Lululemon in the running shoe circle began to harvest the middle class

Visual China.

Text |Fixed Focus, Author |Jin Yufan, edWei Jia.

The evaluation of Ang Run is two-level, but it does not affect its important position in the middle class. Some people have heard of this brand because it is the same as lululemon, Arc'teryx (arc'teryx) and is known as the "urban middle class trio".

Many people still don't know about Angpao, and if you make a comparison, you may be able to understand why it is one of the middle-class three-piece sets.

lululemon made a billion dollars in revenue with a pair of yoga pants, which took 14 years. And Angpao, a brand founded in Switzerland in 2010, only took 10 years to achieve this volume.

You must know that running shoes are a more involuted market than yoga pants, with old brands gathering and fierce fighting. There is no shortage of niche "middle-class shoes" that can tell a story. Allbirds, the "wool shoe" that once swept Silicon Valley, has long since fallen out of favor, and the company has been losing more and more in the past year, and its stock price has been hovering around $1.

There is no shortage of professional running shoes in the market, a pair of running shoes of a few hundred yuan can meet the demand, why buy thousands of yuan of running?The fact is that when Nike and Adi are declining in the Chinese market, the growth rate of Angrun in the Asia-Pacific market is the fastest, and more and more stores are opening in the Chinese market.

When the giants lost ground and the new stars fell, in the third quarter of this year, Angrun created the strongest performance since its listing: net sales increased by **46 year-on-year5% to 4800 million Swiss francs (approx. 5US$500 million), and net profit jumped 184% to CHF 58.7 million (US$67.16 million).

Just like lululemon used to be the hottest in the Chinese market, the market once asked "what did it do right", since the beginning of this year, more and more people have become curious about Angpao: how popular is Angpao?How did this Swiss brand capture the middle class?How long will it be with the "honeymoon period" of the middle class?This article attempts to answer these questions.

If a brand is called a "middle-class harvester", it must not be cheap.

The average price of a pair of shoes is more than 1,000 yuan, and the mid-to-high-end shoes are more than 2,000 yuan, and the overall price is higher than most running shoes on the market.

Within half an hour of Walking into an ON store in Beijing, a salesperson repeatedly emphasized, "Our brand is not discounted." ”

Compared with old brands such as ASICS and Sony Kang, Angpao has only been established for more than ten years. However, Ang Run claims to be from the Swiss Alps, and this "origin" makes many people think of "high quality and high quality" for the first time, even if it is a new brand, it seems to have some heritage.

Ang Run is popular among the middle class, but many running enthusiasts find it very frustrating. Cai Ya, who has been running for ten years, said that if you like its design style and have a sufficient budget, then the competitors on the market may not be as good as Angpao, but if you want a pair of professional running shoes, you can find more mature and cost-effective options on the market than each of its series.

Ang run sells expensively, with a two-level evaluation, but it does not prevent it from selling well, just look at the company's financial report.

In the past five years, the company's performance has been running wildly, with net sales exceeding the CHF 1 billion mark for the first time in 2022, reaching 13A new high of $200 million.

Fixed focus cartography.

In 2023, Ang Run raised its full-year results** and expects net sales to reach at least 17600 million Swiss francs (about $2 billion). Now two-thirds of the way has passed, and the KPI of Ang Run has been completed three-quarters, cumulative net sales for the first three quarters of the year were 13500 million Swiss francs (approx. 15$500 million).

Ang Run not only sells well, but also makes money. In 2022, Angpao turned a profit, earning 57.7 million Swiss francs (about 66.02 million US dollars), with a net profit of 1100 million Swiss francs (approx. 1US$300 million), a year-on-year increase of 264%。

It is worth noting that the profitability of Angrun is not stable, after experiencing losses in 2019 and 2020, it began to turn around in the first half of 2021, and in Q4 of Q year 2021, it lost money again.

Fixed focus cartography.

