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Lining CEO: China Sports Shoes Looking For The Next Driving Force

2010/5/7 17:14:00 58

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The overestimation of sports consumption and the financial crisis have left a curse on the development of China's sports shoes industry in 2009. The impact of the financial crisis on the sports shoes industry worth 50 billion yuan has been fully reflected from the production link to the sales terminal. By October this year, the "closure" of the national major sports brand retailers and regional retailers is still continuing.

"Fundamental changes in industrial driving force are often brought about by crises."

Li Ning Co CEO Zhang Zhiyong told this magazine that "the Chinese sports brand has come to the time to find the next driving force."

From the appearance of Isinbayeva at the Athens Olympic Games in 2004, Li Ning Co saw this excellent partner.

"We have to choose such a person.

At that moment, she will be the focus of the audience. "

Zhang Xiaoyan, director of the Li Ning Co's government and public affairs, told the magazine, "in addition, we need to give enough time for this pair of shoes."

In track and field events, pole vaulting and Eva are undoubtedly regarded as the best carrier of Lining shoes by this company.

Li Ning Co waited for 5 years until Isinbayeva's contract with Adidas expired.

This is a costly contract, and Lining will pay $1 million 500 thousand a year in sponsorship.

But in Lining's opinion, this investment is worth the money.

Signing the Russian pole vaulting queen is part of Lining's brand internationalization strategy. In the luxury shopping list issued by Li Ning Co, NBA's Baron Davis is also listed.

From Lining's further emphasis on differentiation and subdivision of brands, this kind of brand marketing which requires high input has also become an important field for domestic sports brands to compete with each other.

"Running shoes will be one of our most important items. I rank it in the second place, next to our badminton sports product."

In an interview with Li Ning Co, CEO Zhang Zhiyong told the magazine that "last five years strategy" actually wanted to differentiate the brand.

At that time, the project was also found, but without financial resources, you couldn't invest so much money.

A team in Portland and a team in Beijing work together for Isinbayeva's "China shoes".

They not only design unique visual images, but also give them new functional appeal.

From a high-speed camera specially trained for Eva, the main engineer, Mark Thompson (MarkThompson), noticed the subtle differences in the way of effort of pole vaulting athletes and other track and field athletes.

"The explosive force of track and field athletes mainly uses the forefoot of the foot, but the most important thing for pole vaulting athletes is the last step before taking off, and the key point is the whole sole.

This is ignored by designers of traditional pole vaulting shoes.

Mark said in his office in Portland, "we have revised this detail, lengthened the floor of the traditional pole vault to support the forefoot, and extended it almost to the hind paw and increased its hardness, which can greatly reduce the failure of strength in athletes' jumping."

Mark is a biomechanical engineer with nearly 20 years of experience. His partner, MattRask, is a senior employee of Nike company.

A group of designers who had similar experiences with them went to the Lining design center from Nike and Adidas sports SuperBrands last year to become employees of the Chinese company.

Li Ning Co now has 3% of its annual turnover, which will be used in the newly established design center in Nike, Portland. The number of overseas design headquarters is increasing by 30% annually.

For China's shoe industry, why more international brands are trapped in crisis and inventory backlog, why did they choose to expand against the market? Li Jiaming, chief executive officer of Li Ning Co, Zhang Zhiyong and Lining, chief representative of the US design center, received an exclusive interview with CEO.

Triple Life Weekly: from the design center of Nike home in America to the first line of sports stars such as Isinbayeva and Baron Davis, Lining's brand internationalization has apparently not stayed on slogans. These brands need continuous financial resources.

I remember that when I interviewed you last year, you once said that insufficient financial resources is an important constraint on China's brand promotion.

Is there any fundamental change in the financial situation?

Zhang Zhiyong: the existing capital market and our board of directors still give management a lot of space.

In China's listed companies, the net profit margin of Li Ning Co is very low, but this does not mean our PE (price to earnings ratio), PE is the highest.

Netprofit (net profit) is the lowest, but investors still give us the highest PE.

