ADI Nike Transformation Strategy Permeated Three Or Four Line Cities

This time, it is by no means groundless. Adidas , Nike Other brands Campaign to the countryside It has started.

As a member of Adidas China Development Department, Li Qiang has been running around the county level cities for nearly half a year. He told China business newspaper that in 2009, Boston consulting company (BCG) made predictions for Adidas's China market, and the penetration of the three or four line market was the only choice to expand the market share. So in 2010, Adidas's development strategy shifted to a low-level market.

Nike's strategy is exactly the same. It even said that it would launch low-cost products to attack the three or four line market.

But how to take a foothold in this strange market, including product pricing, channel construction and management mode, has attracted much attention.

Go all the way to the countryside

Li Qiang thinks that Adidas's going to the countryside is the general trend. At present, the sportswear market of big cities in China is becoming saturated, and the business of new shopping malls is not as good as before. The whole retail terminal, including department stores, is infiltrating into the three or four line market. This has also set up a platform for Adidas to go to the countryside.

He disclosed that as early as 2009, Adidas hired BCG to forecast the development of China's market. It divided all cities and districts in China and above into 1 to 7 categories according to disposable income, total retail sales volume and purchasing power of consumer goods. Combined with Adidas's terminal sales data, in 2007 ~2009, the sales of sports products showed a flat or even slight downward trend in the 1 to 3 categories of cities, while the results from 4 to 7 cities were just the opposite, and sports products showed the trend of expanding market share.

"So our conclusion is that opening stores in 1 to 3 cities will have an impact not only on the sales of existing stores, but also on the quality of shops. Therefore, moving towards a low level city is also the main direction for us to expand in 2010. Li Qiang said that in the past new shops, the proportion of 1 to 3 cities and 4 to 7 categories of shops was about 6: 4, but the proportion will be reversed in 2010. In 2010, about 7 of the new shops opened in Adidas, the number of shops in low-level cities will account for 70%.

And Nike's opening area and quantity are very consistent with Adidas's. At present, dealers in the three or four line market almost all act as agents for Adidas and Nike.

"Adidas and Nike are well advised to infiltrate the three or four tier cities in the face of fierce competition in big cities. At the same time, we can counter the opening strategy of rural sports enterprises such as Lining, Anta and other rural encircling cities. A person who served Anta dealers said.

Obviously, this is also an opportunity to expand the market for dealers. Guangzhou Bao Yuan Trading Co., Ltd. is a distributor of brands such as Nike and Adidas. At present, it is mainly through the development of the two tier distributor mode to open stores in three or four cities. "Now the rents in big cities account for about 25% of sales, while the rents in low level cities are low, so there are more opportunities for profit than in big cities, and net profits are relatively high." Bao Yuan Business Development Department official said.

Another big distributor, BELLE International's China Daily, shows that sales of two brands of Nike and Adidas account for more than 80% of the group's sportswear business. The 282 top sports shops in the first half of 2010 are also dominated by the two brands. Nike encourages distributors to open stores in two or three or even four or five line cities and offer subsidies to shop.

Different markets

But for multinational companies who are good at "urban marketing thinking", going to the countryside is obviously a complex subject.

"We have no experience in low-level market operation." Li Qiang said.

At present, there is no difference between Adidas's practice in the countryside and big cities. Li Qiang said that in the next one or two years, Adidas will belong to the trial run stage for the low-level market.

Dealers in low-level markets habitually choose public price products when ordering. And for Nike to launch low and medium price products, Nike said it has not yet mastered the information.

"Nike and Adidas need to expand the proportion of medium priced products appropriately instead of preempting low-end markets at a low price, otherwise they will hurt their high-end brand image." The dealer who once served in Anta told reporters that the price of the same function, fabric and serial products of the domestic brand Anta, Lining and so on is about 65% of the foreign brands.

Peak Sport Products Co Limited CEO Xu Zhihua also believes that Nike is unlikely to launch a series of low-priced products, because price positioning is very important, but may launch individual styles. He said Nike had lowered its price in 2009 but had no effect on PEAK's sales.

But Gao Jianfeng believes that the three or four line market has huge purchasing power has not yet been aroused, which is also a major reason why many brands are dropping. Nike, Adidas, etc., as long as they control the sales area, pay attention to the tonality of the brand and guarantee the basic quality, then lengthen the product line and launch different price products, which will have limited influence on the brand.

Domestic and foreign close combat

A strategy for Adidas to set up shop in the low-level market is to see if there are local stores such as Anta, Lining and other domestic brands and sell them well. Then a shop will be opened nearby.

Obviously, the threat of foreign brand market is not a threat to domestic enterprises. Interestingly, the news that Nike will introduce low price shoes directly caused the stock market turbulence.

Because the three or four line market has always been the base of domestic brands. Xu Zhihua told reporters that enterprises are now fighting for brands and terminals. As of the end of August 2010, PEAK had 6949 distribution networks in China, an increase of 153 over the end of June, and the opening of the shop is still dominated by the three line market, because the market is the foundation of PEAK.

At the same time, PEAK, Anta and other domestic brands are also accelerating the opening up strategy of "rural encircling the city". At present, PEAK has opened more than 200 stores in Beijing, Shanghai, Guangzhou, Shenzhen and other cities. Xu Zhihua jokes that he is not afraid of close competition.