From the perspective of gross profit margin, Angpao is more profitable than lululemon. Its gross margin in 2022 was 56%, rising to 59 in the third quarter of this year9%, which is also the highest gross profit margin since the listing of Angpao. The average gross profit margin of lululemon in recent years is 55%.

Angpao is running faster, especially in the Chinese market.

In the United States, the American market contributes more than 60% of the revenue, although the Asia-Pacific region with the Chinese market as the core accounts for less than 10% of the revenue, but in terms of growth,Asia Pacific is the fastest-growing regional market for Angrun: Net sales for the first three quarters of the year were 1CHF 100 million, with a year-on-year growth rate of more than 60% in a single quarter.

A more direct basis is,Angrun has accelerated the speed of opening stores in the Chinese market

In the five years since it entered China, it has opened 15 directly-operated stores, mainly in first-tier cities such as Shanghai, Beijing and Shenzhen. At first glance, this number does not sound like much, but a comparison shows its gold content. As of September 30 this year, there were only 26 retail stores around the world.

This is because, unlike Lululemon, which takes the store direct sales model, the channel strategy of Angrun is to focus on both distribution and DTC.

In the early days of the brand, Angrun mainly sold its shoes through a wholesale model, and when it entered the Chinese market in 2018, it also sold through distributors. According to the company's prospectus, as of the first half of 2021, there are more than 8,100 retail stores in more than 50 countries and regions around the world** its products.

Shortly before the listing, Angrun began to pay attention to the direct DTC channel, especially in a potential emerging market such as China, and achieved good results. According to Tmall data, after entering the platform in 2019, Angrun has grown rapidly at a year-on-year rate of 263% and 125% for two consecutive years.

However, the turn of the DTC channel is not as "too strong" as Nike, therefore, in recent years, the tide of DTC has ebbed and flowed, when Nike has paid the price for overexerting too much force, and began to re-find the optimal solution between DTC and wholesale mode, the relatively conservative channel strategy of Angrun is stronger in terms of risk resistance.

So far, the wholesale channel of Ang run is still the main force. In the third quarter of this year, for example, wholesale revenue and DTC revenue from distribution channels accounted for one-third respectively.

Two, one-third.

How did Ang run make money in the Chinese market?Who is the main force of consumption?

It's very similar to lululemon in that it's all about high-net-worth individuals. But the problem is, there are too many brands that want to learn from lululemon, why is it Ang Run?

Feng Yuan, an investor who pays attention to the footwear and apparel market, has been concerned about Angpao for a long time, and he summarized five elements for this problem:

First,The exterior design is stuck in the heart of the middle class, and the low-key sense and recognition are just right.

The logo of Ang Run is not big, up O and N down, not too eye-catching. Chen Cong, who was born in the 80s, is the CEO of a company, and he is usually busy with work and has no time to think about dressing.

But the unique hollow bottom of Ang Run is not so that it cannot be distinguished from the crowd. Whether you recognize this brand or not, there is a high probability that you will leave an impression when you see this sole.

Chen Congxiang recalled to Dingjiao that his initial idea of buying Angpao was that mainstream brands were almost all over the street, and he had always wanted to find a pair of shoes that were high-end and niche but recognizable.

Second,The experience of the product is very special, resulting in a minority understanding it, which meets the demands of the "middle class".

The most outstanding thing about Ang Run is its special sole structure, which is officially called the Cloud module, which can cushion the shock in both vertical and horizontal directions. But this is also one of the main reasons for the two-level brand evaluation.

In order to experience it more intuitively, Zheng Qi, a sports enthusiast, bought three different series of shoes from Angpao, and after wearing them for a while, he gave an interesting statement:Only the group of people who are most sensitive to the experience of wearing shoes can feel the special features of Angpao.

