The Impact ofCOVID-19on Sports & Fitness in China

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S P O R T & F I T N E S S I N C H I N A T O D A Y

• Since the outbreak consumers increasingly pursue a healthier lifestyle at home – explosive growth in fitness home equipment & online fitness classes; look at sports at home as a way of staying in shape, strengthening will and relieving stress during trying times

• Recreation sports centers & gyms have reopened in most provinces – still subject to strict regulations e.g. wearing masks during workout: among most re-opened centers are gyms, basketball & badminton courts as well as square dance gatherings

• Sports retail still driven by online sales – major brands have focused around online activation particularly livestreaming and social commerce; significance of smaller outlets grew as well as consumers are still reluctant to visit major malls & stores

• Sports leagues continue to be on hold – Government reissued a statement not to start any major sport leagues before May; CBA (basketball) among the most active to work out a proposal to start the Basketball season

• eSports currently the only viewable form of sports entertainment – Some domestic eSport leagues setting all time records in viewership

• Current consumption of fitness & health suggests healthy growth moving forward– expect current short-term behavior to evolve into more sporting event participation inline with current growth trajectory pre COVID-19(see slide 4 for China’s sport landscape pre-outbreak)

Key Observat ions

F E B R U A R Y – A P R I L 2 0 2 0

KEYWORD(S) INTERPRETATION TAKEAWAY

Keep

• Keep has been the clear winner among fitness apps increasing their DAU (Daily Active Users) almost threefold to 6 million a day in March

• On Weibo the hashtag #StayAtHomeHealthyExercisePlan gathered over 1.96 billion views, to which Keep users have contributed to among other fitness platforms

Platforms offering online fitness classes for consumers to follow at home has been by far the biggest trend coming out of the virus outbreak. While Keep is the frontrunner, there are several platforms that have significantly grown their followership and provide opportunities to partner with

Outdoor Sports

• As situation stabilizes consumers are increasingly getting involved in outdoor sports again

• Recent survey in T1 & T2 communities suggests 29.7% to increase their outdoor sports activity over the coming weeks

• Several recreation centers have reopened their doors to the public

Though heavily restricted in number of participants and having to wear facemasks throughout the exercises, consumers are returning to their exercise routines. Particularly gyms, but basketball & badminton courts are likely to resume normal operation soon

Gaming• Top three searched keyword overall on Taobao & Tmall throughout the

outbreak• Games such as Nintendo’s Ring Fit Adventures sold out with secondhand

sales prices increasing from ¥600 to ¥2000

Gamification to grasp consumers’ attention has been a steady trend in China over recent years with esports being no exception. The entertainment factor grew even more in importance during self isolation time

Stress Relief • Has been a hot topic across a variety of industries especially during times of self isolation with fitness & sports related content common

Still one of the top trending keywords, however expected to decrease with consumers resuming normal routines

Yoga Mats• By far the number 1 selling home fitness equipment on major ecommerce

platforms• Fifth most searched keyword on Taobao overall in month of February

Consumers increasingly searched for equipment-free work out routines, however still a necessity for yoga mates to execute those

Trend ing Keywords

Sports Leagues St i l l On Hold

P r e - o u t b r e a k

• Basketball is the most popular sport in China with 300m NBA fans (US$5 billion business in China) and CBA league among

the most watched domestic basketball leagues in the world outside of US

• President Xi is an avid supporter of football with big plans to turn China into a football superpower by 2050. The aim for 2020 is

to have 30m kids play, 20k new academies & 70k pitches

• Spurred by preparation for Beijing Winter Olympics 2022, the number of ski resorts visitors tripled from 5.5m in 2009 to 15.1m

in 2016

• The running boom has hit China steadily increasing in participants and races held with numbers of participants at

major running events expanding from 2.8m in 2016 to over 10m in 2020

• China is set to take over Korea as second biggest eSports market behind the US. eSports related majors are now available

at several colleges across the country

C u r r e n t S i t u a t i o n

• On 10th April the Government issued a statement postponing all major sports leagues with a potential start in May earliest. Arenas are open to the general public and are currently being used mainly for basketball, badminton and ping pong

• Restrictions do not affect eSports leagues as long as matches are played in isolation or in dedicated training centres

• Chinese Basketball Association (CBA) was pushing a proposal to hold a one-month tournament in two selected cities (10 teams per city) with no fans in the arena. Likely to be the first league to reopen as CBA President Yao Ming and the Government Sports Bureau are closely working together to relaunch basketball in China

• Work has started on new $1.7 billion lotus flower-shaped football stadium for Guangzhou Evergrande expected to be ready by the end of 2022. Once completed it would be the largest football stadium in the world. Plans to build another 3-5 more stadiums across the country with capacities of 80-100,000 have been announced to gear up for a bid at hosting its first World Cup by 2036.

