Recently, Chinese sports brands like Li-Ning, Peak and Anta closed their stores and their profits declined. After the Beijing Olympic Games and the extensive development stage, Chinese brands needed changes.
Chinese Sports Brands Face Harsh Winter
Up to the 30th of September, Peak reduced 1067 retail outlets to 6739 retail outlets in China. Meanwhile, the total orders declined 20%-30% in the second quarter order meeting of 2013. It was estimated that Peak’s net profits would decline greatly because of inventory adjustment and weak economy.
Peak CEO XuZhihua said that it was sensitive to close stores, but it would finally result in the survival of the fittest.
In the first half of 2012, although Li-Ning opened 248 stores, Li-Ning closed 1200 stores after the profit evaluation and the management adjustment. Up to the 30th of June, Li-Ning reduced 952 stores to 7303 stores, including common stores, flagship stores, factory stores and discount stores. At the same time, Anta also closed 110 stores.
In Beijing downtown areas like Xidan and Wangfujing, reporters found many Chinese sports brands’ sales promotion ads. Compared with fashion stores and international brands’ stores, fewer customers visited Chinese sports brands’ stores.
Mr. XiongXiaokun, a researcher of light industry, said that Chinese sports brands had to give up their former development modes due to the increase of labor cost and rents and product homogeneity.
Problems Caused by Crazy Expansion
In the last few years, Chinese sports brands have experienced the explosive growth with the opportunities brought by the Beijing Olympic Games, such as sports enthusiasm, sponsorship, ads promotion, and stock market.
In the past several years, many Chinese sports brands opened a large number of stores in the second-tier cities and third-tier cities. On one hand, it was a performance indicator for stock market. On the other hand, these brands grabbed the market share in this way.
Mr. Jiang Yunlu, an Internet marketing expert, said, “Many Chinese brands do not pay attention to the characteristics of products, so product homogeneity causes intense competition among these brands. Many stores are not effective because of bad management and bad profits.”
In the first half of 2012, top six Chinese sports brands’ inventories reached 3.721 billion RMB Yuan while the inventory had reached 3.699 billion RMB Yuan by the end of 2011. Among these six brands, 361º and China Dongxiang’s inventories decreased a little while Peak’s inventory increased 25.65% to 529 million RMB Yuan.
In Mr. Jiang Yunlu’s eyes, besides product homogeneity, Chinese sports brands also faced the competition from fashion brands. Chinese customers have had more choices with the emergence of fashion brands.
Chinese Sports Brands Face Reforming Pressure
In order to solve the problems, Chinese brands should first position themselves, adjust the product structure and strengthen the characteristics of their products. In Mr. XiongXiaokun’s eyes, Chinese sports brands faced double pressure from domestic market and international market. On one hand, many Chinese brands intensely competed in the domestic market. On the other hand, international brands like Nike and Adidas entered the second-tier cities and the third-tier cities through the sales promotion. Therefore, Chinese brands should position themselves, find development ways, adjust the product structure and promote themselves with their unique products.
Secondly, with the development mode of scale expansion, Chinese sports brands like Li-Ning have got in trouble. They should not occupy the market by opening more stores. They should improve stores’ profitability through their channels, promotion and services.
Thirdly, with the development of Internet and new media, Chinese brands should pay more attention to the application of E-commerce and try to reduce promotion cost. In this way, Chinese brands may win over price advantage.