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THE BACKGROUND

US-homegrown sportswear brand Under Armour was founded in 1996 by the former captain of University of Maryland’s football team, Kevin Plank, in his grandmother’s basement. Having first-hand experience with clothing unsuitable for sweaty sports led him on a path to find a better fabric.

The first T-shirt from the brand was made from moisture-wicking fabric, which contained fibers that drew sweat off the skin for faster evaporation. It was the perfect material to keep athletes cool and dry.

In the first year, the company generated $17,000 in revenues by selling it to college football teams.

Under Armour sales

Two years later, Under Armour signed its first league-level deal to become the official supplier for NFL Europe in 1998. Fast forward to 2005, after the company struck deals with media powerhouses like Warner Bros, ESPN, NBC, and organizations like NHL, MBL, and USA Basketball — it eventually went IPO and raised $157 million .

In 2010, the company’s annual sales topped $1 billion for the first time.

Confident with double digit growth in the last few years, Under Armour eyes an aggressive $10 billion valuation in 2020, up from the $4 billion valuation in 2016 but with recent headlines reporting the company’s decline in quarterly sales for the first time, is the goal feasible?

THE CHALLENGE

Under Armour underwent scrutiny after posting its Q3 2017 earnings report, revealing the company’s first quarterly sales decline (-5%) since going public in 2005. The news drove the company’s stocks down by more than 20%.

Under Armour sales

Under Armour’s growth has been going down after hitting its first $1 billion revenue in 2010. Source: Quartz

Citing the weakening sportswear market in North America, Under Armour is joined by Nike in the disappointing growth of this quarter. But is it really lacking consumer demand when competitor Adidas successfully grew its business in North America by 32% in the first half of 2017?

Under Armour CEO Kevin Plank admitted that the company celebrated fast growth too early.

“I think we probably were a little braggish,” said Plank.

“This is now about more than external factors; it demonstrates issues with the brand and its proposition,” wrote Neil Sanders, Managing Director of research firm GlobalData Retail.

Another analyst from the firm also mentioned that Under Armour “does not have the clarity or a sense purpose in the way that Lululemon or even Nike does.”

In the US, the company is mostly a wholesale brand and heavily dependent on its wholesale partners, which made up 65% of its 2016 revenue. Meanwhile, its direct-to-consumer (DTC) segment — a mix of the company’s offline and online footprint — only contribute 31% of the revenue.

So when the partners are getting disrupted by online and their retail stores are closing down , the company’s performance is also highly impacted — or to quote Quartz :

“It’s selling products that customers aren’t buying, at stores where they’re not shopping — and when they’re shopping, they don’t want to pay full price.”

THE STRATEGY

“Under Armour is not so broken that it cannot be fixed. But the days of glory, when it would post double-digits uplifts in sales, are over. Now is the time to work out, slim down, and become more competitive,” said Sanders.

To face the ‘ difficult environment ’ that the company will likely face into the next year, Under Armour needs to reduce its cost structure and restructure the business in a way that suits the pace of the company’s not so rapid growth anymore.

Plank declared 2017 to be a reset year for the company and announced it was going to cut 2% of its global workforce (roughly 280 job cuts), mostly at its HQ.

“After 6.5 years of more than 20% top-line growth that ended in the fourth quarter of last year, we are clearly operating in a different environment, particularly in our largest market (of) North America,” said Plank.

Not all is bleak for Under Armour. Although North America slumping its sales in the international market is exceeding expectations with 35% quarterly revenue growth to $350 million.

The company also plans to put more focus on its direct to consumer segment, especially ecommerce.

Under Armour’s direct-to-consumer sales, including ecommerce, grew 15% year-on-year while overall sales decreased 4%. – DigitalCommerce360

“We’re protecting and prioritizing international expansion, ecommerce development, footwear design development, areas like that while we continue to dig in deep and kind of right-size the cost structure,” said CFO David Bergman.

In Asia , the company saw 89% of sales growth in Q2 to $93.6 million, driven by customers from China, Taiwan, and Korea. The company’s interest in Southeast Asia has also increased . The company, through retailer Triple , plans to open 35 stores in total across the region including Vietnam, Brunei, Indonesia and Thailand.

“Establishing the retail network in rapidly growing markets such as Southeast Asia is regarded as the key element to leverage this brand marketing strategy,” said Toshi Sakurai, GM of consumer service Mitsui APAC (invested in Triple, the sole operator of Under Armour Asia).

Under Armour sales

Under Armour online stores in Southeast Asia are operated out of Singapore.

