Managing Asia

Managing Asia

How Ding Shizhong made a business out of his love for shoes

Ding Shizhong
Courtesy ANTA Sports

Ding Shizhong is passionate about sports shoes. So much so that the self-made billionaire says that he sometimes wears up to three different pairs in a single day when trying out the newest designs from his company, the Chinese sportswear giant ANTA.

"My first jobs was in shoes and shoes have never left my life ever since," Ding tells CNBC's Managing Asia.

Ding says that ANTA began as dream he had when he was 16 to lighten his family's financial burden. He first began by selling shoes that his father made at home, eventually starting ANTA in 1994 as China's planned economy was transitioning to a market economy.

The 2008 Beijing Olympics that were a key illustration of that transformation proved to be a mixed bag for the company. Sportswear brands benefited from the surge in interest in sports and the accompanying increase in purchases of sporting equipment and garb in China.

Diversification is key to ANTA's success in China

However, this collective optimism quickly led to an oversaturation in the local sportswear sector. ANTA soldiered through this slowdown in sales with a spate of store closures, shrinking its store count of 8,000 at the time by more than 2,000 in 2009. The company operates 7,000 ANTA stores today.

Nevertheless, Ding says this setback proved to be a catalyst that led to a change in ANTA's business operations. The company crafted a multi-brand strategy to engage the diverse Chinese consumer market and subsequently acquired Italian sportswear brand Fila's loss-making China arm in 2009. The strategy positioned the ANTA label as a mass market brand while Fila targeted the high-end sports market that ANTA had been unable to capture.

The company currently runs 600 Fila stores in China and Ding says his target is to hit 2,000 Fila stores in the future. Fila revenues have been growing at an average of 40 percent over the past five years.

Also part of ANTA's multi-brand strategy is its joint venture with the Japanese brand Descente, which specializes in winter sports equipment and apparel.

The plan is to open 100 retail stores in China. It's still early days but Ding is confident the partnership will bolster earnings in the long-term. "[It] will take time to nurture a new brand so I don't think Descente's contribution over the next three years will be great," Ding says, "But after that, we'll see positive contributions to profits."

More acquisitions are in the pipeline. While no agreements have been made, Ding say that ANTA is keen to explore the outdoor and professional sports gear segments, including yoga and swimwear.

Courtesy ANTA Sports

"[A]s a single brand, we won't be able to surpass Nike and Adidas," he says, "But with our multi-brand strategy, there is a possibility that we could."

The company is also developing its brand equity. ANTA sets around 10 percent of revenues for advertising and marketing. Among its most high profile investments are partnerships with the National Basketball Association (NBA) in China and the Chinese Olympic Committee.

Star power is another way ANTA enhances brand visibility. The company's endorsement and shoe deal with the Golden State Warriors' Klay Thompson resulted in the development of the point guard's signature ANTA KT Fire basketball shoes - a top seller for the brand.

It will also be dressing the Chinese national team for the 2016 Rio Olympics. However, Ding says the belief that brand visibility during the Games will lead to an immediate increase in revenues is a misconception. "[T]he impact will be felt after brand awareness and recognition are enhanced," he explains, "It will [only] bring about ... benefits in the long run."

Besides advertising, ANTA reckons innovation has also played a role in its success. Not only has the company built its own research and development center, it also requests that its suppliers develop similar venues to pursue innovation. This approach has already notched a few wins, including a pair of smart shoes that the company released in June.

At the moment, Ding says that market capitalization is not his main goal. Rather, he aims to make ANTA the number one sportswear brand in China by 2025. Eventually, he wants the company to be a world-class name.

Ding's advice for aspiring entrepreneurs or those wishing to succeed in China? Be determined and passionate.

"I think it's an occupational illness, I even dream about hugging shoes to sleep," says Ding, "I love shoes to that extent."

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