Why did Hongxing Erke suddenly become popular?

Why did Hongxing Erke suddenly become popular?

Why did Hongxing Erke suddenly become popular? Recently, “the average number of followers per day is 10,000” has made Hongxing Erke on the hot list after donating 50 million yuan. Once again became a hot topic of discussion. On the 23rd, Hongxing Erke’s sales increased 52 times year-on-year. Why did Hongxing Erke suddenly become popular? Why Hongxing Erke suddenly became popular 1

The Year of Xin Chou in 2021 can be said to be troubled. Heavy rains caused disasters in Henan in July, and the heavy losses are still fresh in the memory. Floods in Shanxi have come one after another. God will not let people Ansheng. Shanxi was severely affected by the disaster this time. The abutment of the Changyuan River Bridge was washed away, a breach occurred in the Xinjiang section of Fenhe River in Shanxi, 60 coal mines were suspended, 2.8496 million acres of crops were affected, 4 traffic policemen were killed in a landslide in Puxian County, and more than 1.75 million people were affected, etc. .

Fortunately, when one party is in trouble, all parties support it. At critical moments, you have to rely on your own people. Every time we face a disaster, we can see Chinese people lending a helping hand and businesses generously donating money. Internet majors are still at the forefront of donations. Tencent, Alibaba, Baidu, Byte, and Pinduoduo each donated 50 million, Ant and NetEase each donated 20 million, Xiaomi, OPPO, VIVO, Vipshop each donated 10 million, and local Shanxi brand Shanxi Fenjiu Donate 30 million and so on.

Hongxing Erke, an almost forgotten sports brand, returned to people’s attention like a rocket after selflessly donating 50 million in supplies to the Henan floods. It became really popular and triggered a panic buying of Erke. After a flood in Shanxi in February, Hongxing Erke immediately donated 20 million yuan in materials to help. It is common for companies to do charity, not only to give back to society and contribute, but also to promote the company and build a good reputation. For a company like Hongxing Erke that has suffered losses all year round and is rumored to be "bankrupt", it is not easy and extremely valuable. Of course, there are many popular people, and the same applies to companies. There are different opinions on whether Hongxing Erke's motive is to take the opportunity to publicize, covert advertising, and create traffic. In fact, this is not necessary. In the face of disaster, everything is insignificant in terms of life and survival. If you can step forward and donate money at this time, you should affirm and support it no matter what the considerations are. Facts have proved that this is indeed the case , Hongxing Erke was sold out, sales surged, and even sold out of stock.

How did such a representative of a once-popular domestic sports brand end up in today’s predicament despite the halo of being the first domestic sports brand to be launched abroad? Get up and find out.

Former Hongxing Erke

In 2000, the Wu Rongzhao brothers became independent from the family business Fujian Quanzhou Hongxing Shoes and founded Hongxing Erke. At that time, the company was allocated a rough factory building worth 6 million. There are three to four million in accounts receivable, more than 10 million in bank loans, and only a few hundred thousand in working capital. The Wu Rongzhao brothers were determined to take the initiative into their own hands and gain greater development space for this venture by establishing their own brands and channels. However, there is always an insurmountable gap between ideals and reality, and the tortuous start seems to indicate that Hongxing Erke's growth is destined to be extraordinary.

In 2000, the Chinese apparel industry had just begun to form a brand concept. In the early days of its establishment, Hongxing Erke had no advantage at all in terms of brand premium. In addition, the problem of accounts receivable was difficult to solve, and a serious lack of funds threatened the survival of Hongxing Erke. and development. Hongxing Erke decided to introduce foreign strategic investors and at the same time began to explore the establishment of an exclusive agency model. Wu Rongzhao made up his mind that he would rather eliminate some dealers with strong financial strength than choose dealers with high loyalty to the Hongxing Erke brand. After this wave of desperate operations, Hongxing Erke gradually improved, and the company's negative equity situation was effectively improved. .

At that time, he spent a lot of money to invite the popular star Jordan Chan as an endorsement, and through the overwhelming advertising effect, he also began to cooperate with important domestic and foreign events, especially in the field of tennis. He sponsored many events, signed tennis players, and gradually became famous. , market share has steadily increased. In 2005, it was successfully listed on the Singapore Main Board and became the first sports shoe brand to be listed in the country. It was once unparalleled at the time, and its revenue that year even exceeded that of Anta, the later industry leader. That year, it was awarded the title of "Top Ten Influential Brands in China's Industry," "China's Famous Brand", and was selected into "China's 500 Most Valuable Brands" for the first time.

