Nike Enters The Mainland's Two Or Three Tier Market With Low Price Products To Achieve Business Growth

December 1st, in June of this year, listed in Hongkong. Lining , Anta , Peak Chinese sports apparel prices fell for two weeks in a row. The reason is just one piece of information: Nike plans to enter the mainland's two or three tier market with cheap products. In fact, Adidas has similar plans. Why should the foreign brands headed by Nike expand to the two or three tier market?

　　 The march to China's two or three line market has become the only way for Nike and other foreign brands to achieve business growth in the world.

At present, the Chinese market is already Nike's largest overseas market. In 2009, Nike's revenue in the Chinese market increased by about 10% over the previous year. Domestic sports brands such as Lining and Anta grew by more than 25%. The reason for such a big contrast is that foreign brands have long been limited to northern Guangzhou and other tier cities, while local brands focus more on the two or three tier cities. Although the size of the market is large and the purchasing power of consumers is strong, the growth of the first tier cities is relatively slow, fierce competition and higher cost. Along with China's urbanization process, the growth of consumer income in the two or three tier cities is fast and the market space is huge. It can be said that if Nike still seals itself on the first tier cities, it will give the competitors the world's fastest developing sportswear market.

　　 However, Nike will face great challenges if they want to succeed in the two or three line market.

The first is the adjustment of product line. In China's two or three tier cities, the most acceptable footwear price in the market is between 170 yuan and ~250 yuan, while the price of shoes sold by Nike in China is 400 yuan ~1000 yuan. Therefore, Nike must consider introducing some cheaper products. It is estimated that Nike needs to move the price range of footwear products down 25% to 300 yuan per pair.

However, price cuts are not easy to achieve. Because it means that enterprises must compress the cost of product value chain. In order to reduce the price to 300 yuan, the profit of Nike and its suppliers will drop by about 21%. It is not known whether the growth of final sales will be enough to offset the loss of profits caused by price decline.

Secondly, lowering the price may damage the brand image and make it lose loyal customers.

Finally, it is inevitable to increase the sales terminal coverage in the two or three tier cities.

In order to overcome these challenges, Nike is not completely helpless.

First of all, in order to reduce costs, Nike needs to transfer more factories to inland China and reduce costs in product design, procurement and sales.

In terms of channels, we should strengthen the flat construction of channels, recruit more local staff, and send more managers to actively communicate with local distributors, so that they can get closer to the rapidly changing demands of consumers. For example, Adidas changed the strategy of contacting dealers only, and the latter was responsible for managing distributors. Before September this year, a team with distributors was established.