Embracing New Retail Concepts to Enhance Store Productivity and Customer Experience
As at 31 December 2018, the Group had a total of 6,230 stores in China and overseas markets, with about 200 net openings in 2018. The number of exclusive distributors remained stable at 40, with their directly-operated stores accounting for around 60% of the total store count. In 2018, same store sales in the Xtep retail network surged at mid-teens level, signifying the success of the Group in transforming and boosting development of its business.
During the Year, 75% of Xtep’s stores were refurbished into new international-style sports store format. These stores have gross floor area of over 100 m2 on average with the design emphasizing running features and collections from head-to-toe to boost cross-selling opportunities.
In addition, the Group directly operates the Xtep Run Clubs to provide runners a one-stop professional service from events and facilities to other running-related services and elevate Xtep as a running professional brand. New initiatives and features have been gradually implemented in Xtep’s flagship stores, aiming to strengthen customer experience and enable them to enjoy the convenience of an omni-channel retail environment that efficiently links e-commerce and physical stores together. Embracing the new retail trend, the Group’s new retail team started strategic collaboration with Alibaba Group in June 2018 to explore a new way of customer-centric retail marketing covering branding, e-commerce, omni-channel, community marketing, etc. The Group will continue to collaborate with Alibaba Group and other business partners to conduct in-depth research on new retail models and ride the wave of transformation from traditional retail into a new era fueled by big data and technological innovations.
Reinforcing E-commerce and O2O Business
The Group’s e-commerce business has been gaining strength, with its contribution to the Group’s revenue continued to be over 20% in 2018. Thanks to its stronger brand and product portfolio, Xtep topped the list in sales volume of running and casual footwear products on Tmall.com again in 2018, and achieved record-breaking growth of around 50% YoY in 2018 Double 11 Global Shopping Festival.
Xtep was one of the first sportswear brands in China to initiate O2O with its exclusive distributors starting from late 2016. To foster O2O, e-commerce inventory pool were shared between the Group and the distributors, where products are available online and offline at the same time with identical prices and promotions. Popular offline items that were also available online recorded high online sales volumes as well. In 2018, the O2O system was fully rolled out to the retail network directly operated by the Group’s exclusive distributors and created a win-win siutation where Xtep products could be aligned online and offline, coupled with synergies in branding and promotions. Profitability for the Group and the exclusive distributors could thus be maximized, while inventory turnover at retail level could stay at a healthy level of around four months.