Distribution revolution

From Next magazine issue 2/2004. Text by Josetta Mykkänen

Shaking up the world's second biggest sports equipment market.

Japan's sports equipment market is characterized by its fast tempo. Changing trends cause massive sales spikes, but they are treacherously transient. When something goes out of fashion, its disappearance is quick.

"That's why Amer is seeking growth from well-established sports with enduring popularity. In particular, baseball, golf and alpine skiing have a strong and steady following," says General Manager of Amer Sports Japan, Matt Gold, speaking in his office in Tokyo's Shinjuku business district.

Gold aims to take all of the company's products to the same place that he has guided Wilson Tennis in Japan: market leadership. "At present the only area in which we are somewhat satisfied is tennis. There are really big opportunities in every other sector," states Gold.

Large and isolated market

The opportunities are enormous. About 127 million people live in Japan, which is slightly less than half the population of the United States. The world's second biggest economy is also its second biggest sports equipment market.

Japan is a trend-setting country and its quality and brand-conscious people are willing to spend money on their recreational activities. In almost every sports equipment sector, the size of the market is approximately half that of the United States. Japan boasts the world's biggest golf retailer and there are over 15 million alpine skiers and snowboarders in the country.

The isolated island country is by no means an easy place to do business, however. The people are interested mainly in local Japanese sports and Japanese athletes. During the Olympics, for instance, the television coverage doesn't include anything unconnected to Japan.

Top industry professionals join Amer Sports

Thirty-five-year-old Matt Gold has gained a lot of local experience during his ten years in Japan. He speaks the language fluently and has forged strong relationships with influential people in the sports equipment industry. "I like to keep my finger on the pulse. I devote a great deal of my time to key customers, and I meet a lot of people that way," says Gold, whose background is in marketing.

Originally from Washington D.C. and a keen tennis player, Matt Gold first joined Wilson's Racquet Sports Division. Marketing work brought him to Japan, and within five years he had assumed responsibility for Wilson's whole operation in the country.

Human capital is the most important resource as far as Gold is concerned. "As we have gotten bigger with more brands, one of my focuses has been on recruiting the best possible team of people," he says.

Gold has a wealth of experience in the sports equipment industry and he has assembled a strong management team of experienced professionals. Apart from Gold himself, the 108 members of the organization are all Japanese. The company's office building is bursting at the seams with employees and products. To the visitor the impression is one of dynamism, but Gold says the situation is getting chaotic. The rapidly swollen team is eagerly awaiting the move into new premises in May.

Distribution revolution

The long recession that followed strong economic growth in the 1980s has humbled Japan's sports equipment companies and caused many changes on the market. For example, 1.9 million pairs of skis were sold annually during the bubble economy, but sales have collapsed to approximately 400,000 pairs a year currently. Japanese companies have found it difficult to adapt to change, and they have lost market share to international brands. There used to be many local Japanese brands in the alpine ski market ; now there is only one significant domestic player left.

"There is a genuine distribution revolution underway here in Japan," states Gold. Distribution in Japan is now transitioning from the multi-layered system developed during the bubble economy to a simpler model. Costly layers have been stripped out. The market is consolidating and the strong are getting stronger. Amer has also radically strengthened and reorganized its operation. Brands have been gradually transferred from distributors, agents, and wholesalers to Amer's own local company, which just one year ago was responsible only for Wilson's business. In 2002 the company changed its name to Amer Sports Japan, to which Precor was transferred in 2003 and Atomic this year. Other recently acquired Amer brands and products lines will follow suit. Besides Tokyo, Amer has a branch office in Osaka and sales representatives nationwide. There is a main distribution and customer service center in the Tokyo area in addition to smaller warehouses for the recently consolidated brands. In the future, more synergies will be sought for logistics.

Rapid growth

The investment has already begun to bear fruit. Amer Sports Japan sales grew 8% in 2003 in local currency terms. Wilson's tennis sales are promoted through partnerships with schools. About 6,000 schools buy tennis balls from Wilson.

In baseball Wilson sponsors Tokyo's Yakult Swallows professional team. In addition, several U.S. baseball players in the Japanese Professional League are using Wilson's equipment to promote the brand. Gold believes that it is very important to focus on local sports, local promotion, and local execution.

The differences between Japan and other markets are also evident in baseball. Product development geared to the unique soft baseball used in Japan is essential for success in the market. Outside the professional and college leagues, almost all baseball in Japan is played using a soft rubber ball. For Wilson and other foreign companies, it is a major learning curve to understand this and adapt product line planning accordingly.

"Team Selling has been our most successful program with the trade," says Gold. The aim of the program is to maximize the size of the contact interface between the retailer and Amer. The whole corporate organizations are in contact with each other, not just the salesman and the buyer.

The Team Selling program was adaped from Wilson U.S. and started in Japan in 2003 with four leading nationwide retailers. It has been received favorably by these National Accounts and resulted in sales gains.

Changing image of golf

During the boom years of the 1980s, golf developed in Japan as a luxury sport and the golf course was primarily a venue for corporate hospitality. The number of courses rose to 2,400 and club membership prices skyrocketed. Golf clubs became palaces and caddies did just about everything but hit the ball for the players. Nearly every businessman played golf. It was by no means unusual to see morning commuters practicing their umbrella swings at train and metro stations.

When the recession hit, golf expenses were the first to be cut by Japanese companies. The golf courses found themselves in financial difficulties. There is still oversupply, but the situation has forced the golf clubs to be innovative in attracting customers. "A lot has changed. Golf has become cheaper and it is now easier to get into the sport," says Gold.

A broader and stronger base is only now being developed for the sport. Wilson is focusing on younger golfers and has made agreements with a number of promising young players.

Easy access to great powder

On the skiing side, a combination of racing and technique called demo-skiing is unique to Japan and the country's No. 1 form of competitive skiing.

Atomic improved its position in the sport considerably this year, and it now has four male skiers ranked in the top 15. An Atomic female skier, Seika Minemura, won the Japan Womens Demo-Skiing Championships for the first time - a great advertisement for the brand.

Alpine skiing and snowboarding are popular with Japanese youth, although the numbers of participants have fallen from the peak period at the turn of the eighties/nineties.

The powder snow conditions on the northern island of Hokkaido are among the best in the world. Also on the main island of Honshu are numerous alpine skiing areas. Japanese skiers are offered services that suit urban living, long working days and short vacations.

The fastest way to get to the ski slopes from downtown Tokyo is by bullet train. It takes little more than an hour to get to Gala Yuzawa station in the heart of the mountains. The railway station is also the point of departure for the gondola lifts. A quick change, travel clothes in the storage lockers, and off you go! Transporting skiing and golf equipment around the country has been made as easy as possible. The local Fedex service will transport equipment anywhere in one day for less than ten euro.

Gold's Atomic skis often find their way to the slopes at Niseko, which is not far from Sapporo on the northern island of Hokkaido. "Its called Powder Paradise. The deeper, the better!," he says.