SBD/October 12, 2011/Marketing and Sponsorship

Nike To Continue Investing In China, Plans To Double Sales In Country By '15

Nike Brand President Charlie Denson yesterday said that the company “will continue to invest heavily in the world's most populous country, as the world's top sportswear maker plans to double sales in China by 2015,” according to XINHUA. Denson said, "We certainly will continue to invest in China, and very aggressively. We are very excited about the growth opportunities here." With more than 7,000 retail stores in China, Nike “plans to expand distribution to second and third-tier cities.” Denson said, "We will move west. ... We will continue to grow as we move into the lower tier cities -- athletes still want the same products." He did not confirm reports that Nike “will build a new campus in Shanghai, but stressed the company will certainly increase its presence there by recruiting more and developing more locations” (XINHUA, 10/11). Nike CFO Don Blair said that the company “hopes to roughly double China sales by 2015 to reach a target of $4 billion annually.” The WALL STREET JOURNAL’s Laurie Burkitt noted in order for Nike to reach that figure, the company “plans to open more stores, put a renewed focused on recreational sports such as running and snowboarding, and emphasize its stable of local endorsers," including Gold Medal-winning hurdler Liu Xiang and tennis player Li Na. Nike already has “tapped into China's basketball craze, sponsoring NBA stars like LeBron James who are popular in China.” The company indicated that it “can build Chinese sales on its existing basketball fans, but its growth could be juiced if it can replicate an individual and team-sports culture like the one that exists in North America.” Burkitt noted the company last month “launched a running-gear collection inspired by Mr. Liu ... in hopes that he will inspire consumers to buy merchandise" such as the $141 Nike LunarGlide LiuXiang Storm Fly running jacket. To “build an appetite for snowboard apparel, it is planning in 2012 a snowboarding competition at a snowpark outside of Beijing and will build its own course” (WSJ.com, 10/11).

LI NING FALLING BACK: The FINANCIAL TIMES' Patti Waldmeir reported Li Ning in the latest rankings of the richest people in China “has tumbled from 64 last year to 291,” and the decline in fortune “mirrors that of the Olympic gymnast’s self-named brand, which last year had overtaken Adidas for second place in the Chinese sportswear market.” Li Ning CEO Zhang Zhiyong last year “was predicting it would be a top-five global sportswear brand by the end of the decade.” But Li Ning since has “seen its profits and share price plunge and is rethinking its ambitious branding strategy.” With “so few successful Chinese brands in the global marketplace, the trials and tribulations of Li Ning can be seen as a proxy for the fortunes of brand China.” The company's net profits “fell 50 per cent in the first half year on year, and its share price has fallen 57 per cent since the beginning of the year.” The company last year “unveiled a new logo, and a plan to reposition the brand as a near-direct competitor with global brands” such as Nike and adidas. But with many consumers “unwilling to follow a local brand upmarket, Li Ning appears to be returning to its cheap-and-cheerful roots.” It still holds a “slight advantage over Adidas in the China market led by Nike, but market analysts expect it to slip back to third place soon.” Zhang admitted that Li Ning “had lost loyal customers when it raised prices.” Meanwhile, Waldmeir noted adidas is “expanding aggressively into Li Ning territory in smaller Chinese cities, and aims to boost its presence from 550 to 1,000 cities by 2015” (FINANCIAL TIMES, 10/11).
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