Nike Lowers Prices And Grabs Market Share Of Domestic Brands

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The capital market expressed concern.

At the beginning of July, after the news of Nike's push for cheap shoes in the mainland, several listed companies in Hong Kong were listed.

Analysts say Nike is rushing to adjust its strategy in China, including lowering the price to grab the market share of domestic brands.

For Lining and Anta, the real skirmish will start.

300 yuan Nike shoes?

Nike intends to push in the mainland

In June 23, 2010, at Nike's 2010 fiscal year conference call, Citigroup analyst threw the problem to Nike brand President Charlie Denson (Charlie Denson).

The latter responded that the company did plan to enter China's second tier, three line or even four line cities, and will launch some other brands when considering the launch of NIKE series of low price products at different prices.

Just before the conference call, Nike just announced a "Five Year Plan" in May. It is estimated that the annual income of the Greater China region will grow by more than 10%.

Analysts and Anta dealers Ma Gang saw the plan for the first time and felt surprised.

From February 2009 to February 2010, the income of Nike Greater China was 1 billion 277 million US dollars, and it also decreased by 4% compared with the same period last year.

"It is absolutely a radical plan to propose an annual increase of 10%."

Ma Gang said.

At that time, he thought that Nike would surely have some new initiatives to launch.

He wrote in his blog that Nike, for example, will launch low-cost products for the second and three line markets and grab market share from domestic brands. "This is a terrible thing for Lining and Anta and all sporting goods manufacturers."

"If Nike insists on its current pricing strategy, it will be the fastest growing sport apparel in the world.

He even calculated the price of Nike cheap shoes by careful cost accounting, which is 300 yuan / double, which is 25% lower than the current price.

According to the "300 yuan plan model" provided by the UBS team, the supplier will reduce the operating cost by 9% and the production cost by 26%. Nike and its dealers will also have to reduce the operating cost by 20% and 36% respectively.

Liang Yuchang believes that for these purposes, Nike may shift more factories to inland China and reduce costs in product design and procurement.

Liang Yuchang said that although Nike's "low price card" will reduce the profit of its suppliers and their suppliers by about 21%, the rapid growth of sales volume is expected to offset the decline in profits of all parties.

The reporter has confirmed the matter to Nike (China) company, the other side responded that they have not yet mastered the above information.

CONVERSE, UMBRO or

Although it is also believed that Nike's low price strategy is inevitable, Ma Gang believes that Nike will have more consideration before playing this card, that is, whether the price reduction will lead to Nike's brand damage, which will lead to the loss of a group of the most loyal users.

"For example, a middle class in a city walks out of the door and finds that shoes on the streets are brand names. Will he persist in his choice?"

Liang Yuchang also believes that Nike's low price strategy faces at least three obstacles.

First, Nike's suppliers must produce cheaper shoes, but at the same time maintain profitability. Two, how to mobilize Nike dealers in two or three line cities to increase the enthusiasm of the distribution shop, three is how to launch low-priced products at the same time, does not affect its high-end image in China.

He believes that prices and brands are not born on the opposite side.

Just like in Shanghai's best buy, there are 199 yuan NOKIA low end machines on the shelves, but the top white-collar workers in Shanghai are also willing to spend more than 6000 yuan to buy the latest NOKIA mobile phones.

It depends on whether the company has the ability to meet the needs of different segments of the market with a diversified product mix.

In Ma Gang's view, Nike headquarters "timely" released the low price of the wind, hoping to explore the consumer group and all aspects of the acceptance of partners.

If all aspects of the conflict are relatively high, Nike will intervene in the low price market through the way of brand combination, so that the two brands of CONVERSE and UMBRO will be low price pioneers, and Nike's main brand will continue to stick to the high-end.

In addition, if Nike is determined to enter the two or three tier market, in addition to adjusting the product line, it is necessary to make some changes in the existing distribution channels, so that the channel can be flat.

For example, the Nike outlets in the two or three tier market are generally purchased from the Nike distributors in the primary market, so the cost of the goods in the two or three tier market is higher, which is the main reason for the limited profitability of the two or three tier Nike market.

Domestic and foreign capital encounter

Prior to the investigation of the sale price of footwear products in the two or three line cities of mainland China, UBS found that footwear in the 170~250 yuan interval could not only guarantee the profits of the manufacturers, but also the local consumers, which was the "perfect pricing" range of footwear.

And when consumers spend more than 50 yuan to buy Nike shoes, where will the domestic brands go?

Especially in the past few years, Lining is constantly raising the price, and now the average selling price of its footwear products is also around 300 yuan.

A recent order will show that Lining's footwear orders in the 3 quarter of 2010 increased by 11%.

In addition, the average price of KAPPA brand shoes in China's trend is around 370 yuan.

Liang Yuchang said that the impact of Nike's low-priced shoes on such brands is the most obvious.

He believes that the marketing budget of domestic sports brands will be an important factor in deciding whether they can survive in this wave.

Some companies with limited marketing resources are likely to be eliminated in this encounter.

However, Nike's entry into the two or three tier market also has its own handicap.

A dealer told reporters that at present, the profit margin of agents such as Anta and Lining is generally about 5 percentage points higher than that of agent Nike.

For the majority of small and medium-sized distributors, they would rather profit from the same investment.

And Nike's current distributor, such as BELLE, does not necessarily have the experience and strength to penetrate into the two or three tier market.

If Nike wants to enter China's two or three tier market, it needs to do much more than just launch products.