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One of its biggest bugbears has been counterfeits, but the company that owns the Ugg footwear brand is still managing to find more than a comfortable footing in China.

While the counterfeit fleece-lined boots have undoubtedly dented the company's bottom line, demand for the real thing is helping it conquer heights that make its footwear seem more like sturdy mountain boots.

Deckers Outdoor Corp first dipped its toes into the Chinese market in a joint venture four years ago but is now going it alone with a direct subsidiary.

A joint venture with Stella International Holdings Ltd for sales and distribution of Ugg footwear in China ended in April, and the company set up the subsidiary in Beijing, with plans to open a satellite office in Shanghai this year.

"It was the right way for us to enter the market, with a partner that really understood the market," says Pete Worley, president of Deckers Asia Pacific, "but it was never a plan to be forever."

Market success boots the bugbears away

Pete Worley, president of Deckers Asia Pacific, sees the growing importance of the Chinese market. [Photo/China Daily]

The maker of fashion-oriented outdoor, athletic and casual products based in Coleta, California, felt it was time for it to have more control of the brand in the marketplace after it had found its feet in China.

In Shanghai, unveiling the new autumn collection said to have been inspired by New York, Worley says Deckers plans to have 20 stores in China by the end of this year, based on the current 13 stores.

"China contributes a very small percentage at the moment, but we are roughly doubling our business here year-on-year since we entered the market with one store in Beijing and another in Shanghai in the first year (2008).

"China has the potential to be the equal of our US business in terms of percentage of global business in the next five years."

Among the company's expansion plans, it will launch the Chinese version of its website to cash in on the increasing propensity of Chinese to buy online, and will introduce two other brands, Teva and Sanuk, to the market.

"Ugg is by far and away our most successful brand today, which represents 85 percent of our total global business that reached $1.38 billion in 2011," Worley says.

Before last year, Ugg contributed to as much as 88 percent of the company's turnover, he says.

However, both the Teva brand, which grew 22 percent last year, and Sanuk are beginning to show great power now, so it is time to introduce them to the Chinese market, he says.

The subsidiary is also working with the brand team in the global headquarters in California to create products specifically for China to take advantage of Chinese consumers' attraction to the brand.

Yet there still is that threat of counterfeiting. Worley says that as a result of aggressive legal action in the past couple of years, many counterfeiters have been put out of business.

In May, Deckers Outdoor Corp announced it had won two cases against 3,007 websites based in China selling counterfeit Ugg Australia products. An Illinois Federal court ordered a permanent injunction against the defendants and awarded Deckers a combined $686 million in damages.

Since last year, Deckers has filed six lawsuits that have resulted in the transfer of more than 6,000 domains and the freezing of $1 million in linked financial accounts.

In addition to lawsuits, Deckers has taken action against more than 23,000 sites and has had 19,000 links removed from search engines.

"This is not a problem that is limited just to the Ugg brand, but also other US and European luxury brands," Worley says.

But Deckers, founded in 1973, has other problems to contend with. One of these is how to expand its products by competing with many other well-known brands with their spring and summer series, says Ren Guoqiang, a partner of Roland Berger Strategy Consultants, who specializes in consumer goods.

Chinese consumers' recognition of Ugg seems to be limited to the traditional classic sheepskin boots, Ren says.

Market success boots the bugbears away

Women's boots are also products of the Ugg brand. [Photo/China Daily] 

"It was a fashion brand three to four years ago when it began to be popular following the trend among Western stars. However, when the fashion faded and people were just buying them for winter warmth, a problem began to emerge."

By setting up a subsidiary, the company is showing its determination to gain overall control of its finance and marketing in the Chinese market, Ren says.

Two of Deckers' other problems are how to educate people that the brand is more than just the classic boot and how to define fashion for the brand.

Some suggest that the company's dependence on Ugg is no bad thing, and Ren says building a flagship brand and gaining some experience first is what most multi-brand companies aim to do.

"The key problem is that it has to prove that Ugg is not transitory, but an evergreen tree with many other nice goods. After that, the company can pay more attention to other brands."

Ren says the increasing willingness of Chinese consumers to spend big means they are willing to buy authentic overseas brands.

And Ugg, priced at between $200 and $250 and targeted at urban, fashion-conscious men and women from 25 to 35, may seem like an affordable option for those attracted to foreign logos.

"We don't consider ourselves a luxury brand in the same way you might look at Gucci or Prada," Worley says. "We prefer the term affordable luxury. But we are about comfort and stylishness."

In the new collection, one of Deckers' main products, blue sheepskin boots covered with blue glitter, has a more urban feel than boots in previous collections. That can be put down to the city influence, but it nevertheless has many familiar Ugg traits and is easily recognizable.

Together with the new men's collection, they signify the company's efforts to impress customers that the brand is a fashion leader.

"We know that the awareness of our brand in China is very high," Worley says, "but in the market we still have to provide new styles, every-season products, and to move consumers beyond their perspective of Ugg as just the iconic boot."

In the company's efforts to achieve that aim, the brand now puts out a spring collection every year. It has also developed an Italian-made collection, more luxurious and upmarket, for men and women.

In addition, Worley sees big growth opportunities for the men's product.

"The brand really began as a men's brand in California, but over the years the classic boot really took off in the women's side of the business. Men want the same kind of luxurious product - that is, comfort with premium style."