• There has been talk from other leagues to move its teams to China to finish the season. Most prominently the English Premier League is currently discussing this as an option to hold the final 9 games of the season in the Middle Kingdom. However, some team owners are calling the idea outrageous and are expecting to turn this option down should it come to a vote.

• Since the outbreak developments in sports tech looked to cater towards people increasingly staying at home

• Apps such as Alibaba’s Le Power (乐动力) provide users with fitness classes that do not require any equipment while scanning their performance and providing real time feedback all free of charge

• In 2019 the Chengdu based Fiture rolled out its fitness mirrors. The mirrors are installed in consumers’ home, offer a variety of personalized classes, track performances and enables to connect with other users and workout together.

• In regards to fan engagements, China still clearly lacks behind the US of getting fans involved in professional sports leagues. American Football leagues such as the FCFL and YCF have already kicked off in the US which enable fans to vote for the type of plays their team should execute next. Teams are further run by popular sports and lifestyle KOLs to gain consumers attention and interest in the sport. While such leagues haven’t been implemented in China yet this may be an indicator of what the future holds.

Developments in Sports Tech

Fiture’s fitness mirrors received increase exposure since the outbreak as their product tailored to consumers increasingly staying at

home

The US is the front runner in involving fans in the fan experience. Interactive leagues such as the FCFL and YCF may be what the future holds in

China

Alibaba’s Le Power offers consumers a free way to stay fit

at home with no fitness equipment required

F I T N E S S A P P S A T T H E F O R E F R O N T

• Fitness apps were among the first to tackle the increasing need of people staying at home but wanting to stay physically and mentally fit

• New video and livestreaming classes were uploaded within days for people to train at home, none more successful than Keep reaching over 6 million DAUs (Daily Active Users) at its peak

• Not just fitness apps but offline gyms also got involved in offering livestream classes which is expected to continue moving forward

Accelerat ing D ig i ta l E ffor ts

Over the past year Sports and Fitness Apps in China grew 93.3% in daily active users

Since the outbreak fitness platform Keep nearly tripled its Daily Active Users from 2.2m (Jan 28th) to 6.0m (Mar 3rd)

K E Y T A K E A W A Y F O R T I Q

With fitness app membership exploding during the COVID-19 crisis, fitness and sport remain at the forefront of consumer thinking. Given the pre-COVID-19 trajectory trending upwards, it would be safe to assume that this sharp boost in online sports and fitness participation is likely to leave a permanent mark on consumer behavior. This may extend beyond simple training gear to include the establishment of home theatres for both watching and participating in sport, virtual reality solutions for increased cabin fever etc.

Gym program provider LesMills immediately saw the potential in expanding digitally (see slide 6)

2019 202046.18 M

89.28 M

D A U s f o r S p o r t s a n d F i t n e s s A P P s ( m i l l i o n s )

NIKE INCREASINGLY PUSHING DIGITAL

• Nike was able to offset much of its lost retail sales through pushing its digital channels resulting in 36% increase compared to last quarter’s digital sales

• Utilizing its own channels from NTC app, to WeChat Mini Program, Nike swiftly updated new training courses to be done at home

• Further utilized other channels such as Douyin and Tencent Live to push content

• Campaigns pushing social commerce have been implemented working with popular KOLs and KOCs in the process attracting reaching over 25 million RMB in sales (slide 7 for more details social commerce)

C A S E S T U D Y

Les Mills International works with 140,000 fitness instructors and 20,000 clubs worldwide to deliver "the world's best workouts" and had been experiencing strong growth in China on the back of the fitness boom. Yet when China went into COVID-19 lock-down, the gym industry was one of the hardest hit.

