amateur sports enthusiasts to a mid-market proposition that could still meet the needs of seasoned fitness enthusiasts and even professional athletes. With many of the most popular sporting brands in the Russian market, including Adidas, Puma, Reebok, Nike and Under Armour, all focusing on premium products, Demix's realignment as an affordable quality sports brand has been seen by many as a well-thought-out move.
Confident in its new niche, the first branded Demix outlet opened in Moscow's Gagarinsky Shopping Mall in September. With a distinctly middle class to upper middle-class catchment area, while also close to many of the capital's foremost universities, the choice of the mall was clearly a shrewd tactical one. Since opening its doors in 2010, the site has become something of a testing ground for brands new to Russia and for new retail formats, largely on account of the particularly desirable demographic it attracts.
As well as the canny choice of location, the timing of the move is also seen as fortuitous. By and large, the whole of the Russian sportswear and accessories market has enjoyed something of an uptick in the past 12 months, a development testified to by many players within the sector.
This is largely line with global trends, with the athleisure look becoming ever more ubiquitous, while sports clothing and sports shoes have become almost the norm when it comes to casualwear. Indeed, with more and more Russians habitually wearing tracksuits, sweatshirts, tennis shoes and trainers in non-sporting scenarios, sales in the sector are seen as sure to grow in terms of both quantity and value.
In order to capitalise on this, Sportmaster is expected to make rapid moves to develop its new retail property. In line with this, plans are apparently in place to open a further 14 Demix-branded outlets by the end of next year. As well as increasing its number of locations, the brand is also expected to expand its range, shifting up from its current level of 2,200 to 3,500, a figure seen as about the average for single brand sports retailers in the Russian market. With 1,300 additional lines to pitch for, this is again seen as offering a real opportunity for Hong Kong companies.
Leonid Orlov, Moscow Consultant