From the discovery data

TO BE No.1’s crisis

After the cheers, the crisis comes. In 2007, Hongxing Erke shouted the slogan that was well-known at the time: "TO BE No. 1". However, crazy expansion will inevitably lead to tight capital chains. Hongxing Erke has opened many stores across the country, and the number of global stores has reached more than 7,000. However, due to "greed for bigness and seeking perfection", unscientific location selection, management, etc., many stores once fell into trouble. losses, resulting in large-scale losses for the company.

Hongxing Erke clearly realized that it must correct its mistakes and change its strategy at this moment, so it cut off its arms to survive, "cut off" all loss-making stores, introduced an ERP system, and reorganized its channels with a scientific management method of digital presentation and evaluation. structure.

The following year, the 2008 Beijing Olympics not only caused great excitement, but also sparked a lot of sports brands. The entire sports market was booming. Hongxing Erke also took advantage of Dongfeng's revenue to reach 2.88 billion that year. The sponsored North Korean Olympic delegation won two gold medals, one silver and three bronze medals at the Beijing Olympics. Sponsored Chen Xiexia, a 48kg competitor of the Chinese women's weightlifting team, won China's first gold medal at the Beijing Olympics. It was selected into Forbes' 200 best companies that year and entered the top 500 Asian brands for the first time.

The good times did not last long, and a bigger crisis came. Hongxing Erke was exposed to financial fraud in 2010, with a huge loss of 1.69 billion yuan. In 2011, Hongxing Erke was suspended from trading until it was delisted due to falsified financial data.

Wu Rongzhao said: "The inventory crisis from 2012 to 2014 once again pushed Hongxing Erke to the edge of the cliff. Most of my white hair was contributed at this stage."

< p> The concept of fast fashion was a craze in the clothing industry at that time. Brands including ZARA, H&M and other brands quickly conquered the city at that time. This fast fashion craze made Hongxing Erke "itchy", and it began to blindly imitate and follow the style of fast fashion products. However, the concept of Hongxing Erke as a sports brand has long been deeply rooted in the hearts of the people, and its fast fashion transformation has not been "buy-in" by consumers.

The house leaked and it rained continuously. A fire in 2015 burned down nearly half of Hongxing Erke's production facilities. It took a long time to put out the fire. Customers' order orders could not be guaranteed, and the company was in trouble with a broken capital chain. Wu Rongzhao recalled, “At the most difficult time, the cash flow on hand was not enough to last for a week.”

After so many negative impacts, Hongxing Erke’s market share in domestic sports brands continues to decline, and the gap is getting wider and wider. According to Euromonitor data, from 2010 to 2019, Hongxing Erke's market share dropped from 2.9% to 1% in 10 years, a decrease of 65.5%. By 2019, Hongxing Erke’s market share had dropped to its lowest level in 10 years. It has suffered losses for 10 consecutive years, with an average annual loss of approximately 400 million yuan.

Data from Euromonitor

Return and innovation

After heavy blows, Hongxing Erke finally realized the importance of returning to its main sports business and determined the integration of products and technology. Development route, put forward the corporate development vision of "creating the world's leading sports brand", and began its own technological change and transformation. Promote the team's transformation from managers to operators; continue to invest in the research and development of technology and products, accumulate more than 200 patented technologies, and become a national-level intellectual property demonstration enterprise in one fell swoop. Product values ??are also rising.

From discovered data

From discovered data

In 2018, Hongxing Erke increased its smart supply chain To build smart stores, we cooperated with Ant Financial and chose to open new stores in large-scale comprehensive commercial MALLs. In 2020, Hongxing Erke proposed the channel sinking strategy of "strengthening the county level and optimizing the prefecture level", and provided a subsidy of 500 million yuan to support dealers.

While returning to tradition, Hongxing Erke is also actively innovating and adapting to the trend. From OEM to imitation to technology accumulation and application, Hongxing Erke's concept is also constantly changing.

Hongxing Erke launched a black technology running shoe in 2019: Tianshu Qitan

While playing with the concept of "trendy shoes", it is different from some well-known international brands , Hongxing Erke has embarked on a new technological route, launching a new generation of leading technology in 2019 - "Erke Qidian". This midsole cushioning technology is based on the traditional "non-Newtonian fluid cushioning material technology". Hongxing Erke's new technological material α-flex is mixed with different chemical agents. It has been foamed hundreds of times and folded tens of thousands of times. Testing finally enabled mass production of this midsole material, which is both soft and elastic, and has a unique performance and feel. Erke Qidan's first-generation sports shoes also use reflective gauze uppers and luminous sole materials that change color in light environments, making the already full-featured running shoes even more attractive. The carbon plate in the midsole is even more attractive. Let the overall technological functionality be fully eye-catching.

