How New Balance made its way into China
The fusion of fashion and sportswear; an ever-increasing awareness of physical and mental well-being; growth in consumer disposable income: These trends have created fertile ground for the development of China’s sporting goods industry. According to Euromonitor, the sportswear market in 2021 increased by 23% (compared to 15% in the United States) compared to 2020. And there does not appear to be a significant reduction in growth. The continental sportswear market is forecast to grow at 13.7% CAGR (vs. 7.8% in the United States) for 2021-2025.
Rightly, the major international players continue to increase their investments. For example, Nike would invest $205 million (1.3 billion RMB) in an innovation center in Shenzhen. Yet the Chinese sportswear market scenario also presents strong growth opportunities for smaller sportswear brands, which means their more nimble counterparts will struggle to maintain their lead.
According to the NPD Group, New Balance was the only international leisure label to see growth in China in Q3 2021 compared to Q3 2020. And that can’t be attributed to discounts. In fact, its average list price has increased by more than 10%.
As they vie for leadership in the field, we outline some of the strategies responsible for New Balance’s position.
New Balance has developed an ecosystem of retail concepts that offer differentiated facets and connection points for Chinese consumers. For example, NB Gray is a concept store with outlets in Beijing, Guangzhou, Chengdu (pop-up store) and Shanghai that showcases head-to-toe product collections and outfits. Likewise, NB Running Store not only sells performance products, but acts as a hub for running communities. All of this taps into New Balance’s “Runs with You” philosophy, and retail experiences are designed to engage with existing and potential consumers on an emotional level.
New Balance uses its heritage as a source of inspiration and innovation. For example, the 327 – based on classic running sneakers – is one of their most popular shoe designs on the continent. Other retro styles include the XC-72 model, which references the aesthetic of the 70s. A more contemporary design is the 550 model: a retro sneaker designed in 1989. The rising average resale price premium reflects the value perception of the brand. StockX reported a 400% growth in trade for New Balance 992 in the first half of 2021 compared to the first half of 2020.
Made for China
China-specific collections are nothing new for the brand, which celebrated last year’s CNY with the release of M1500 “Year of the Rat”. New Balance Shanghai Design Studio (SDS), established in 2019, also facilitates local R&D efforts and helps develop marketing initiatives tailored to the region. the Designed by SDS CNY Pack for 2022’s Year of the Tiger was a recently released collection in the country. They also featured the stories of four Gen Z influencers – Sen Lin, Bing Xie, Wang Ke and KUN – for its Lunar New Year campaign.
New Balance sought to identify influencers from diverse backgrounds. Although they recently signed famous K-pop singer IU as their global brand ambassador, New Balance has launched a series of interviews called “NB Talks” with young independent craftsmen such as a photographer, a musician and a barista. Here it is the authenticity of the narrative story: how running plays a significant role in their lives.
New Balance partners with designer creations that lend the company credibility in the luxury space. For example, New Balance x Stone Island FuelCell RC Elite v2 has attracted a lot of attention among running and lifestyle enthusiasts. The collaborations are also appealing to a more fashion-conscious audience: take the recent New Balance X Miu Miu, which reimagines the New Balance 574 from the 1980s. The wide range of these underscores a diverse style and commitment to craftsmanship and creativity.
New Balance is not Nike or adidas. And the brand does not claim to be. On the contrary, it has been able to carve out a distinctive market position that resonates deeply with Chinese youth. It is this call that has attracted the attention of imitators, and New balance recently won a trademark case against a Chinese sportswear company, “New Barlun”. All of this implies that the company will continue to expand its footprint here. Their ability to strike the right balance between sport and fashion, tradition and modernity, and ultimately local and global influences, should take them further down the road to success.
Glyn Atwal is an associate professor at the Burgundy School of Business (France). He is co-author of Luxury Brands in China and India (Palgrave Macmillan).