Nike And Adi Adjust Price Cuts: Sports Brand'S Jedi Counter Attack

UBS calculates through cost accounting.

"If you spend more than 50 yuan, are you willing to change your mind and buy a pair of Nike shoes?" Nike's upcoming launch of cheap shoes, the capital market immediately responded.

In June this year, at the Nike 2010 fiscal year conference call, Citigroup analysts asked Nike brand President Charlie Denson: is there any plan to enter the two or three tier cities of China?

Du Bairui, managing director of Greater China in Adidas group, also said that the operation rights of these cities would be recovered from dealers, so that the Adidas team could control the market of the two or three tier cities in person, and hoped to give "competitors a heavy blow" through reducing prices.

Luo Fu is a German student, although he carefully selected his own name Rolf for a very Chinese plation, but it can not change his rigour of the Germanic people. In the 3V3 basketball court, the students will play strict tactical discipline without any play.

However, this is not the most noticeable place of rof. What is most interesting is that when Chinese students step on Nike and Adidas boots, a blonde roher is wearing a pair of old fashioned cloth shoes sold in the school canteen.

Everyone said that the foreigner was so cool and so personable that the Germans didn't wear Adidas, but he didn't think it was cool or cool. Instead, he felt that his classmates were making a fuss.

"I also wear Adidas in the country, which is the easiest place to buy shoes in the locality, and the price is not expensive." Luo Erfu thinks he is just following his usual consumption habits and chooses a sports equipment with high cost performance.

Luo Fu doesn't understand his Chinese classmates' admiration for Nike and Adidas.

These brands in Europe and America are indeed good quality, brand new designs, but they are only famous. "Wearing these brands of shoes can really make you add a little bit of bounce, but it will not make you superior."

Foreign monks are good at chanting. It seems that all foreign brands will have a mythological process after they enter China.

When Coca-Cola first entered the Chinese market, it was once regarded as a valuable gift to give relatives and friends in the new year. But now, who will feel that drinking Coca-Cola is a matter worth showing off. Maybe, under the impact of domestic brands, Adidas and Nike will return to the status of ordinary brand sooner or later. But it is because of this myth and the process of being elevated that when Nike and Adidas decided to lower their prices and enter the two or three line cities and the domestic brands, they would have a big advantage.

It is better to lean and seek than to bend down.

The promotion of brand needs years of operation, and the promotion of product prices needs more time to digest. But the reverse is much simpler. No consumers will object to getting quality products. A UBS analysis shows that the attraction from Nike, Adidas brand and product quality can stimulate consumers to spend more than 50 yuan, that is, the idea of "buy 50 more Nike shoes with more than $50" will probably drive consumers who buy domestic sports shoes such as Lining and Anta to take the lead in empathy.

The main consumer of sportswear is about 16-35 years old young people.

In the first tier cities, this group has a richer and mature brand cognitive ability.

In the two or three line city, the recognition of a brand by young consumers will be more affected by the people around them, and their pursuit of individuality will still have the impression of the traditional consumption concept.

Compared with the consumption ability of the first tier cities, how to make them get the recognition of values at a lower cost is a way to win the recognition of this consumer group.

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PEAK CEO Xu Zhihua had kindly reminded Nike that "if changing brand positioning, the disadvantages outweigh the advantages".

But for Adidas and Nike, is the change of brand positioning a kind of "sink" or a "return"?

A slightly ironic thing is that Nike and Adidas are doing the same thing in European and American markets when China's domestic brands take Nike and Adidas as examples to improve their product positioning.

As early as in 2002, Adidas began to introduce fashion concepts into sports products in order to counter the invasion of fashionable luxury brands such as Prada and RalphLauren in sports products.

At that time, Adidas invited the world-renowned Japanese fashion designer Yamamoto Teruji to be the creative director of the sports fashion SportStyle, and built a brand named "fashion leader" Y-3.

Nike, like Adidas, is concerned about the combination of sports products and fashion.

On the one hand, Nike excavated talents from the fashion industry. On the one hand, it started mergers and acquisitions for such enterprises, and COLEHAAN, hockey brand BAUER and so on had successively joined the Nike camp.

Just as China's sports brand was worried when Nike and Adidas stepped down from the altar and voluntarily abandoned the huge product premium caused by the brand effect, Adidas's SLVR products had already entered the Adidas global brand center in Sanlitun, Beijing.