Shoes that run high have a cushioning effect, but they are very weak. If I hadn't worn sneakers for more than a decade, I probably wouldn't have felt it. So if I was in my early twenties, I wouldn't have bought it, because at that time, I must have felt that this kind of shock absorption effect was very frustrating, and it was better to buy Nike and Adi brand shoes with higher cost performance. Zheng Qi said.

In his opinion, the cushioning effect of Ang Run is natural and makes people feel that there is a certain amount of technology in it, rather than the shock absorption effect of mainstream running shoes with a full sense of technology and a more direct foot feel, which can be felt by anyone who wears it.

The reason why Zheng Qi, who is now over 30 years old, buys Angpao, in addition to seeing it many times in the gym and social platforms, has a strong curiosity about it, and there is also a psychology of conformity and showing off: "There should be a few people who can get the experience of Angpao, and I am one of them." ”

Third,Ang run is not only expensive, but also very strong, rarely discounted, and the high-end image is stable.

Feng Yuan said that a certain consumption threshold can screen out a large part of users and separate some groups of people.

Chen Cong has been buying Angpao since 2020, and in his impression, whether it is online or offline, this brand is almost not discounted, including the broken code model. For regular customers like him, it is a sense of security and "protects our feelings".

This is very much in line with lululemon. lululemon's Tmall*** shows an all-time low discount rate of just 2%.

Fourth,The middle class likes the community, and Ang Pao slowly infiltrates it by organizing the community。This is also the case with lululemon.

In the early days of the North American market, Angpao continued to sign various great runners, organized offline activities with high frequency, organized sports enthusiasts and elite enthusiasts together, and gradually got out of the circle.

Now in the Chinese market, too, the city stores of Ang Run often organize running activities, and the social attributes are very strong. Ang Run invites KOLs who run laps to join, and participants can enjoy new product try-ons. This allows the brand to reach more runners and fitness enthusiasts, and expand its audience to outdoor enthusiasts, fashion circles, and groups who identify with a healthy lifestyle.

The highest level of recognition of a brand is probably to join its organization. From the company's point of view, this type of marketing campaign can achieve twice the result with half the effort while maintaining the high-end tone of the brand.

In addition to the appearance, dress, and ** circle, there is a very important pointEvery "middle-class harvester" has to be able to tell a story。Since the birth of the brand, Ang Pao has been a good storyteller.

As mentioned earlier, Jean Ang ran from Switzerland has an aura of "nobility", and its founder, Bernhard, is a famous Swiss athlete. This will invisibly make consumers feel that the brand is professional, but it is not enough.

Ang Ran invited the tennis king Federer to make him an investor and spokesperson for the brand. Running was originally the sport with the lowest threshold, and the action of running is directly different from other running shoes, binding itself to the middle-class symbol of tennis, which is closer to the target users of running.

There are many elements in the story that Ang Run tells to the middle class, such as the sense of technology that the middle class likes, environmental protection, etc., and I will not list them one by one.

I have to say that by learning Xi lululemon, Ang ran has become the "favorite" of some middle class.

Feng Yuan concluded that in the eyes of the middle class, it can decorate the façade and perfectly and low-key reflect financial resources and taste. In other words,Ang Run is no longer just about shoes, the middle class is not just buying Ang Run for sports.

But don't forget, "the middle class is sensitive, and even more demanding," he says.

Chen Cong originally chose Ang Run because it was niche enough and cool to wear, but now it feels less cool, "I and many people now have a feeling that I have seen the logo of Ang Run more and more."

Trends and fashion are a cycle, and so is the business world, where no brand stays in adolescence forever.

Remember the allbirds that took Silicon Valley by storm?A brand that is five years younger than Bianpao made a fortune with a single product and countless halos on it.

Allbirds was once known as the "Silicon Valley shoe", not only Google co-founder Larry Page and Apple CEO Tim Cook like to wear them, but Alibaba founder Jack Ma has also worn them many times.

