Taking over the operating rights in China: "Shoe King" Belle International and "Silicon Valley New Noble" Allbirds win-win situation

According to Zhitong Finance APP, the once popular global sports leisure shoe brand Allbirds is set to relaunch its presence in the Chinese market with the "Shoe King" Belle International Holdings Limited (referred to as Belle International).

On August 2nd, Allbirds announced that starting from June 28, 2024, it will officially transfer the exclusive operating rights in China to Belle International. The operating rights include the distribution of Allbirds products in retail, online, and wholesale channels.

Independent fashion industry analyst Tang Xiaotang from No Agency pointed out that Belle International already has mature experience in operating multiple brands. With Allbirds' global business at a strategic turning point, securing the operating rights for Allbirds in China is an attempt to expand Belle International's brand portfolio.

What's Wrong with "The World's Most Comfortable Shoes" Allbirds

In 2014, New Zealand national footballer and Allbirds co-founder Tim Brown launched a crowdfunding campaign for minimalist wool sports leisure shoes priced at $98 per pair. The campaign raised a total of $119,000 in five days.

Materials scientist and Allbirds co-founder Joey Zwillinger, in order to address the issue of wool not being durable enough, chose superfine merino wool with a diameter of 12.5 microns as the fabric. To tackle the wool's abrasion resistance issue, the fabric was processed using tanning techniques. The pursuit of comfort and quality has made Allbirds popular among many consumers. Time magazine once rated Allbirds' Wool Runners wool shoes as "the world's most comfortable shoes."

In 2019, Allbirds entered the Chinese market and opened its first store at Taikoo Hui in Shanghai. Passersby found this niche brand to be stylish. After all, former U.S. President Barack Obama, Google co-founder Larry Page, and Apple CEO Tim Cook are all fans of Allbirds. Hollywood star Leonardo DiCaprio is not only an investor in Allbirds but also starred in its first brand promotional video for the Chinese market.

In 2021, Allbirds went public on the Nasdaq. However, its financial performance post-IPO has been disappointing, lagging behind emerging sports brands such as On Running and HOKA that gained popularity around the same time. In summary, Allbirds has encountered performance difficulties mainly due to two reasons: lackluster new products and insufficient localization operational capabilities In recent years, Allbirds has been trying to design more complex and trendy styles to attract young people and female users. However, this approach not only failed to expand its customer base but also weakened its focus on core users. Joey Zwillinger admitted in a public interview that the company's decision-making mistakes had a significant impact on the financial performance in the fourth quarter of 2022, with the fundamental reason for the performance issues being a loss of focus on product structure.

In addition to product issues, the Direct to Consumer (DTC) model has also become a significant factor in the decline of Allbirds' revenue. The DTC model inherently requires a high level of localization operational capability for the brand, which is clearly a major weakness for Allbirds. To change the current situation, Allbirds has started to shift its model. In its financial report, it stated, "In addition to the direct sales model, we have chosen some third-party retail partners to sell our products."

Previously, Allbirds had reached cooperation intentions with distributors in Canada, South Korea, Japan, Australia, and New Zealand. In the Chinese market, Allbirds chose to cooperate with Belle International.

Industry insiders point out that Allbirds is in a high-potential track of sports leisure and has good international visibility. The high-quality brand image and assets are solid fundamentals, but the urgent issue to address is the localization operation.

Allbirds' Weaknesses, Belle International's Strengths

After entering the Chinese market, Allbirds opened 6 stores with 230,000 fans on its Tmall flagship store. In contrast, On Running, which entered the Chinese market around the same time, had opened 22 stores by the end of 2023 and currently has 720,000 fans on its Tmall flagship store.

Comparatively, Allbirds' full-channel localization operational capability in the Chinese market is clearly insufficient. It is worth noting that this is precisely Belle International's strength.

In the footwear and apparel industry, as a non-standard product, shoes pay more attention to offline experiences. With online traffic reaching its peak, offline channels still need to maintain a significant proportion. The overall channel development emphasizes the overall structure. According to Frost & Sullivan data, the proportion of online retail sales to the total retail sales in China's fashion market is expected to increase from 26.1% in 2020 to 31.5% in 2025. Currently, the industry's revenue ratio of 3:7 between online and offline is considered ideal.

For a long time, Belle International has adhered to the DTC model. Since its digital transformation in 2017, it has continuously optimized channel structure and upgraded capabilities. Online sales have increased, offline channels have been fine-tuned, and the current online revenue ratio has risen from less than 7% before the transformation to about 30%. In terms of offline channels, shopping centers and emerging channels account for about 30%, while department stores have decreased to about 40%. In addition to structural optimization, there is a high degree of integration between online and offline channels, forming a nationwide network to improve efficiency and optimize inventory.

