Why Does Shoe Enterprise Lining Reshape The Brand?

On the evening of November 7, 2010, Zhang Zhiyong, who was accompanied by Zhang Xiaoyan at the theatre in Beijing in twenty-first Century, watched the drama "win".

Zhang Zhiyong is Lining [16.48 -0.84%] (2331.HK) CEO, Zhang Xiaoyan is

But cheers cheer.

In December 17, 2010, Li Ning Co announced that its two quarter December 17, 2010 Lining products.

What's wrong with Lining?

For Lining

JP Morgan's "weak order performance" refers to the average retail price of Lining's clothing products and shoes rose by more than 8% in the second quarter of 2011, but the number of orders decreased by 7% and 8% respectively compared with the same period in 2010.

However, as Li Ning Co adjusted the wholesale discount rate to dealers in 2011, the order was calculated by wholesale shipment (sell-in), which was even down by about 6% over the same period in 2010.

In this regard, Zhang Zhiyong told reporters that Li Ning Co will adhere to its unique competitive strategy, for a time of order fluctuations, the company will accelerate the integration of channels in 2011, improve store efficiency to resolve.

According to Lining's bulletin, by the end of 2010, there were about 7900 shops in Lining, which were divided into three categories: Li Ning Co direct camp, 129 distributors and more than 2000 distributors.

Most of the distributors are small, and more than 1700 distributors operate only 1 stores.

"According to the established strategy of Li Ning Co, we offer 0.3%~0.5% discount to dealers every year.

But since 2009, the rental and manpower costs of dealers have suddenly increased rapidly.

Zhang Zhiyong said, partners have reflected that in the 3~5 years, the dealer's labor cost has increased 10%~15% every year, that is to say, 5 years later, the cost of manpower will only double.

Therefore, in order to stabilize the "value chain" consideration, the Li Ning Co decided that it would be better to give the discount rate to all dealers by 3% in 2011.

However, with such a considerate partner, why does the order amount of Li Ning Co channel not increase or decrease?

"Lining is the operation mode of" heavy brand and light assets ". The production and sale of products depend on relevant suppliers and distributors.

If Li Ning Co wants to develop, it must ensure the health of this enterprise value chain.

Zhang Zhiyong said that considering the need for future development, Li Ning Co has put forward 30% requirements for the integration of 30% of the distributors.

"There are about two thousand or three thousand counties and cities above the country, and there are no less than 50000 terminals for all major sporting goods manufacturers such as Nike, Adidas, Lining, Anta, XTEP, PEAK, and 361 degrees.

Such a market saturation degree shows that in the past, the level growth mode that could be brought about by increasing store opening and increasing sales volume was no longer sustainable.

Beijing key road sports consulting Management Co., Ltd. CEO Zhang Qing said.

"In 2011, we will accelerate the integration of about 500~600 distributors."

Zhang Zhiyong disclosed that there are two ways to integrate Lining channel: one is the larger Lining dealer enters the next tier market through the acquisition of the distributor, the other is the joint operation of the small distributors, and promotes the operation level through large-scale operation.

Based on this, the order quantity of the integrated Lining distributor is conservative, slightly decreasing, of course, it will be "expected".

The price increase is reasonable.

Unexpectedly, Lining's share price plummeted.

"In 2007 and 2008, Lining also adjusted about 500 stores a year."

Zhang Zhiyong stressed that Lining's integration of distributors in 2011 was not a closed shop.

The shops were closed because of the expiration of the lease and location adjustment.

But in Zhang Qing's view, Lining's stock price plummeted instead of buying a good opportunity: since the level growth is not sustainable, vertical growth is inevitable. As a representative of the domestic initiative to seek vertical growth, Lining's share price is only a matter of time.

Zhang Qing's "vertical growth" refers to the "price increase" of Lining's products.

"Before 2009, the rise of raw materials, rents and human costs did not appear, so there was an irrational" malformation "phenomenon among Chinese sporting goods manufacturers.

Zhang Zhiyong said, the quality of products is very good, enterprises can also sign high stars as endorsements and marketing, and the products sold on the market are not very expensive.

All this, with the turnaround of China's "demographic dividend" in 2007, is coming to an end.

"Li Ning Co has a supplier from Xiamen, whose wages have risen, but no workers have been recruited."

Zhang Zhiyong said that under such pressure, Li Ning Co moved its production base and logistics park to Jingmen, Hubei in 2008.

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At the same time, the selling price of Lining's products has also been increasing, not only to "throttling" but also to "open source".

"There are two types of price consumers and value consumers in the Chinese market.

The former is sensitive to price, while the latter is not only satisfied with the price performance of the product, but also cares about the product brand's feeling for itself.

Zhang Zhiyong said, Lining's "raise price" is also to find their own "value consumers".

It seems that this is against common sense. Lining does not seem to worry about purchasing power, nor is he afraid that raising prices will frighten consumers away.

Zhang Zhiyong also admitted that Lining carried out a market survey every 3 months.

For example, Lining's tennis shoes sell very well in a city in Inner Mongolia, but the survey shows that consumers do not buy this product for tennis fitness, but because the city's environment is not good, dusts are much, and Lining's products are not easy to enter because of tight feet and dust.

"Some Chinese consumers buy Lining products, rather than brand attributes and sports performance, but treat it as an ordinary shoe or clothing."

Zhang Zhiyong said that the increase in prices may cut this part of consumption, but Lining is willing to do so to constantly highlight his brand personality.

To this end, at the end of June 2010, Li Ning Co vigorously carried out brand remodeling activities.

Brand remolding

Zhang Zhiyong's courage is remarkable, but the price he paid is not only the sharp fluctuation of Lining's stock price.

In recent years, Lining brand accounted for the declining proportion of Li Ning Co's overall sales, and the multi brand strategy of red double happiness, AI Gao and lotto has achieved substantial growth in performance. According to the Li Ning Co announcement, its sales volume in 2010 was about 9 billion 793 million yuan.

That is to say, a steady increase of 20% over the previous year can easily break through the annual sales mark of 10 billion yuan in 2010. Li Ning Co is likely to stay for more than a year under the annual sales of 10 billion yuan because of the "price increase" and "brand remolding" started in the mid 2010.

Lining's brand is aiming at the top five international positioning in 2018, which is the goal of Li Ning Co. And rebuilding the brand and strengthening the brand's sports professional attribute is a tool and means for Li Ning Co to achieve its goal smoothly.