Nike Will Extend Its Tentacles To The Two Or Three Line City.

It's like a football match, the two sides try their best to attack each other's half court.

Foreign sporting goods giants represented by Adidas and Nike want to extend their tentacles to China's two or three tier cities.

Recently, Nike said that in the next 5 years, the annual revenue of its emerging markets, including the Greater China region, will grow at around 10%.

Although there is no description of strategic details, the cost of the first tier market is rising significantly. The industry has predicted that the two or three tier cities will be the focus of Nike's next stage, which means that Nike will "invade" the site of domestic brands.

However, this is by no means a one-sided game, because Anta and PEAK, which have pioneered the "grassroots" brand through the two or three level market, "become rich", have consolidated the advantage areas and are also covying with the first tier cities.

This is doomed to be a wrestling attack.

Nike growth depends on emerging markets

For multinational giants in all walks of life, developing countries such as China and India are not only manufacturing bases, but also "potential stocks", and the market position is increasing year by year.

In the third quarter of the 2009-2010 quarter, Nike's turnover increased by 7%.

"It's good for emerging markets."

Nike is outspoken.

According to statistics, Nike's profit increased by 6% to $496 million in the quarter, or 1.01 dollars per share.

In the same period last year, the company made a profit of 244 million US dollars and a profit of 50 cents per share.

Sales increased by 7% to $4 billion 400 million, unchanged from the same period last year.

Among them, the best performance of Nike brand is the emerging market represented by China, with sales in the Chinese market rising by 10%.

In view of this, Nike has also shown unprecedented importance to emerging markets.

It is reported that Nike has made a prediction that its revenue in emerging markets will increase by 10% in the next 5 years and become a key area of business development.

According to the estimated total income of the new market in the first three quarters of this fiscal year, 3 billion 580 million dollars in 2015, the total income in the whole fiscal year is about 5 billion dollars, an annual growth of 10%. This means that by 2015, the income of the emerging market will exceed 8 billion dollars.

Like Adidas, Puma and other pnational sports giants, Nike's current sales network in China is mainly distributed in Beijing, Shanghai, Guangzhou and other first tier cities.

However, with the continuous improvement of store rents and other operating costs, and the layout of the first-line market of domestic sports brands such as Lining, Anta, PEAK and XTEP, the growth space is far behind.

As a result, the industry generally believes that the two or three tier cities will be the next stop of Nike's pnational brands.

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Cut prices for market, hard choices

However, unlike the domestic brand's high-profile entry into the first-line market, Nike has never expressed a strong desire to enter the two or three line market.

Is it not possible to find the entry? For this reason, recently, UBS invested Nike in a bid to launch low-cost products.

"We believe that Nike's current pricing strategy in China has made it impossible for businesses to enter the two or three tier cities, while domestic brands are actively expanding in these cities."

After UBS analysts conducted discussions with manufacturers, it concluded that Nike has the ability to set the price of footwear at a competitive 300 yuan / double.

If Nike can really make the price more competitive, even in the luxuriant two or three line market of domestic brands, it will still go all the way.

According to the UBS report, if Nike decides to sell products with lower price in China, the average high priced domestic brands, such as K AppA (China trend holding brand) and Lining, will be most affected in the short term, because some consumers in the two or three tier cities may choose Nike instead.

In the long run, some brands of Chinese brands will be squeezed out of the market.

"We believe that small and medium-sized brands with annual marketing budget of 350 million -5 billion are unlikely to compete with Nike, Lining and Anta all over the country.

This seems to be a very destructive tactic. Will Nike do it?

In 1998, Mr. Shao, who was still in high school, bought a pair of Nike N BA star "pennies Hardaway" shoes with his entire summer job savings, which was sold for 1280 yuan at that time.

"In those days, having a pair of Nike basketball shoes was a great honor among classmates."

After 12 years, the same thing happened to his nephew.

Mr. Shao's nephew is reading sophomore this year. His pair of Kobe Bryant's exclusive sneakers make his classmates very envious.

Shao and his nephew objected to Nike's lowering of its selling price. "So the sense of superiority in wearing Nike will disappear."

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A little careless, the backyard caught fire.

This is the case in any industry. Price is not the only factor determining consumer choice.

Good brands often retain more consumers because of high prices, which naturally means more profits.

Changing prices to market is not necessarily a wise choice.

However, if we do not consider the price reduction, Nike wants to enter the two or three line market, which is almost impossible, because it will be faced with the constant strengthening of domestic brands.

At present, the sales force of domestic brands, represented by Anta and XTEP, is still in the two or three line market.

"In some small cities in China, you only have to see a Nike store, and there will be 2-3 Anta and XTEP around."

Hua Jie consulting clothing industry analyst Liang Venlo believes that the two or three line city is the main battlefield of domestic brands, and is the cornerstone of enterprises.

If you feel that the international brand has the meaning of channel sinking, the price and marketing resistance of domestic brands will be quite fierce.

International brands may not be cheap enough to compete.

In addition, the domestic sports brand is still "momentum like rainbow" at this stage.

According to statistics, in the 4 quarter order meeting of the major sports brands that have ended in 2010, the average order growth of XTEP international increased by 23%, the Chinese trend ranked second, reached 20%, Anta ranked third, reached 19%, Lining ranked fourth, and the growth rate also had two figures.

"The four sports apparel suppliers received a common trend of growth in the fourth quarter of 2010," he said.

Dafu securities research believes that this phenomenon shows that distributors continue to have confidence in the sales prospects of domestic sports apparel.

On the other hand, with the continuous drop in the first tier cities, the intention of Anta, PEAK and other enterprises to attack the international brand hinterland is obvious.

As a result, in order to achieve the annual growth rate of 10%, besides attacking, Nike must consider how to defend.