Data shows that Belle International has the largest direct fashion footwear and apparel retail network in China, with over 8,000 direct stores and tens of thousands of employees. The extensive offline store network and employees not only serve as strong sales and service channels but also act as frontline touchpoints for reaching a large consumer base. The continuously embedded digital capabilities significantly enhance the operational efficiency of individual stores. As of November 30, 2023, the same-store sales growth rate of individual stores increased by 16.1% compared to the same period in 2022

In recent years, Belle International has invested heavily in strengthening its online capabilities. Currently, Belle International has a wide presence on major e-commerce platforms and social media platforms in China. According to the total online fashion footwear retail sales in 2022, Belle International ranks first among all companies in China.

In addition to traditional e-commerce platforms, Belle International has also increased its investment in emerging channels such as live streaming. Starting its live streaming business in 2018, Belle International was one of the first fashion companies in China to engage in live streaming sales. As of November 30, 2023, Belle International has collaborated with over 120 KOLs and has established its own dedicated live streaming team consisting of approximately 275 members to conduct live streaming sales. With the dual drive of KOL live streaming and self-owned live streaming, live streaming sales accounted for approximately 27% of its online sales in the nine months ending on November 30, 2023.

With its omni-channel operational capabilities, vertically integrated business model, and responsive supply chain, Belle International has achieved strong explosive product capabilities. During the Tmall Double 11 sales events in 2021, 2022, and 2023, among approximately 100 to 200 products launched by each brand, Belle International had 10, 7, and 10 explosive products with single product sales exceeding RMB 10 million.

Allbirds and Belle International: A Win-Win Situation

With over 30 years of experience in multi-brand operations, Belle International had a successful case of localizing international sports and leisure brands before Allbirds. In 2019, Belle International obtained the rights to represent Champion apparel and accessories in China. With deepening cooperation, in 2021, it obtained the authorization to design, manufacture, and sell the brand's footwear and accessories in China.

As one of the few growing markets for Champion globally, Belle International, a strong local operating partner, has played a crucial role in the localization of Champion in the Chinese market. Leveraging its footwear expertise, Belle International expanded the product range from primarily apparel to footwear, accessories, and other categories. Additionally, it helped Champion launch products suitable for a wider age range, such as the "Puffy Loafers" and "Tear-and-Wear Skate Shoes," and signed Wang Junkai as the first brand ambassador for the Greater China region to expand the brand's audience in the Chinese market Belle International's prospectus shows that Champion's revenue in the Chinese market exceeded 1 billion yuan in 2021, and continued to increase during the historical period. Footwear and accessories contributed to the growth of Champion's brand revenue, with a growth rate of over 30% in the months leading up to the prospectus release.

In 2023, Belle International became the exclusive authorized operator for Champion footwear and accessories in China, as well as the exclusive agent for the brand's apparel in China. As of November 30, 2023, Belle International has opened approximately 100 new Champion stores compared to February 28, 2022, continuously expanding Champion's presence in the Chinese market.

Through Belle International's localization transformation of Champion in China and the group's platform advantages, the future development space for Allbirds in the Chinese market is full of imagination.

According to Frost & Sullivan data, in terms of retail sales, Belle International has held the top position in the Chinese fashion footwear market for over a decade. In 2022, its market share further expanded to 12.3%, making it the leading fashion trend company and the largest fashion footwear company in China. The company owns 19 core proprietary and collaborative brands covering categories such as women's shoes, men's shoes, children's shoes, clothing, and accessories. These include fashion-forward brands like BELLE, TATA, STACCATO, 73Hours, Joy&Peace, BASTO, TooManyShoes, casual functional brands like SKAP, hush puppies, Bata, SENDA, sporty casual brands like TEENMIX, Champion, CAT, ellesse, and trendy brands like OGR, INITIAL, MOUSSY, SLY.

Expanding the track and revitalizing the brand are key factors for stable and sustainable profitability. Despite industry pressures in recent years, Belle International has maintained a revenue scale of around 20 billion yuan and sustained long-term profitability and ample cash flow. According to the prospectus, as of the 9 months ending on November 30, 2023, Belle International's revenue was 16.1 billion yuan, a year-on-year increase of 12.8%, net profit was 2.1 billion yuan, a year-on-year increase of 92.7%, and the net profit margin reached 12.8%, the highest level during the historical period In recent years, the sportswear market has maintained a continuous growth trend. According to Euromonitor data, from 2018 to 2023, the global sportswear market size has increased from $331.2 billion to $395.5 billion, with a high compound annual growth rate of 4%. It is expected that by 2028, the global sportswear market size will reach $544 billion, with a compound annual growth rate of 7% from 2023 to 2028.

Independent industry analyst Cheng Weixiong believes: "This is a mutually reinforcing win-win cooperation. For Allbirds, Belle International can complement Allbirds' shortcomings in localized operations, bringing new growth engines and vitality. For Belle International, with Champion in the front and Allbirds in the back, the inclusion of high-quality international sports and leisure brands is not only the optimization of the brand matrix but also the expansion of the group's capabilities - Belle International is not just about women's shoes."