Li Ning is forced to be less aspiring and returning to its roots
As TextileFuture reported before, Li Ning Co., a Chinese sports-apparel brand that wanted to topple Nike Inc. and being now forced to a major overhaul is returning more to its roots and wants “only” to increase its market share in China by as much as 40 % or from current 10 % to 14 % in the next two years
The overhaul includes the bringing in four new senior executives since replacing its CEO in July. Jin-Goon Kim (recruited from TOG Group, a buyout firm) is executive director and vice chairman.
The gain of more market share shall be based upon overhauling the retail outlets, bushing up an image tarnished by massive inventories (mostly sports apparel, ordered years ago counting on the effects of the 2008 Beijing Olympics) that forced clearance sales, and adjusting prices either being too high or too long, according to Kim. It is estimated that Nike has control over 75 % of its inventory, while the figure for Li Ning is only 50 %. Kim adds: We want to be the leading brand in China, as opposed to the leading brand here and overseas and we are going after the 70 % Chinese consumers who aren’t yet buying branded shoes from companies such as Nike and Adidas and we are trying to compete with Nike.
Li Ning has been also cutting the number of stores to 7303 as of June 30, a decrease of 952, at the end of 201 there were 8250 stores. The company wants to become a better retailer, analysing merchandising data to understand regional and product preferences and intends to create innovative products such as lighter running gear and tennis shoes that fight odour and fungus.
It has to be noted that Li Ning faces an uphill battle on pricing under the aspect that higher disposable incomes in China make brands like Nike more affordable, lower-end Nike shoes are selling online for only around 19 % more than a similar pair of Li Ning shoes are claiming experts from Barclays Capital. Rival products also tend to be more innovative. Kim declares that the company will likely cut prices on its basketball shoes to appeal to younger players and because he aims at the middle tier of the market. A new five-year partnership has been sealed with the Chinese Basketball Association and the company signed a contract with NBA Miami Heat guard Dwyane Wade to create a Wade-signature “Dynasty” collection to oppose Nike’s perennial hit “Air Jordan” shoe.
Ultimately Li Nings’s success will hinge on improving operating efficiency, inventory management and product iteration states Ben Cavender to the Wall Street Journal, a senior analyst at China Market Research Group, and the company needs to get products that consumers want into stores now.