In a sense, this indicates that the financial resources of Chinese companies are not enough.

Why do we need to invest so much?

We must think of the growth of China today, the greater the chance that consumers will give you, or is your ability bigger.

Frankly speaking, China's market gives more opportunities.

Sporting goods is a relatively mature market. If you return net profit to more than 10% a year, it is a happy thing for shareholders. But basically many companies in China have reached 20% or even higher than that. This is an opportunity. It is not entirely capable.

And you must go to a more competitive market in the future. In this big global market, you need to make a lot of continuous advance in product innovation, company organizational competitiveness and human resources.

Our Chinese enterprises actually invest less in this area, so the net profit is high, but it is too late for you to get out of the crisis.

Triple Life Weekly: what can not be overlooked is that these investments happen to be in the trough of the global economic crisis. The footwear industry is one of the most influential manufacturing industries. I notice a news that Yuyuan has closed nearly half of the shoe processing plants in the mainland of Taiwan.

Zhang Zhiyong: This is also one of the most important reasons that we are determined to do. The fundamental changes in the driving force of industry are always caused by crises.

Before and after the financial crisis, what changes has taken place in the driving force of Chinese sporting goods and the driving force in the future?

I think the change is that China used to be mainly "distribution" and "channel" drive. Whether it's Chinese brand, or Nike or Adidas, you only have business as soon as you get to the store.

Have you found out which brand does not open a large number of stores in the past few years?

The top 6 brands in the world have opened more than 3.4 stores in China.

To see all the provincial capitals, many places have become sports goods street, each brand has five or six stores, and the five or six brands are dozens of shops there.

But you find that it has changed since the second half of last year.

There are several phenomena that we can see: the first is the most mainstream passageway of sports goods in the super large cities, China's department stores, which begin to compress sports zones in a large number.

This shows a very important index - "flat effect" reduction.

"Flat effect" is the amount of sales divided by the area, the output per square metre, and retail is the most sensitive. When the retail end finds that the output per square meter is not comparable to other products, it is natural to compress this and expand the other "higher efficiency".

The second is that some large national retailers and regional retailers have begun to close. Since last year's economic crisis, a lot of them have been shut down, because the number of stores owned by tens of thousands of people has been over saturated in the years of "channel and channel competition".

As far as I can see, these provinces in Zhejiang, Jiangsu and Guangdong are basically impossible to open a shop, and they may have to close some stores.

Sanlian Life Weekly: then what is the next driving force of Chinese sports brand under your observation?

Zhang Zhiyong: I want to go on and give an example.

I wonder if you notice, why Chinese brands can live in the two or three tier cities and live in super large cities?

If we look at the price dimension, the most direct is that the rent is too high.

The rental cost is too high, the labor cost is too high, and the output is not so high.

What is the reason behind it?

I have always said that 100 square meters of retail outlets, rent to Adidas is 1 million yuan, it can not be changed to 800 thousand yuan for rent to you, you have 100 square meters of shops multiplied by 100 SKU (inventory unit), what are you going to follow?

You can't live without a higher price than a high price.

What's behind this price?

Brand competitiveness and product competitiveness.

This is the reason why Chinese brands can't survive.

Why did so many brands grow so fast in the past?

No other secret is "distribution".

Originally consumers can not buy, he bought a shop, more than one shop more business.

Now that there are more products and more stores, we have to establish contacts between consumers' choices and products.

Why does Nike want to play basketball?

Why is Adidas playing soccer?

Each brand has its own leading sports item. After the positioning is clear, sports brand can establish a connection with consumers. This is the fundamental reason.

Because of the change of driving force, back to brand innovation and product innovation, there is no good idea and design, no first-class global talent reserves, it is sure that we can not go on.

Sanlian Life Weekly: is this why Lining wants to create a design center in the United States and set up a brand image shop?

But I think, for Chinese shoes, the old driving force has not completely disappeared. Urbanization has allowed more villages and towns to become new cities. The price factor seems to have not yet been completely abandoned and neglected.

