Skechers Gets One Step Closer to Making China a $1 Billion Market
Skechers (NYSE: SKX) sold 4.3 million pairs of shoes in China this quarter, which topped last year's result by a whopping 54%. With the company stocking extra inventory for Singles' Day, it could surpass that mark and post record sales for the fourth quarter, too. The company has been ramping up its store growth and e-commerce capabilities for what could turn out to be Skechers' largest market.
Company-branded stores are leading the way
Skechers uses a joint venture model for its branded stores in China and other international locations. This strategy leverages local knowledge and talent to run the stores with the product, brand backing, and infrastructure that Skechers corporate brings to the table. The company grew its branded stores 116% year over year to 736 locations, and they serve as a way to highlight the brand, watch inventory trends, and drive growth in new locations.
With wholesale partners, Skechers has added to its "retail doors" in China, and you can now buy a pair of its shoes in any one of 2,339 locations across the country, up 26% from last year.
Chinese 100 Yaun banknotes. Image source: Getty Images.
E-commerce is not to be outdone
Meanwhile, Skechers is also doing very well with its e-commerce business. In China, e-commerce makes up a bigger percentage of retail than it does in the U.S., and with faster growth, it's expected to be the largest e-commerce market worldwide in short order.
| 2016 Metric | China | U.S. |
| E-commerce sales | $4,659 billion | $4,953 billion |
| E-commerce growth | 26.2% | 15.6% |
| % of retail sales | 15.5% | 11.7% |
Data source: GFluence, E-Commerce Nation, and Digital Commerce 360. Table by author.
In its most recent earnings report, Skechers reported "double digit" e-commerce growth in China, which was preceded by seven consecutive quarters of "high double-digit" or "triple-digit" gains.
And the company is ramping up for the biggest online shopping day in China -- Singles' Day -- on Nov. 11. A shopping extravaganza for consumers all over the country, total online sales came in at $17.8 billion last year, up 24% from the previous year. CFO David Weinberg indicated they have "high expectations for Singles' Day," which would be "very positive [...] for the fourth quarter."
To support all of this growth, Skechers has purchased land to build its own distribution center in China that will be completed in 2019. Investors should be pleased the company is aggressively investing in this market, but one question still remains.