The outbreak provided an opportunity for Les Mills to accelerate their digital initiatives:

• Launching an online training program which was streamed to 2,800 instructors in one session. Lower costs to serve led to profits being 2.5 times higher.

• Creating a WeChat Mini Program with fitness-related content and free workouts, including exercises for children.

• Offering paid live-streaming classes, which marks Les Mills' first foray into the direct to consumer (D2C) model.

• Discussing partnership models with Alibaba, which includes providing content on DingTalk, a popular productivity app.

Les Mills provides us a valuable lesson for not just for succeeding in times of crisis, but also taking time to explore other marketing, sales and training channels.

Gyms are now starting to open again in China, although it will be some time before they are back to the crowded hives of activity that they were before the outbreak.

Nevertheless, Les Mills is likely to emerge stronger than it was before, with complementary digital channels, more profitable systems and new avenues to grow their revenue and customer-base.

• Trending well before the COVID-19 outbreak, several brands have put increased emphasis towards social commerce as result of temporary store closures

• With several social platforms now integrating ecommerce components campaigns range from WeChat Mini Programs, Taobao, Douyin, XHS to fitness specific platforms among many others

• Commonly brands collaborating with KOLs (Key Opinion Leaders) with a large following has been the norm but recent trends particularly in the beauty category have seen greater use of grassroot KOLs and KOCs (Key Opinion Consumers) with smaller followings considered as more trustworthy

• Social commerce is an eCommerce function that leverages the individual in the sales process. According to China Internet Research, social commerce will be worth in excess of ¥2.86 trillion in 2021, up from ¥6.27 billion in 2018. Since this figure was predicted before thequarantine economy (隔离经济), the actual outcome is likely to be even higher.

T h e N e w N o r m i n C h i n a

Socia l Commerce T A K E A W A Y S

• Social commerce is seen as the next key area for growth, meaning that business must prepare their grassroots networksnow for a country setting the wheels back in motion.

• Traditional retail models are challenged by KOLs, KOCs, live-streaming, social activations, content sharing and referral selling. Covering these channels will be key.

• Young consumers, particularly those born after the 1990, are the key consumer group shopping on social commerce platforms.

Wanda Nanshang Plaza in Guangdong collaborating with LiNing to host livestreaming campaign on Douyin

Adidas Tmall Super Brand Day promoting each 50th anniversary collection with KOLs

Weiya, Jeffery Dong and Angel Chen promoting the line through their social channels and

Taobao livestreaming event

S p o r t C e n t r e s a n d G y m s r e o p e n

Slow Return to Normal

The program Suishenma tracks every WeChat and

Alipay users steps in China to determine whether they have accessed or been

exposed to any infected areas or people. Without a green QR it is currently not possible to enter any

facilities in China

M i n i C a s e S t u d y : S u p e r m o n k e y

• The gym chain Supermonkey was the first to reopen their doors and offer classes

• As with other recreational facilities it is mandatory to wear a facemask throughout the workout and keep a distance of 1.5m from other people

• As other gym chains, Supermonkey offered online video courses which they currently still upload although they have since resumed full operation

• Since mid March gyms and recreational centres have gradually reopened for the general public

• Restrictions are currently still in place with several venues requiring WeChat or phone registration to reduce visitor flows mainly to basketball and badminton courts

• Facilities have to execute mandatory temperature measurements of every visitor and check their health code on their phone which indicates if that person has travelled in the past 2 weeks

• Swimming pools reopened in the beginning of April and are currently restricted to 3 swimmers per lane

K E Y T A K E A W A Y F O R T I Q

• Despite physical locations reopening, COVID-19 has had such as strong influence on consumer behaviour that consumers are likely to remain attached to their online alternatives, if not permanently, then for the foreseeable future.

• Virus and contact tracing are likely to remain prominent post-COVID-19, meaning that all services and offering must take this extra step into account. Mitigating the encumbrance of this step will help retain customers.

• Online or virtual offerings that remove the contact tracing step will also be a product bonus.