Now, Hongxing Erke has gradually sold its products overseas. The brand has a presence in Southeast Asia, the Middle East, Eastern Europe, North and South America, Africa and other regions. It has more than 1,000 stores overseas and 100 stores around the world. Several countries have exclusive rights to trademarks. As of the first half of 2020, Hongxing Erke's financial data has improved, shrinking for two consecutive years.

However, the issue of resumption of trading is still far away. During this period, Hongxing Erke acquired the Philippine MMJV PTE gold mining company in 2019. MMJV PTE owns the copper and gold mining rights in the Philippines. It hopes that the SGX will delay the exemption conditions and Reconsider and cancel the forced delisting. However, the outbreak of the epidemic has caused all countries to adopt blockade policies. It can be said that the last life-saving straw is useless. Hongxing Erke has no choice but to accept the fate of being delisted. In October 2020 Delisted from Singapore Exchange.

With the rise of domestic products, changes in the international environment have stimulated a craze for buying domestic products. More and more people support domestic products, which once again gives domestic sports brands an opportunity. Various brands are in style design. There has been a qualitative leap in product quality. Not only have international masters been invited to design, but some high-quality assets have also been acquired to integrate with international first-line brands. Hongxing Erke also held the "Erk 303 Sports Technology Day" event in Beijing on March 3, 2021, displaying its long-developed artificial muscle technology and the latest running shoe product Qitan lite series.

What will happen in the future?

Judging from the current product and market positioning of Hongxing Erke, it still belongs to the cost-effective route. The product price is cheap. The market layout is mainly in second and third tier cities, focusing on technology sports. Young people are the main consumers. The donation for the Henan disaster in July greatly increased the sales of Hongxing Erke, but after all, it was essentially impulse consumption and would not last long. The data also proves this.

Sales changes of Hongxing Erke Tmall flagship store in July

Now Hongxing Erke is steadily improving. If sales and brand continue to improve in the future, it still needs to improve its products. Work hard on quality and design, and make products in a down-to-earth manner. After all, this is a long-lasting guarantee and an eternal truth. The situation of Hongxing Erke is still grim. In addition to foreign brands such as Nike and Adidas, many domestic brands have conquered the country. Domestic brands Anta and Li Ning also occupy a large market share. Hongxing Erke wants to break through and it will be difficult to catch up. No matter what, you should support more domestic products and brands. Of course, the choice is two-way. Consumers support you, and you also need to use better things in return, a virtuous cycle. I also hope that Hongxing Erke can get on the right track, remain sincere, and become an excellent domestic brand. Why did Hongxing Erke suddenly become popular 2

Recently, "the average number of fans per day is 10,000", making Hongxing Erke once again become a hot topic after donating 50 million yuan and making the hot list. According to data released by Feigua, Hongxing Erke’s Douyin fans decreased by approximately 290,000 in the past 30 days, with an average of 10,000 followers per day. In the past week, Hongxing Erke’s live broadcast room’s cumulative sales of nine live broadcasts were less than 3 million yuan. Compared with its sales of 200 million yuan in the week after the donation, it can be described as a “cliff-like” decline.

On July 21, Hongxing Erke donated 50 million yuan to aid the Henan flood disaster, staged a corporate version to move China, and Hongxing Erke once became a hot brand among domestic independent enterprises that are responsible for society. Public information shows that in 2020, Hongxing Erke lost 220 million yuan, and in the first quarter of 2021, it lost 60 million yuan.

The donation of 50 million yuan is equivalent to one-sixth of its own valuation. "Loss" + "lavish donation" have aroused netizens' feelings for their family and country and their sympathy and support for it.

At this time, Hongxing Erke is no longer just a low-priced sports shoes and clothing company, but has become a symbol of patriotism and fashion in the hearts of the public. It has exploded from offline stores to online live broadcasts. At that time, Hongxing Erke’s offline stores were sold out. Online, its official Douyin account alone gained 15 million followers in July. As of July 25, the sales of Hongxing Erke’s official live broadcast room exceeded 100 million yuan, and the sales of other related live broadcast rooms exceeded 60 million yuan. During the peak period, more than 6 million people poured into the live broadcast room of Hongxing Erke’s Tmall official flagship store to participate in “sweeping goods”. On July 23 alone, it broke many records in the brand's history: total sales exceeded 22 million yuan, cumulative views exceeded 24 million, and cumulative online users exceeded 100,000. According to news released by JD.com, Hongxing Erke’s sales increased 52 times year-on-year on the 23rd.

