Lining Transformation: Gradual Or Radical?

It is a difficult test to change from the incremental mode to the deep excavation mode.

Jun Hua Hu

Ai Qing is a college student born in 1989. In June 2010, Lining [16.68 1.21%] formally changed the "L" product logo to "human" shape, which made Ai Qing somewhat disappointed. She said, "the new trademark does not look good."

This is unpleasant consumer feedback for Li Ning Co, turning to "after 90".

In addition to the replacement of product identities, the Li Ning Co which set up 20th anniversary in 2010 had a revolution: the brand positioning began to directly challenge the international first-line brands such as Nike, Adidas and so on. Sales channels began to close or integrate inefficient stores, and from continuously increasing the incremental growth path of new stores to pforming the way of existing stores to increase profits.

Any action mentioned above may be a good medicine for Li Ning Co, but in such a short period of time, many "good medicine" can be turned into a "strong medicine" at the same time. If it is strong, such as Li Ning Co, it will also be ill, and the stock price at the end of December 2010 will be a symptom of the sequela of "strong medicine".

Farewell to the golden age

The "golden time" for the development of domestic sporting goods enterprises was held in 2008 in Beijing Olympic Games.

That year, taking half a year's report as an example, Lining, Anta, XTEP, China's trend of [3.41 1.49%]2008 revenue or turnover in the first half of the year has increased by more than 50% over the same period, when XTEP's earnings surged by 174.3% over the same period last year. By the first half of 2009, the highest growth rate of the above four enterprises was the trend of China's year-on-year growth, which increased by only 33.5% compared to the same period last year. In the first half of 2010, the turnover of the four enterprises increased to the highest level, and the turnover increased by 22.6% over the same period last year.

Despite the decline in Li Ning Co performance, sporting goods observer Ma Gang is still right.

The "wind direction change" of Ma Gang refers to the "ceiling" in the high growth era of the domestic sporting goods industry. This is not just a problem for Li Ning Co, Anta, XTEP and other domestic sports enterprises.

When Lining's share price fell sharply in December 21, 2010, the stock prices of Anta, XTEP and other companies all showed a downward trend.

The declining growth year by year shows that the traditional growth path is heading for an end, which is especially evident for Li Ning Co.

The so-called traditional growth path is to open as many stores as possible, and increase the growth of the company through the increment of stores.

PEAK CEO Xu Zhihua once told reporters that there is plenty of room for a sporting goods company to open to 1 stores in the domestic market.

As of the end of June 2010, the number of retail outlets of Lining brand reached 7478. It is the largest number of stores in domestic sporting goods companies, and there is still a way out of the boundaries of 1 million. However, the huge volume has made Li Ning Co feel the unsustainability of its opening strategy.

Li Ning Co CEO Zhang Zhiyong said in Beijing in June 2010 that the employment cost of sporting goods retailers increased, and the rent of urban commercial areas rose. Although China has a vast territory and there are still some shops in some areas, the overall performance of enterprises has reached the ceiling by expanding the number of stores, and it is very necessary to enhance the output efficiency of existing stores.

A sporting goods dealer said that the annual rent of a store in Sichuan's prefecture level cities was 10 thousand yuan per square meter, and the rent increased by 10%~20% per year. The rent level in some areas was almost the same as those in Shanghai.

According to XTEP semi annual report 2010, staff costs increased from 81 million 318 thousand yuan in the same period last year to 95 million 345 thousand yuan, an increase of 17.2% over the same period last year.

Ma Gang said: "according to the old way, Li Ning Co can continue to go on, in fact, other brands are still walking this road, the days can still go on."

However, Li Ning Co needs more than just living.

{page_break}

Less expensive "after 90"

The Li Ning Co, the first to feel the chill of the market, has chosen the breakthrough after 90.

As one of the oldest sporting goods companies in China, the Li Ning Co's "60 after" and "70 after" fans are slowly getting older, leading the trend of sporting goods into "post-80s" and "post-90s".

In order to please young consumers, Li Ning Co changed its logo from "L" to "human".

At that time, the rise of Li Ning Co in the domestic market was gradually shaken.

The main market of Li Ning Co is in the two or three line market in China. This is a market which pays great attention to the price performance ratio.

In April 2010, Li Ning Co announced the first increase in footwear products by 11.1% and 7.6% in clothing products. In June 2010, Li Ning Co announced that the average selling price of footwear products increased by 7.8%, and clothing products increased by 17.9%.

In September 2010, Li Ning Co announced that footwear and clothing products were raised by more than 7% and 11% respectively.

Behind the rising price, Li Ning Co wants its brand positioning to match the first-line brands such as Nike and Adidas. Zhang Zhiyong said that in the next 20 years, Li Ning Co should not only be the leader of the Chinese market, but also the top five of the world sporting goods market.

Dong Bin's view of "post-90s" is representative. He admits that he occasionally buys Lining's goods, but he is not a loyal "fan".

The main reason is that Lining's products are expensive.

Dong Bin said, or is expensive but famous ADI, Nike, or the price is right, nor is it a "drop" Anta, XTEP.

"Lining has no special advantage and competitiveness."

Of course, if Lining has his own commodity, he will still consider buying it, Dong Bin said.

Similar to the "post-90s" on the pformation of the unacceptable, Li Ning Co earlier response has been psychologically prepared, I believe that after a period of running in and debugging, like Lining new products, new logo will be more and more people.

But Li Ning Co must face the current problem: in the brand positioning, Lining wants to become a pnational brand like Nike and Adidas. In reality, in the eyes of consumers who want to catch "80 after" and "post-90s" by Li Ning Co, Lining looks more like a domestic brand. When such knowledge has not been properly resolved, Li Ning Co has launched a change in sales channels, which has lost both consumers and dealers, which may be the worst result.

In 2010, Lining's news kept on.

In addition to changing the label, the "90s" communication plan is proposed to take the initiative to move closer to the emerging consumer groups. Li Ning Co is working with the extraordinary China [0.36 7.35%] to enter the sports brokers and sports marketing, as well as the real estate industry.

Behind the action, Ma Gang said, "rough look seems to be a series of coherent movements. Business can borrow from each other, but it actually deviates from the core sports goods and footwear industry. The span is too large, and the turning is too urgent.

These should be demonstrated by Lining's decision team, but there is no understanding of whether there are differences in the decision making.

He further analyzed that the decline of performance is a representation, and the deep reason is still from the inside of the enterprise. Lining wants to get out of the shadow of "negative growth". The main opponents are not Nike, Adidas, nor the Jinjiang department headed by Anta, but Lining himself. Only through self challenge can he surpass himself.