THE FUTURE

“As we look to close out 2017, we do not expect these conditions to improve. And although it’s too early for us to provide an outlook for fiscal 2018, our initial assumptions anticipate continued strength across our international and direct-to-consumer businesses,” said CEO Kevin Plank.

Double-digit growth again on its home turf might not be in the cards for the company anytime soon, but with a $231 billion global appetite for sportswear growing steadily, Under Armour only needs to play to its strength in the international arena.

Here’s what you should know today.

1. Adidas has nearly doubled its US sneaker market share

According to data from retail researcher NPD Group, Nike’s share of the US athletic footwear market was 34.7% last month, a dip from 35.9% in May 2016.

Adidas? Its share nearly doubled year over year, from 6.3% in May 2016 to 11.3% in May 2017.

To be sure, Nike is still the top sports apparel dog in America. It sells more shoes in the US than Adidas, plain and simple. (In 2016, Adidas had $3.6 billion in US revenue, a 24% gain; Nike did more than three times that much.)

But after a bad run of declining market share in the US from 2011 to 2015, Adidas is now steadily eating away at Nike’s dominance.

The biggest reason Adidas is on the rise is because of an industry trend that benefits the brand: casual sportswear. That refers to both apparel and sneakers, and Adidas has always been known for streetwear, or as the category is called these days, “athleisure.”

Both brands have also doubled down on their ecommerce efforts, with Nike having official online presence across the globe, and considering to sell on Amazon. Adidas also has a worldwide ecommerce presence.

Read the rest of the story here.

 

2. Philippines’ Acudeen receives $6m fintech financing deal

Early-stage fintech firm Acudeen Technologies has sealed a $6 million financing deal with Rizal Microbank, a unit of Philippine-listed Rizal Commercial Banking Corp.

The money will finance the invoices and receivables to the startup’s network of small and medium enterprises in the Philippines.

Bong Roxas, Rizal Microbank president said the biggest problem of SMEs in the country, who are mostly unbanked and underserved by banks, is how to access affordable credit. “With this partnership, we’ll be able to reach out to more MSME business operators. It is really aligned with our enhanced business model,” Roxas said.

Read the rest of the story here.

 

3. Recommended Reading: Ramadan is the holiday high season for modest fashion brands

London- and Dubai-based The Modist, a luxury e-retailer that launched this spring as a Net-a-Porter for the modest set, has noticed a similar gravitation toward fun, expressive style among its customer base during Ramadan.

“For women who celebrate it, it’s their version of the holiday season, so their shopping trends shift, and they really go all out,” says Sasha Sarokin, the company’s buying and fashion director.

Read the rest of the story here.

Here’s what you should know today.

1. Facebook Live auctions come to Singapore

Several wholesalers and auction houses in Singapore are now regularly conducting auctions via Facebook’s live video streaming feature, Facebook Live.

Would-be buyers don’t have to be physically present at the event, but they still get to participate in the bidding process – and enjoy the banter of the auction room – as if they were right there.

Grunge Bidding MobCube, Hong Heng Mobile Auction, Live Bid Win, SG Auction House, andelectronics wholesalers Urban Lion are among the retailers that started running Facebook Live auctions in Singapore earlier this year.

Read the rest of the story here

 

2. Alibaba sales forecast tops all estimates as new forays pays off

Alibaba forecasts 45 to 49 percent revenue growth in the year ending March, sustaining a near-unbroken run of 40 percent-plus annual rises and underscoring how investments into businesses beyond its bread-and-butter of online shopping are paying off.

To reflect an increasingly diverse customer base, Alibaba will start reporting “active consumers” as opposed to just buyers, Chief Financial Officer Maggie Wu said during the company’s annual investor-day conference Thursday. It’ll begin to disclose “customer management revenue” instead of just online marketing, to reflect a broader base of advertising platforms.

“Its market valuation has fallen behind Tencent’s recently, so the forecast could inject some confidence,” said Ray Zhao, an analyst at Guotai Junan Securities Co. “This will be good news for its share price, which could rise 6 to 7 percent based on this forecast,” he added without specifying a timeframe.

Read the rest of the story here.

 

3. Recommended Reading: Nike and Adidas are making huge investments that should terrify Under Armour

Adidas has reacted to this strongly, with 80% of Adidas’ sales in 2016 from products that were less than a year old. Adidas’s products are very on-trend, which is contributing to a staggering run of growth, especially in the US where it is growing much faster than a sluggish Nike and an even slower Under Armour.