The brand is aimed at the mass leisure market, claims to be no socks and no foot odor, and was named "the most comfortable shoe in the world" by Time magazine. Ang Run is attacking the professional market segment and claims to have made the world's lightest cushioned running shoes. The two have different positions, but their growth trajectories are very similar.

They all have a brand story that impresses the middle class, and it also includes several major elements such as technology, celebrity effect, and environmental protection. Ang Pao hired Federer as an investor, and Allbirds also got an investment from Hollywood star Leonardo.

The two companies that were chased by venture capital institutions to make money also went to the U.S. stock market around 2021 to ring the bell and go public, although they were both in a state of loss at that time, but their market value soared.

Fixed focus cartography.

In the first year of listing, the stories of the two companies went to a different ending. Silicon Valley's elite began to abandon Allbirds because the company's performance did not grow, it lost even more, and its market value fell from $4 billion at the beginning of the IPO to just $1$600 million. On the other hand, Angpao not only rose sharply in performance, but also turned losses into profits, with a current market value of 91$100 million) is 50 times more than Allbirds.

There is a view that the division between the two is due to the rise of the professional market segment and the loss of the mass fashion market. Judging from the fact that these two brands fall together, it seems to be valid. ButNike and Adi, which have been entrenched in the professional sports market, have been squeezed in market share, and have even been "grabbed" by the runs, and how to explain it?

The CEO of Foot Locker, one of the wholesalers of Nike and Adi, recently said that although Nike is still the main brand, ON and Hoka One One (a running shoe brand from France, acquired by UGG's parent company Deckers in 2013) are the best-performing performance running shoe brands during the period, and "will continue to increase the number of products of these two brands next year."

Another wholesaler DICK'Among S Sporting's stores, the proportion of ON Running footwear products has also increased from 08% to 61%。

It's no wonder that when Nike and Adi often offer 2 or 3 discounts on "big sales", Angpao, which is not discounted, sells hotly. This also reflects a trend: mass sports brands cannot sell, and niche sports brands have begun to grow rapidly. Feng Yuan said,This is the result of the target consumer getting tired of mass brands and turning to niche, novelty trends.

As a representative of the minority, Ang Run has temporarily become the new star that overpowers Nike Adi and replaces Allbirds, what will be its follow-up development?

Judging from the reaction of the capital market, in stark contrast to the performance of Angpao, it is the less than ideal stock price performance. Compared with the market value of more than one trillion US dollars three times since its listing, and the previous market value high of 15 billion US dollars, the market value of Angrun has dropped significantly since the beginning of this year. Feng Yuan analyzed that after the listing of Angpao, the inventory continued to rise and the profitability level was not stable, and the existence of these hidden dangers was not enough to dispel the doubts of the capital market about a new brand.

It's also important to note that there are more and more niche brands that tell similar stories. Feng Yuan said, don't forget,The reason why the middle class chooses Ang Run is to pay for the niche and don't want to follow the crowd, but after the listing, Ang Run will inevitably break the circle, so will it always be the "new head" of the middle class?

On the other side,The opponent hoka is menacing。It tells a similar brand story to Angpao, the signature is trail running shoes, the price is close to Angpao, and it is also professional, niche, young, and lululemon's "apprentice". HOKA's growth is also rapid, and the parent company's stock price has easily outperformed Adi and Nike in the past year, and sales are also rising this year.

HOKA also entered the Chinese market a year earlier than ANGPAO. The relationship between the two is like KFC and McDonald's, a business district that opens an Ang run store, and a new hoka will be opened soon. Search for "running shoes" on social platforms, and you can also see the argument between the two "fans".

There are no wins or losses in the comment section, and who knows which niche, cool new brand the middle class will turn around and fall in love with?From Nike, Adi to Allbirds, to Angpao, Hoka, who can guarantee that they will never let middle-class consumers "aesthetic fatigue"?

At the request of the interviewee, Zheng Qi, Cai Ya, Feng Yuan, and Chen Cong are pseudonyms in the article.