Can Lining's American designers take this into account?

Li Jiaming: This is not contradictory.

Winchinabutbeinglobal, if you want to win China, you must be an international organization.

Alan, the creative director of our design center, is from Nike. He has had many excellent design products in Nike.

Why did I choose Alan?

An important reason is that he is very concerned about the realization of commercialization.

I once asked him a question: what is a good criterion for testing a designer?

I was impressed by his answer. He said, if I give you 1000 yuan of shoes designed for target price, mediocre designers can design good ones, because they can use all kinds of good materials, good crafts and many selling points.

If you only sell 400 yuan, use a simple line, simple process, only use the material at the most critical point, and design according to the target price of 400 yuan, this is a good designer.

This is the designer who should be recruited by our company.

Triple Life Weekly: Why did Lining choose this design center in Portland?

Is the Nike close because of the talent pool there?

Zhang Zhiyong: This is only one aspect.

Our fashion design center is located in the Hongkong area. The shoe design center is in the US. Why is this layout so?

I believe that we will have to take the international market in the future, only two main directions.

One is to do supply chain matching. The Hongkong area is undoubtedly the convergence place of the sports brand supply chain, and the other is the big market, for example, the top three in the global market - the United States, Europe, Japan.

Why in the US?

Relatively speaking, although the US market is fierce competition, it is still easier than Europe and Japan.

Because its "access" is relatively easy, retailers in the United States are relatively commercial, and their mode is to directly trade with retailers.

You go to Europe and Japan are different, there is also a wholesaler in the middle, in Japan to open the market and to talk about relations, "relationship" is much more difficult than commercialization.

In addition, the industry cluster of the global footwear industry is very clear, mainly in three places: Italy, Boston on the east coast of the United States and Portland on the west coast.

The industrial chain is concentrated in these places. New materials and new information in the industry will be gathered here every day, and their advantages are incomparable in China.

Finally, in Portland, there is a reason why there is a time difference. The difference between Portland and Beijing is 15 hours, which can get 4 hours' work time for both places. If it is not in the eastern part of the United States, it will be completely black and white.

Sanlian Life Weekly: "the Oregon state newspaper" said, "Lining inserted the red flag in the backyard of Nike". Does it need to adapt to the soil and water for Lining?

How can two cultures be agreed on the final product?

Zhang Zhiyong: there are some legal problems that are very specific, but we need to face them, such as the insurance of foreign employees.

In fact, this is also a culture, you need to give him, or do not need to give him, there is no right and wrong to say, but involves the positioning of the company's overseas institutions.

This is actually a very basic thing, because everyone else will see how you do it and what your tactics are.

Li Jiaming: there are some problems at the beginning.

Specifically, from the design point of view, in our latest sampling conference, the retail business has such a reflection that the products are very good, but not like Lining's.

They do come from our designers from Nike and CONVERSE.

In the process of internationalization, we allow this to happen, but the final challenge is how to integrate the new things brought by these foreign designers with those accumulated by Chinese brands in the past 20 years.

We have begun to try, such as the "rotation training" of designers in Portland and Beijing. Lining currently has about 10 designers in the United States and 48 designers in China. These designers are divided into 4 batches a year, and each batch goes to each other's workplace to experience a complete design season.

This year we have just completed a round of Chinese designers coming to the United States. From next year, we will let American designers go to China to make a design season.

Triple Life Weekly: I want to know, what can Nike learn from Nike?

Li Jiaming: Li Ning Co can learn more from Nike than process itself, rather than design itself.

Of course, back to the shoe profession, the best thing that Nike has done is the use of materials, which is common among designers.

One of the reasons is that the material suppliers of the export system and the material suppliers of the domestic marketing system are different.

Many high-end and good material suppliers are not able to supply to the domestic sales system. We should learn from Nike and excavate these materials suppliers.

In addition, when we came to GIC, we found that domestic designers still had defects in the use of color. Now we have begun to update the color system under the guidance of American designers.