Compared with becoming the first in the anchor’s fan list in July, the popularity of the Hongxing Erke brand began to “cool down” three months later. The industry generally believes that although consumers have an unprecedented tolerant attitude towards Hongxing Erke's products, when the enthusiasm passes, consumers will still focus on the product itself. The fundamental reason for the decline in popularity is that its products have not really retained consumers.

Fashion industry investor Yang Dayun told "Consumption Titanium" that charity marketing can indeed increase attention and influence, but the sustained growth of any brand must be based on the good quality of its products. And the brand itself can create a strong resonance with consumers' value demands. Hongxing Erke's growth has entered a recession in recent years, its scale has declined, and it cannot save itself through several charity marketing.

In recent years, the revenue of the global sportswear market has shown a continuous upward trend, and the domestic sports industry is also booming. Data from the State Sports General Administration show that the scale of China's sports industry has been growing from 2015 to 2020. In 2020, the scale of China's sports industry will be approximately 3 trillion yuan, a year-on-year increase of 1.69%.

Economist Song Qinghui said that domestic sports brands are facing a new round of development opportunities, and the market size is expected to further expand. Some domestic sportswear brands with strong core competitiveness are expected to increase in the number of brand stores and overall sales. Profitability and other aspects have maintained strong growth momentum, and achieved greater and longer-term development. At the same time, the rise of national trends, and incidents such as Huawei and Xinjiang cotton, have also made "support domestic production" a high-frequency vocabulary. The Chinese people who have gone through the test of fighting the epidemic and fighting floods have more felt the national justice of local brands, and the attention of domestic brands has greatly increased.

However, to achieve rapid development in the current opportunities, the core is the quality of the brand. In fact, in order to ensure that the product can still be worthy of the support of consumers after returning to its commodity attributes, Hongxing Erke has taken frequent actions after the explosion: launching joint models with some well-known IPs such as the Chinese comic "Under One Person", "Gintama", Henan Museum, Qingming Shanghe Garden, etc. , and even cooperated with Chery Automobile to launch a series of retro national fashion sweatshirts, and collaborated with Xiaomi on marketing activities.

Currently, Hongxing Erke holds the industry’s first national-level shoe and clothing testing center certified by CNAS, and has jointly built a first-class biomechanics laboratory with the world’s top sports research institutions to search for revolutionary artificial muscle materials and launch The Qidan lite series creates a new trend in blockbuster sports brought about by a new data collection method connected to the Internet ecosystem.

Compared with Hongxing Erke, domestic sports brands such as Li Ning and Anta have already increased their investment in scientific research and innovation of products, improved their product design, quality and three-dimensional brand image, and relied on the hard power of their products to "outperform". Circle" and achieved stable customer stickiness. According to the latest financial report, in the first half of 2021, Li Ning achieved revenue of 10.197 billion yuan, a year-on-year increase of 65%; net profit was 1.962 billion yuan, a year-on-year increase of 187%. The ANTA brand achieved a low-end positive growth of 10%-20% in the third quarter of 2021 compared with 2020, and its online business grew by 25%-30% year-on-year, exceeding 90% compared with the same period in 2019.

Some industry analysts said that Anta Sports has expanded the breadth of its brand through "single focus, multiple brands, and omni-channels", while Li Ning has expanded its brand through "single brand, multiple categories, and multiple channels". The strategy extends the depth of the brand and continues to build SHELL's own professional sports technology platform to enhance the professionalism of Li-Ning's sports equipment. It has successively launched domestic leading shock-absorbing technologies such as "Li-Ning Arc" for structural shock absorption and "Li-Ning Cloud" for material shock absorption. . Anta has invested heavily in R&D to create cutting-edge sports technologies such as wormhole technology, hydrogen technology, elastic technology, and nitrogen technology, which have become its innovative IP.

"Li Ning and Anta have slightly different development strategies, but they have both integrated with international standards at an early stage and have accumulated rich experience in both products and marketing. At present, Hongxing Erke must grasp the brand positioning and development Strategy, product quality control, and marketing promotion may still have a way to go,” Yang Dayun said.