Retail Channel Management

The Group has gained full control of the retail channel, changing from managing a distribution channel to managing a retail network that consists of approximately 6,000 stores. The Group decides store location and layout, universal tag price, design product ordering instructions, discount ranges based on detailed store tiering, and provides training for all retail store staff. Exclusive distributors have been transformed from wholesalers to partial retailers, their directly-managed stores are now over 60% of the total XTEP store count. These stores have seen over 10% sales efficiency improvement. During the channel flattening process, the Group has voluntarily extended the trade receivable credit period to exclusive distributors to help quicken the pace of transformation, as the transformation is nearing completion, the Group intends to retreat its trade receivable credit period to close to the 120 days level on contract. As at 31 December 2017, its trade receivables turnover days have been reduced to 130 days as compared to 164 days as at 30 June 2017.

The Group remodeled more than half of XTEP stores to international-style “6s” generation sports store design, in which the new sportive stores saw over 10% increase in retail sales per square meter. Moreover, a new big data team utilized full ERP system coverage over of the whole XTEP store network to monitor inventory level and sales performance in real-time. Retail inventory levels are at a very low 4 months level as compared to industry average of 4-6 months. Proactively, the analyzed big data helps the Group set precise discount ranges for each store, guide the store staffs on changing product displays in store, offer insights on how to improve customer service quality, formulate accurate product ordering instructions for exclusive distributors per store, and pinpoint consumer behaviors that lead to more popular future product development directions.

XTEP is one of the first and only sports brand companies that operates a truly integrated O2O (online-to-offline) platform in China. The Group shares its inventory for the O2O business with exclusive distributors and distributors send products ordered online to consumers nearby. With the Group’s proven success in e-commerce, O2O is a win-win situation where XTEP products are aligned, branding and promotional efforts see exponential effect, inventory levels are better controlled and profit increased for both the Group and its exclusive distributors.