Decathlon China Social Media Strategy and Market Analysis

Decision Statement

The decision at hand is how best to utilize social media. There are two components to this issue: first, determining a strategy, and second, determining appropriate metrics. Decathlon needs to decide what forms of social media it will use, how it will use them, and what it can realistically expect from them.

Situational Analysis

Before making a decision about social media marketing, Decathlon needs to understand its own situation. The company has a number of strengths that have contributed to a decent level of success in the Chinese market. Decathlon has significant experience in business, having established its brand in 1976. It has been operating in China since 2003 — an eternity in Chinese business terms — and operates 33 retail stores, giving it a fair amount of representation in major cities. There is no reason to believe that the company's products are superior or inferior to those of its competition, and product quality does not appear to be a major concern for Chinese buyers. The company has generally received favorable publicity in China and has achieved a competitive Alexa ranking for its website.

There are, however, a number of weaknesses that Decathlon must overcome. The company does not have a well-known brand name, and it competes against major global companies like Nike and Adidas, as well as dominant Chinese competitors. For example, Li-Ning operates 7,000 stores in China compared with Decathlon's 33. Brand awareness for Decathlon must be significantly lower than that of its competition given this disparity. This lower level of recognition can be overcome in China, but it hurts the company when competing against larger firms in, for example, a Taobao search. A lack of a coherent social media strategy is another weakness, perhaps combined with unrealistic expectations of social media marketing outcomes. A general unfamiliarity with social media on the part of senior management appears to be a contributing problem, and will continue to impede the implementation of a better strategy going forward. Because Decathlon is much smaller than its rivals, it likely has considerably less money to invest in social media and other forms of marketing.

Overall, Decathlon occupies a generally unfavorable market position in China. Although it has some experience and some success, the growth rate in China is very high, and it is difficult to imagine that the company has kept pace with the overall Chinese economy given its expansion to only 33 stores. Its coverage is thin in major cities — typically one to two stores per city — and non-existent in many significant urban centers. The company lacks the name recognition of other Western firms and the market saturation of domestic competitors.

China's rapid and sustained societal transformation should be of significant importance to Decathlon. With 8–10% annual GDP growth, China has been rapidly transformed into a country with a large middle class numbering in the hundreds of millions. The pace of change in the social environment has been remarkable. In the time that Decathlon has been in the country, Internet use in China has expanded from dingy cafes into people's homes; laptops and smartphones have made Chinese consumers far more mobile in their browsing than they were in 2003. Tens of millions of consumers have entered the middle class. Cities that were unknown to the world in 2003 are now filled with millions of potential consumers. The rapid transformation of Chinese society means one thing above all else — opportunity. It is also worth noting that the Beijing Olympics gave sports in the country a significant boost, which should have accelerated the market for sporting goods. It is against this backdrop of opportunity that Decathlon's performance must be evaluated.

The other environmental dimensions are not characterized by such rapid change. The political environment has seen some opening in terms of business practices, but the Internet has, if anything, become more tightly controlled. The technological environment, as noted, has brought a social revolution to China. Chinese consumers are more connected, and in more ways, than they were before. Large, well-established social networks now exist, but in China there is always room for the next major platform. Any company developing an online marketing strategy needs to anticipate technological change — in this case by looking to Western markets, since Chinese technology and consumer behavior tend to follow the lead of Western innovators.

The consumer that Decathlon is trying to reach is typically male and between the ages of 20 and 40. The male demographic is more likely to purchase sportswear, and in greater quantities. The 20–40 age bracket is the most savvy with respect to social media. Decathlon could target a younger demographic, but members of the 20–40 age group have jobs and therefore the means to purchase sportswear. The most direct route to a purchase runs through this group. Most Chinese consumers are active on some form of social media. The purchase decision process tends to be relatively quick — from identifying a need and researching alternatives to completing a purchase. Chinese consumers often rely on recommendations from friends, meaning there is frequently an information-seeking phase that Decathlon may want to accommodate. Sportswear purchases are also inherently repetitive, as consumers can buy multiple items for current use and replace them as they wear out. Typically, the decision-making unit is a single item of clothing, though multiple pieces are sometimes purchased together as an outfit or wardrobe set.

Decathlon's positioning with consumers is somewhat muddled. The company is not a premium producer of sportswear — opting instead for large stores and understated design — but nor is it a low-cost producer, particularly not in the Chinese market. Decathlon's brand positioning is therefore something it will need to resolve globally, and the Chinese social media strategy should focus on building brand awareness rather than brand positioning, since emphasizing the latter risks confusion if the company changes direction. Most Chinese consumers are probably entirely unaware of the brand, given the absence of major athlete endorsements and the limited store count. The Alexa ranking does, however, indicate that there is a baseline of brand awareness with which to work. It must be noted that there are no switching costs in this category. Consumers are never obligated to purchase Decathlon goods and can stop at any time — or switch to Decathlon just as easily — meaning the company is effectively competing for each individual purchase. In the athletic apparel industry, this typically manifests in a need for saturation marketing. Most major firms rely heavily on traditional advertising for its reach, and few industry players rely primarily on social media, recognizing that social media campaigns alone are incapable of delivering the saturation necessary to sustain high sales growth.

With a middle class numbering in the hundreds of millions, China is one of the world's largest markets for sportswear. Two local competitors alone account for a combined USD 2.6 billion in sales, in addition to the revenues generated by Nike, Adidas, and other major foreign firms. China's strong economic growth rate implies that the sportswear market should expand approximately 8–10% per year in line with overall economic growth. At this growth stage of the market life cycle, there is tremendous opportunity for strong players to grow market share simply by capturing a greater proportion of new business.

Market Analysis

Beyond national economic growth, fashion trends, marketing investment, and growing interest in sports all contribute to demand for sportswear. If athletic apparel is in fashion and a company markets effectively, strong growth should be achievable in the current economic climate. Athlete endorsements are valuable for capturing growth, meaning that athletes popular in China would make strong partners for Decathlon. The market should initially be approached without heavy segmentation, other than separating out the female segment, since the social media campaign is intended to focus on one part of the company's total target market — males aged 20–40.

Decathlon distributes through its own stores and would also use delivery services or China Post to fulfill online orders. These services are generally reliable. Competitors typically operate many more stores. Decathlon can build regional warehouses for online orders, or route them through existing retail stores using local couriers. Either approach would be viable, but the warehouse option would enable more rapid scaling of the online business. The social media strategy will focus solely on driving sales growth, rather than on the logistics required to accommodate it.