Situation SummaryC B A• CBA currently among the most likely leagues to resume play, likely without fans in the stands

• Fans could get access to the games through Tencent Live or CCTV5 broadcasts

• Current proposal is to split the 20-team league into half with 10 teams playing each other in one city and the other 10 playing in a different city with both arenas not accessible by fans

• The CBA further planned to house their players in quarantined hotels and perform regular temperature checks per day. However, this strategy wouldn’t be effective with asymptomatic players

• Initially expected to resume play in early April with the league ordering all its US players to enter China within a week otherwise would be banned to play in the CBA in the future

TAKEAWAY

• China likely to be one of the first countries to resume holding sport events

• Consumer sentiment online still cautions, potentially holding Premier League games here was met with mixed opinions as consumers are still cautious of potential second wave hitting

• Leagues likely to start out without fans in arenas/stadiums which puts even great emphasis on the importance of livestreaming

Case Stud ies: CBA & eSports

• The two biggest domestic eSport leagues in LPL (League of Legends Pro League) and KPL (King Pro League) resumed play on March 9th and 18th respectively

• Usually played in stadiums in front of tens of thousands of fans, teams were now forced to play from their training centers with fans tuning in via livestream platforms such as Hua, Tencent, Kuaishou and Douyu

• Since relaunching KPL set a new record views with the official game app alone registering 6.89m viewers not considering the many supporting platforms that reached well over 1m+ as well

e S p o r t s

AFL From A Ch inese Expans ion Perspect iveA n e x t e n s i o n o f A u s t r a l i a n S p o r t s & C u l t u r e t o C h i n a :

Conversation with Tom Parker: AFL Head of China

“We want AFL to be an evocation of Brand Australia”

Having to cancel the annual league game in Shanghai (late May) was a big hit. Not only is it the only physical showcase in China, but it acts as a connector for all things Australian. The government-led Festival of Australia and hundreds of Australian exporters engage China around the event and demonstrate what Australia has to offer.

• AFL started to host regular season games in Shanghai since 2017, has since enjoyed regular spikes in exposure particularly leading up the game, however, nowhere near other leagues such as the NBA or CBA. This year's game scheduled for late May has been cancelled due to the virus outbreak

• AFL has a clear disadvantage for not being a global sport, requires to take offer beyond sports. It is looking to tie in efforts with brands, partners and initiatives to tackle health and wellbeing inline with China’s 2030 Health action plan to appeal to audiences

• The AFL is aiming to grow the sport through bringing youngsters to play the game with previous campaigns targeting 15 Chinese schools to explain and play the game. Currently efforts have been concentrated mainly among T1 cities in Shanghai, Beijing, Guangzhou and Shenzhen where the majority of AFL related searches is taking place.

TAKEAWAY

• Potential to grow a digital presence as fan platforms are struggling to put out content

• Platform such as Hupu traditionally associated with Basketball has pushed a variety of content from other leagues and sports to keep users entertained

• With missing out on hosting a game in China in 2020, the league should look towards a stronger digital presence, pushing the health and wellbeing component in the process

• Potentially could look to partner with a popular Australian brand (e.g. Devondale, Bio Island) as it could tie in with health/fitness component with brands benefiting from the sport boom as well.

Bui ld ing AwarenessA p p r o a c h f o r t h e n e x t 2 - 3 m o n t h s

HEALTHPARTNERSHIPS

TECHNOLOGY EVENTS

Sport

Live Events

Fitness

Wellness

AustralianBrands

Co-branding

Gadgets & Gear

Video content

Social Commerce

Livestreaming

OFFICIALBRAND

ACCOUNT

Interest Groups

Engage

Engage

1 ENGAGE ONLINEBrands must first engage with the most likely interest groups or target markets. As the current situation stands, the most likely routes to market are through leveraging partnerships with Australian health related brands as well as expanding the digital component to engage with consumers keeping the overall trending health theme in mind

2 EVENTSAs it currently stands there

will not be any events or major gatherings held in the

coming month. Sports leagues likely to resume play will do so without fans in the stands, putting even greater

emphasis towards livestreaming sports. Sports

Management providers should be upskilling on

commonly used platforms such as Tencent Live, Hupu,

PP… for content hungry consumers will be essential

to grow a followership

HealthBrands

With COVID-19 having vastly changed the consumer behaviour landscape and an even greater emphasis on online products and services, it is important to re-evaluate how you build awareness and reach out to related consumer groups

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