In order to better react to chasing trends, Adidas is looking to create a “flexible” supply chain.

Both Nike and Adidas have increased capital spending, and Morgan Stanley estimates Nike spent “~$2.5 billion on research and development in the last five years.”

Under Armour has lagged behind Nike and Adidas in innovation. Shares have declined 45% in the past year, compared with Nike staying flat and Adidas gaining 30%.

Read the rest of the story here

As ecommerce in Thailand is aggressively propelling forward, even companies with a rich traditional heritage such as Somjai, one of Thailand’s oldest and most famous stationery store chains, are going online to grow their sales channels.

And there is good reason for that – the number of customers shopping online is steadily increasing. According to Statista, 12.1 million consumers in Thailand are expected to make purchases online this year. This number is projected to grow by 15% within the next five years reaching 13.9 million in 2021.

Online shoppers in Thailand

In Thailand, 4.4 million online shoppers are 25-34 year olds and are followed closely by 3.9 million online users aged 16-24 years.

These two age brackets together make up two thirds of all online shoppers and the ratio is projected to remain consistent in the medium term.

Overall, it is forecasted that within five years, every fourth Thai will shop online, up from around every fifth now.

online shoppers in Thailand

But ecommerce user growth in the Land of Smiles is not even the fastest in Southeast Asia. In Indonesia, ecommerce user penetration is expected to almost double from 2015 to 2021. However, the amount customers in Thailand are expected spend on average online is predicted to soar.

In 2021, an online Thai buyer will spend $382 per year, which is 57% more than the expected spending of $243 per user in 2017.

What to keep in mind?

More online shoppers means more potential customers for businesses with online channels. Understanding the trends of what, when and where these customers buy is essential to capturing more of them going online.

  • Thais have more money to spend on shopping as Thailand has the third highest GDP per capita in the region after Singapore and Malaysia.
  • More companies in Thailand are seeing the benefits of an omni-channel strategy such as Zara, Uniqlo, Adidas who have invested in their own brand.com in addition to offline stores.
  • The tech-savvy generation (16-34 year olds) is accustomed to online shopping both on social media, e-marketplaces/brand.com.
  • Spending power will continue to rise and two-thirds of consumption growth in the period to 2030 will come from increasing per capita spending.
  • Research reports, tools such as Google’s Consumer Barometer and eIQ articles provide useful insights on Thailand’s online shoppers’ behavior and trends.

 


Join eIQ Network for more online retail insights here.

Here’s what you should know today.

1. Alexa now takes orders from Amazon’s instant Prime Now and alcohol delivery services

Great news for impulse shoppers – Amazon announced that it will now let Prime subscribers order from Prime Now, its two-hour delivery service, as well as its newer alcohol delivery service, in cities where these are offered.

Amazon says that Alexa’s Prime Now implementation will let you order multiple items at once and make recommendations whilst automatically give you the next available two-hour delivery window.

These two newest features are also a mark of how Amazon is giving Alexa a front and center place as a key interface between Amazon itself and its customers.

 Prime Now and alcohol delivery are designed in the same vein. The idea is that you can use Alexa when you are multitasking at home and too busy to get on the computer or your phone.

Read the rest of the story here.

2. Alibaba buys online ticketing platform Damai

China’s Alibaba Group Holding Ltd has fully acquired online ticketing platform Damai.cn

The move marks a further push into entertainment by the firm as it expands beyond its core online retail business.

Damai.cn will be a strong platform to distribute the company’s media content as well as expand its user reach and engagement.

Read the rest of the story here.

 

3. Walmart launches tech incubator

The Silicon Valley based incubator will be called ‘Store No. 8’. The incubator will help identify changes that will reshape the retail experience in the next few years, including AI reality, autonomous vehicle and drone delivery, and personalized shopping.

The US retailer has been overhauling its online team to better challenge Amazon with greater selection and lower prices, including various acquisitions of smaller fashion labels, most recently Modcloth.

Read the rest of the story here.

 

4. Adidas trials customer personalization to tackle fast fashion

Adidas has been testing a store where shoppers can design a sweater, have a body scan to determine fit and get it knitted by a state-of-the-art machine within hours, as a way to respond to fast customer demands.

It hopes the drive will help it adjust better to fickle fashion trends, allowing it to sell more products at full price

“If we can give the consumer what they want, where they want it, when they want it, we can decrease risk, at the moment we are guessing what might be popular,” says brand chief, Eric Liedtke.

Read the rest of the story here.