The price of the SLVR series is about three times the price of the Adidas sports product, while the Y-3 series mentioned above is more than 10 times the price of Adidas's sports products.

Behind this is the increasing consumption power of Chinese people. Now, China has surpassed the United States to become the world's second largest consumer of luxury goods.

LV, Chanel and so on have been sinking to China's two or three tier cities.

Du Bairui, managing director of Adidas group Greater China, once admitted that the price reduction would hurt Adidas's brand and consider it a "temporary sacrifice".

But what kind of sacrifice is this? It's just to wear the crown to the real king - the active sinking of Adidas's sports products is the way for the high-end products such as SLVR series and Y-3 series to move away, leaving room for the market.

Obviously, in the future battlefields of sports goods in the first tier cities, the main opponents of domestic sports brands will not be Adidas's ordinary sports products that fade from aura, but SLVR and Y-3.

If SLVR series and Y-3 series are Adidas's positive counterattack to the challenge of Chinese sports brand, Reebok is a surprise soldier who branded China's brand.

In January 2010, Adidas announced that the Reebok brand would be jointly designed and produced by Baosheng international, while Reebok in the future would "take China as the center".

After Baosheng international took over, the brand positioning of Reebok has changed dramatically. The lowest price of its products has dropped to 133 yuan. The strong performance price ratio will undoubtedly pose a direct threat to domestic brands.

Du Bairui once said, "we do not mind changing the brand image of Adidas in China". Maybe he said that the image change not only refers to the return of the Adidas general sports product image, but also includes the SLVR series, the Y-3 Series in the Chinese market, and Reebok's 180 degree turn.

In May 2009, Adidas broke out a "discount ticket" storm.

At that time, Adidas's internal staff discount tickets poured into the society in large numbers, while the discount tickets could enjoy a maximum of 85% off. This resulted in the sale of more than 600 queues at the two stores in Beijing and Shanghai. The scene was once out of control and the police had to step in to maintain order.

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This 85% off "dumping" seems to be just an accident, but Adidas has begun to recessive price reduction is an indisputable fact.

Adidas has been trying to "de Stocking" since the second half of 2008 because of its high inventory due to the high expectations of the Olympics.

In the process, for the sake of maintaining the price system and maintaining the brand premium, Adidas once opposed the discount sale behavior of its dealers. But in early 2009, Adidas finally faced the reality and allowed dealers to open discount stores.

Then, Adidas increased significantly in the discount market in China, so a large number of 30 percent off or 50 percent off Adidas products poured into the market.

Long term high-end brands bring enough product premium to Nike and Adidas, and the premium of these products can become the advantage of their price swears when their brands are gradually returning.

In 2010, Nike released the fourth quarter earnings report in 2009, showing that the pre tax profit margin of Nike in China was 40.3%, compared with the pre tax profit margin of the North American market was only 24.2%.

40.3%, the pre tax profit margin has left enough room for Nike to cut prices.

In the report released by UBS, the price of Nike low price shoes is calculated by careful cost accounting, which is 300 yuan / double.

In the report, UBS analyzed that the price of Nike's cheapest sneakers is 395 yuan at present, the cost of the distribution fee is about 134 yuan, the production cost is about 95 yuan, and the remaining profit is 78 yuan.

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 the distributor will also have to reduce the operating cost by 20% and 36% respectively.

For these purposes, Nike may shift more factories to inland China and reduce costs in product design and procurement.

UBS analysis, these initiatives will lead to a decrease of about 21% of unit profits, but these losses can be offset by the rapid growth of sales volume.

But what does Nike's sales surge mean for China's sports brand? It's not hard to understand that in late June 2010, UBS issued a report saying that Nike would start selling cheaper sneakers in the mainland and news of its entry into the second tier cities. Lining, Anta, XTEP, PEAK, China Trends and other listed Chinese sports brands fell.

On the day of the news release, XTEP shares fell 5.65%, PEAK fell 1.36%, while Lining fell 1.81%, and in the next two weeks, these companies fell more than 10%.

In the UBS report, on the whole, the scale of China's sports shoes Market in 2010 is expected to reach 69 billion yuan, and by 2020, the market size of the famous brand sports shoes may reach 297 billion yuan.

Facing the big cake, the storm of competition between Chinese and foreign sports brands is about to be staged.