Trek Bicycle Corporation began direct market activities in China in 2005, launching with 20 independent retailers and two Trek Concept stores. In 2011, Trek China boasts 260 retail outlets nationwide. Whilst general economic growth has been responsible for boosting the local bicycle market, a successful local marketing program has been pivotal.
According to Larry Wang, Trek China’s Marketing Events Manager, “before Trek established its own distribution infrastructure, Chinese people weren’t willing to spend money on leisure, but it seems now that has changed”.
Giant, Merida, Specialized and other major market players have all followed suit in shortening the B2C supply chain, thus creating a more competitive and consumer-focused environment.
“When Trek first came to China, they hoped it would be one of the most important locations within the entire Trek family” explains Wang. “At the beginning, China was naturally in last place out of all the global distributors. Now we’re in ninth position. Soon enough, we will be in the top five. After five more years, we should be in the top three.”
2010 data from the China Bicycle Association (CBA) reveals more than 80 million complete bikes were produced in China last year, with with almost a quarter being exported to the United States. However, it’s generally accepted Asia will provide most future growth in the global bicycle market. China could very well become a top consumer of its own product.
Wang seems to agree with this sentiment. “Japan is the number one Trek market in Asia. I think they currently have triple the sales volume of China. However, we’re growing fast and we’re catching up – last year, Trek Japan had eight times the sales volume of China. After five years, we are familiar with the market and with the local consumer.”
There are, of course, other factors contributing to this growth.
“Chinese people have become rich, and they’re investing in leisure and events” says Wang. “Local government also started encouraging people to cycle in the primary cities, like Guanzhou, Shanghai and Beijing. Now the second-level cities are following. That’s an important factor in the success of cycling in China.”
Wang is adamant the most successful marketing program elements are those which bring cycling enthusiasts together, with the product being a backdrop.
“Firstly, in 2007, we had the Marco Polo Cycling professional cycling team. Following that, we wanted to focus on a more (grassroots) market. We opened the Huang Shan MTB festival (good article at http://www.enterprisechina.net/node/577) in April 2007, and have continued it every year since. Events are extremely important for Trek’s image. The Trek Shanghai league (an eight race series for road cyclists) has grown to 600 participants. We’ve tried to make that race more like a commercial race. When I joined Trek in 2008 we held 20 events per year. Now we are responsible for 130 events each year.”
So how does any bicycle brand truly engage the Chinese consumer – is there a simple answer?
“No! Trek had Lance (Armstrong), and still we think only 10% of the population knew who he was. Other brands have athletes like Cavendish or Evans, but not many people in China know them. Having a US-made bike is still very important. The wealthiest customers want a product that’s not made in China.”
But even that’s not a golden egg. “In 2010, we sold 20 units of Madone 6.9 SSL Project One road bikes. The retail price is CNY80,000 (EUR9,400) and they were shipped to many different locations in China. It’s weird, we even got a call from a company in a really tiny town – nobody knows why – wanting to buy one of these bikes!”
As with every direct market, Trek has a strict retailer policy and structure to ensure consistent consumer experience and robust B2B control systems.
“We have three levels of Trek store in China – Gold, Silver and Bronze. Bronze dealer is just like a standard Hong Kong-style store, where Trek is part of the overall product mix. For Silver dealers, at least 50% of their product mix is Trek and we have a special policy and plan for them to follow. Gold dealers feature 95% Trek product and some other accessories which we don’t make, like Thule roof racks for example. Out of 260 Trek stores in China, 40 are Gold level. In the end, we don’t throw money into movie stars or anything like that. We’d rather put money into providing good retail experience, service and mechanical support for the customer.”
With increasing economic prosperity and consumer sophistication, a transition from utility to recreational cycling is taking place across the country. Whilst some of China’s nearest neighbours – South Korea being an example – share very similar category profiles (predominantly MTB-centric markets) China now has a UCI WorldTour professional road cycling race in its arsenal. How will this grow the road bike segment?
“Chinese people are comfortable with mountain bikes. Road bikes are not so familiar. They just want one bike, and one that is easy to use. About 65% of our total annual unit sales are MTB. 20% is road, and 15% is lifestyle. We are trying to sell more carbon road bikes in China, with a retail price upwards of CNY15,000 (EUR1,750). City bikes are also growing in popularity.”
Ultimately though, even an established global bicycle brand like Trek faces competition in this dynamic market.
“There are still challenges from local (OBM) brands. You can get a full-carbon mountain bike for only CNY6,000 (EUR700) – it’s crazy!”