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Lucrative golf industry lures stiff competition

Updated: 2011-08-08 09:58

By Wang Ying (China Daily)

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Lucrative golf industry lures stiff competition

Two models stand beside golf equipment and bags at a recent golf equipment fair in Beijing. A total of 350 domestic and international brands of golf equipment manufacturers and suppliers took part in the event. [Photo / China Daily] 

Brands compete to take No 1 spot amid fierce market conditions

SHANGHAI - No one can ignore a 3 billion yuan ($462 million) market, especially when it is growing at an annual rate of 15 percent. For the world's renowned golf equipment brands, China's golf market is the next gold rush.

Lucrative golf industry lures stiff competition

The sport and accompanying retail sector have grown at a rapid rate as the newly rich line up to indulge themselves in the leisure activity.

From the white ball to sportswear, from the putter to the tee driver, major golf equipment manufacturers are pouring into China vying for a share of the lucrative market.

As Chinese golf players become more mature and sophisticated, they start to pay more attention to their equipment and sportswear, said Wang Haihong, head caddy at Shanghai Silport Golf Club.

Having worked in the golf industry for more than a dozen years, Wang said she has witnessed significant changes.

"When the Silport golf course opened, most of our customers were Japanese, South Korean, people from Hong Kong and Taiwan. Maybe one or two people from the Chinese mainland played on our course every month," Wang recalled.

But since then, the number of domestic clients has risen dramatically, and their faces can be seen on the green every week. "They come from different areas of China, such as Shanghai, Suzhou in Jiangsu province and even from Northeast China," added Wang.

Currently, some 900 people play a round at Wang's golf club each weekday and about 1,200 on weekend days. "The majority are Japanese, South Korean, golf fans from Taiwan as well as the Chinese mainland," said Wang.

Golf is a sport that has strict requirements regarding equipment. As a result, expanding the market will generate great demand for the necessary gear.

According to Liu Yongmao, founder of China's largest golf retailer, 100 Golf, the domestic golf market's total sales reached 3 billion yuan in 2010, with a predicted annual growth rate of 15 percent.

At the moment, the Chinese golf equipment market is dominated by US brands Callaway, Titleist, TaylorMade and Nike as well as Japan's Mizuno and Honma. An average set of golf clubs costs about 15,000 yuan.

The golf equipment market is subdivided further with each brand having one or two competitive products. For example, Callaway's iron club and putt club are considered the best, Titleist's golf ball is ranked No 1 and experts say TaylorMade makes the best wooden golf club.

Chinese golf players appear to prefer US brands to those from Japan.

Wu Ming, director of Shanghai Jiaotong University's school of golf management, said the popularity of US brands has a lot to do with their advertising as well as the popularity of the Professional Golf Association (PGA) tour among Chinese golfers. "In order to copy their golf heroes, Chinese golfers use US brands," said Wu.

"The preference for brand is also an indication of the improved skills of Chinese golf players," said Wang. According to her, most entry-level players prefer Mizuno and TaylorMade, while Callaway is more popular among high-level players, and Titleist is more used by professional players.

"I often meet club members changing their golf clubs and sportswear. Usually that means they have reached a new level, such as becoming an 18-handicap player," she added.

Although golf is a luxury sport for most Chinese people, the price of Honma-branded golf equipment can make even relatively wealthy people's jaws drop, with a set of clubs costing several hundred thousand yuan.

However, you do not necessarily get better products the more you pay: There are some bad apples in the golf equipment industry.

"About 10 years ago, when I first started working in the golf equipment industry, the market was full of knock-offs and smuggled products," said Liu. "Many locally made products carried claims they were manufactured overseas and were labeled as foreign brands."

Labor costs then were quite low. A golf club that cost 30 yuan to 40 yuan to make would be sold for between 500 and 800 yuan apiece, added Liu.

Now Chinese golf players know more about golf brands and their quality.

Liu believes the reason the Chinese prefer US brands has a lot to do with the successful golf culture in the US. "Although this game originated in Scotland, the US is the real golf Mecca. The US tour is the most successful in the world both in terms of attendance and economic returns. In addition, the US has the world's best golf courses and top-ranking golfers.

As a result, Japanese golf equipment brand Mizuno has found fierce competition in the China market over the past five years. Industrial analysts said the former second best seller in China is now lagging behind its US rivals, and only ranked fourth or fifth among all golf equipment brands in the country.

As the first foreign golf brand in China, Mizuno has witnessed growing demand for better service among Chinese customers. As a result, the company decided to provide tailor-made clubs.

Callaway used to sell its products through distributors in China but started to open direct-sale stores in 2006, indicating the company's confidence in the Chinese market.

Liu believes all golf brands will enter China sooner or later. According to him, during the 2011 Orlando PGA Golf Show, one of the most important golf exhibitions, the first session's topic was how to do business in China's golf market.

Intense rivalry in the golf equipment market will lead to an industrial shakeup. It is growing harder for small brands to survive due to rising rental and surging labor costs, say observers. Net profit margin has narrowed to the lowest in history to between 5 and 8 percent.

"It is possible (for Chinese golf brands to be successful) but very hard. It requires great capability, resolution and long-term commitment," said Liu.

Liu added many Chinese golf equipment makers are not patient enough and they want a larger market share overnight. However, even the youngest brand, Callaway, has a history of nearly 30 years.

Last year, a Chinese electrical appliances manufacturer, Shanghai POVOS Enterprise (Group) Co Ltd, spent $100 million acquiring 51 percent of Honma. The move exemplified the ambition and appetite of Chinese businesses in the golf equipment market.

China's first golf club was established in 1984 in Zhongshan, Guangdong province. Twenty-seven years on, insiders estimate there are between 300,000 and 5 million regular golfers in China. Compared with the country's 1.3 billion-plus population, that's still not big.