CASUAL FOOTWEAR giant Baofeng Modern International Holdings Company Ltd (HK: 1211) is kicking things up a notch, inking a strategic two-year partnership with global crystal elements player Swarovski.
NextInsight was in Fujian to take in the gala event and talk with Baofeng executives.
The scale of the event is the first thing to strike the attendees, as over 300 were in attendance, primarily comprised of licensed Baofeng distributors across Mainland China and Hong Kong.
They had all come to the thriving industrial city of Quanzhou in the eastern Chinese province of Fujian to not only get better acquainted with executives from Baofeng Modern’s senior executives, but also to more intimately familiarize themselves with some of the many new items under the Hong Kong-listed firm’s product umbrella.
And the newly-proposed products bearing some of the handiwork of Austrian-based Swarovski were certainly near the top of the list in terms of peaking the curiosity of the attendees.
During the high-profile proceedings complete with emcees and an impressive and eye-catching collection of fashion models showing off Baofeng’s Spring and Summer Collection, the two-year tieup with the crystal products player was officially launched.
Baofeng said it intends to develop new products which incorporate “Swarovski Elements” items as part of the strategic joint-development deal.
“Under the terms of the agreement, Swarovski shall provide Baofeng with information sharing, design and production suggestions, marketing support, retail and channel support, ingredient branding authorization, as well as crystal products and components for mass production. Swarovski has technical, marketing and design skills that will contribute toward achieving this objective,” the Hong Kong-listed firm said.
In addition, Baofeng added that Swarovski shall grant it two years of non-exclusive and royalty-free rights to employ the “Made with Swarovski Elements” phrase provided by Swarovski.
The tieup is nothing short of a marketing and image-boosting coup for Baofeng, and comments by company executives reflect the strategic importance of the accomplishment.
“We are delighted and honored to have secured this partnership with Swarovski, a global brand name associated with premium quality products. Swarovski has over the years demonstrated premium quality standards in its products and exquisite brand positioning among its customer base.
“This deal with Swarovski is very valuable to Baofeng as we seek to embrace better technology and knowledge to elevate our brand equity to higher levels,” said Baofeng CEO Chen Qingwei.
Mr. Chen went on to elaborate on some of the more technical aspects to the tieup.
“Swarovski will recommend the latest crystal product and application technology to our products and provide modification suggestions on the crystal pattern designed by our design team. In addition, Swarovski will provide two crystal designs each season for our products (shoes) and a total of eight designs per year for our reference.
“This will enhance our products’ design range and attract more attentions from the PRC consumers.”
The strategic partnership came at the perfect time for Baofeng, considering the solid expansion of the slipper and sandal industry in the region.
“The PRC casual footwear industry has grown steadily over the past few years. As consumers become more affluent, they will see casual footwear as fashionable and comfortable footwear and not only as necessities. They will be willing to spend more to make themselves fashionable and comfortable,” he added.
Mr. Chen said Baofeng was “confident” it has embarked on an era of rapidly accelerating growth with urbanization and rising disposable incomes as the key driving forces.
“We intend to continue our efforts to further expand our presence in the worldwide footwear market, especially in Southeast Asia, and are committed to delivering fruitful returns to our shareholders.”
The casual footwear maker had a strong first half, with revenue rising by around 30% year-on-year to nearly 600 mln yuan, producing a 13% bottom line rise to nearly 100 mln.
Revenue is roughly split down the middle between own-brand sales and OEM business.
All this translates into a market leading 6.1% share for Baofeng for casual footwear like slippers and sandals in Mainland China, the world's biggest market for such items.
“It’s no easy feat to raise our ASPs (average selling prices) to around 200 yuan as the industry average was just 5-10 yuan a few short years ago,” Mr. Chen told the auditorium packed with distributors, investors, members of the media and other interested parties.
As the three-day lineup of speeches, award presentations, ribbon cuttings, tieup launches, product introductions and a seasonal fashion show – Spring/Summer 2012 in this case – it was only natural that the speechmakers addressed the cyclical effect of seasonality’s impact on revenue.
“We are now breaking out of the seasonality cycle and we want to be a truly four-season firm with strong, steady sales year round,” he said.
During the second day, management took media and investors on an exclusive tour of Baofeng’s “Shopping District,” an ingenious invitation-only assortment of ornately decorated and meticulously laid-out shops, each with a unique character catering to the nature of its products on display and the target audience in mind.
The ostensible purpose of the retail street is to provide the throngs of visiting distributors and retailers with an up-close look at exactly what products are available for resale and how best to display them to attract the most eyes and credit cards.
“This is a very useful and effective platform for us to introduce new products to distributors. We find it much more efficient and realistic than the traditional catalog approach – whether paper-bound or virtual. After all, distributors of course want to see the products with their own eyes and inspect quality with some tugging here and there,” said Baofeng Deputy CFO Raymond Wong.
And mega-events like the just concluded Spring/Summer fashion show were major breadwinners for Baofeng.
“We hold these evens twice a year, one for Spring/Summer and another for Fall/Winter. The former is always a bigger, better-attended event. Distributors and franchisees come to see products for themselves and typically make big orders based on what they see. It’s a major order season for us,” he added.
I asked how important a place the two fashion shows hold in the company’s spending outlay.
“Around 10-12% of our brand sales revenue is dedicated to A&P (advertising & promotions), but as for this particular event, I can’t say exactly how much it costs. But I can say from experience that it is well worth it.”
About Baofeng: As one of the largest suppliers of casual footwear such as slippers in the PRC, Baofeng is also one of the largest suppliers manufacturing self-branded slippers in the PRC. The Group owns two slipper brands in the PRC, the “Boree” slipper brand, targeting the medium to high end market with trendy and fashionable designs, and the “Baofeng” brand, targeting the budget to medium market and offering slippers with traditional function. There are 24 and 24 distributors for the Boree and Baofeng brands, respectively; 21 distributors operate both Boree and Baofend brands. The Group launched the Boree brand in 2007 and has already developed 541 sales points for the brand as of the end of June 2011. The Group plans to expand the number of sales points to over 800 by the end of 2011 to tap the rising domestic retail market. In May 2011, the Group entered into an exclusive long-term agreement with NBA China, Baofeng is authorized to manufacture, distribute, sell, advertise and promote NBA-designed flip flops, slippers and sandals in the PRC, Hong Kong and Macau.
About Swarovski: Founded in 1892 in the village of Wattens in Tyrol, Austria by Daniel Swarovski, the brand “Swarovski” has created numerous amazing breakthroughs in its 120-year history. In the 1950s, Swarovski created the the Aurora Borealis crystal effects in collaboration with French designer, Christian Dior. Many international designers such as Dolce & Gabbana, Chanel and LV have made use of the infinite possibilities of this exquisite crystal material to create beautiful luxury products.
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