Sneakerheads: High stakes in China’s online sports shoe market

Fake shoes and genuine articles costing more than 10 times the original price give foreign brands a run for their money.

Apps like Nice are helping to create a thriving secondary market for sneakers in China, where some shoes sell for up to 14 times their retail price, raising concerns among financial regulators [File: Qilai Shen/Bloomberg]
Apps like Nice are helping to create a thriving secondary market for sneakers in China, where some shoes sell for up to 14 times their retail price, raising concerns among financial regulators [File: Qilai Shen/Bloomberg]

Beijing, China – Ma Huan starts her day in a coffee shop on the south side of Beijing, checking her WeChat messages and uploading pictures of some of the world’s most desirable sports shoes for her customers, before contacting her supplier in a factory in Fujian Province to place orders.

Ma, 30, is one of the countless numbers of agents in China making a decent living supplying both fake and real sneakers to discerning customers who are more concerned about being seen in the latest designs than necessarily owning a genuine article. For those who do want the real thing, having to pay up to 14 times the original retail price for a rare specimen is no barrier.

China is a key part of the global sports shoe supply chain. But it’s also a huge source of global demand for the items.

China recorded sports shoe sales worth $22.5bn last year, according to data provided to Al Jazeera by research firm Euromonitor International. It is the world’s second-biggest market for sneaker sales after the United States – with $36.9bn in revenues – and is catching up rapidly with it, the figures show.

Foreign brands currently dominate the Chinese market, with their sales spurred on by an increasingly affluent population, aggressive marketing and a fashion-conscious youth. Germany’s Adidas and US giant Nike make up 19.5 percent and 19 percent of total sales respectively, compared with 11.1 percent for domestic market leader Anta, according to Euromonitor. 

For many of these foreign companies, China also remains one of the most important manufacturing bases, even though a lot of that capacity has moved in recent years to cheaper locations such as Vietnam.

But the dominance of foreign footwear brands among Chinese consumers is under threat. While foreign companies operating in China have long complained about lax enforcement of intellectual property regulations, the main threat to global footwear giants in China appears to be coming not only from knock-off versions of their own designs, but from increasingly assertive domestic brands that play on politics and a growing sense of nationalism.

Ma says that around 70 percent of her sales are of fake shoes, and the rest are of genuine sneakers.

Most of the fakes in Chinese markets are copies of US brands, says Rachel Zheng, senior greater China journalist at Jing Daily, which reports on the business of fashion. The numbers are “pretty significant”, she told Al Jazeera.

Under the spotlight

The surging demand for genuine foreign-branded sneakers has created a secondary market, in which traders – known locally as sneakerheads – buy and sell shoes like stocks and shares, catching the attention of financial regulators.

The state-controlled China Daily newspaper reported last month that China’s central bank is concerned that online and mobile trading platforms are helping to overinflate the price of sports shoes.

As an example, it said a pair of limited edition Nike Travis Scott x Air Jordan 6 shoes, which retail at an original price of 1,500 yuan ($214), can trade for between 15,000 yuan ($2,140) and 21,000 yuan ($2,994) on online platforms such as Poizon.

The newspaper quoted the Shanghai Head Office of the People’s Bank of China saying it had found “alarming signs of possible financial fraud in the sneaker trade, including illegal fund-raising, illegal use of public deposits and illegal pyramid schemes”.

Another side industry that has developed from the sports shoe market is the rise of specialists who check the authenticity of the goods, says Jing Daily’s Zheng.

Agents across China are making significant returns selling limited-edition sneakers to discerning customers online, but fake shoes litter the marketplace [File: Qilai Shen/Bloomberg]

One such company is Goat, launched by Daishin Sugano and Eddy Lu in 2015. Lu told Al Jazeera via email that in 2013, Sugano made an online order of a pair of rereleased Nike Air Jordan 5 Grapes – the same make and model as the first pair his father had bought him when he was aged 10.

“His excitement turned to disgust when he opened the box and realized the seller had sent him fakes,” Lu said.

From there, the pair began setting up Goat in order to authenticate sneakers amid a growing number of counterfeits, Lu said.

But industry observers such as Zheng say the impact of fakes on genuine foreign-branded shoes is limited, because the two markets attract very different types of clients.

“They are not really competing,” says Zheng, who notes that the buyers of fakes are mostly “not the real consumer that would be willing to pay the full price”.

A greater impact on foreign sneaker company sales could come from China’s domestic brands, including Li-Ning, Anta, Peak and 361 Degrees, which have become increasingly assertive in their marketing, according to Zheng.

Goat’s Lu agrees. He says domestic brands are “growing in popularity”. Li-Ning and Anta have both pursued major endorsement deals with athletes, “which help bring awareness and credibility to their products,” he said.

National pride

Chinese sports shoe manufacturers have been busy rebranding their goods as higher-end products, while trying to capture the retro-look market, according to Zheng.

These companies have also made efforts to tap into rising nationalism among China’s youth.

In the case of Li-Ning, the company rebranded itself and began running advertisements rooted in national pride in an effort to capitalise on political tensions with other countries, Tom Doctoroff, senior global advisor at Prophet, a global brand and marketing consultancy, told Al Jazeera.

The controversy surrounding the US National Basketball Association (NBA) and the Houston Rockets earlier this year also provided Li-Ning’s domestic competitor, Anta, with an opening to burnish its credentials as a patriotic Chinese company, says Doctoroff.

Anta severed its relationship with the NBA after the general manager of the Rockets, Daryl Morey, tweeted a message in October supporting pro-democracy protesters in Hong Kong. The tweet provoked a fierce response in mainland China, where state television stopped broadcasts of the league, multiple companies suspended or terminated cooperation and social media was flooded with criticism.

Domestic brands such as Anta and Li-Ning are capitalising on growing nationalist sentiment among millennials, say analysts [File: Qilai Shen/Bloomberg]

Both Anta and Li-Ning are trying to “make inroads driven by nationalist sentiments”, said Doctoroff.

The Houston Rockets incident was a “shot across the bows” of the sneaker industry, the sports teams connected to it, and business in general, he said.

“If a brand makes a hint at supporting dissolution of what China considers to be its legitimate territory, then the brand will suffer,” Doctoroff noted.

Every brand will have to grapple with balancing “freedom of expression and commitment to maintaining China sales,” he said. “Most will be cautious … These are delicate times.” 

A source close to the fashion industry who preferred not to give her name for fear of reprisals told Al Jazeera that companies would do well to separate business from politics in China. 

Curating emotional sentiment

“The [Chinese] media does a good job of curating emotional sentiment,” she said. “You don’t think about criticising; you see the government and the country as one.”

Sportswear companies large and small seem to have taken seriously the advice to keep business and politics apart. 

Nike did not respond to emailed questions, and an Adidas spokesperson replied by email to say that political sensitivities are “not something we comment on”.

Meanwhile, a salesperson at a small establishment in the Gulou area of Beijing said he was happy to talk, providing it was “within the circle of what’s acceptable”. Mention of the word “politics” brought a swift end to the conversation. The owner of a larger shop in the Sanlitun district also ceased email communication at the mention of politics.

Sports shoe agent Ma, who earns enough money to live in a studio apartment in one of Beijing’s more desirable districts, is not too concerned about politics. She’s focused on her next round of big sales, likely to come around the Chinese New Year in January.

She has no plans to stop selling sneakers, she said. The work gives her freedom and a decent income. 

“I am a little tired of Beijing, though,” she said. “I don’t want to be here anymore. I am considering moving to Vietnam. I could still do this from Vietnam. I can do this from anywhere.”

Source : Al Jazeera

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