Behind The Storm Of Lining'S Integration: Channel Operators Secretly Fight

It seems that Lining attributed the decline in performance to the problem of distribution channels. At this time, a distributor in Maoming, Guangdong, broke the news that local distributors had opened shop directly across distributors, making it difficult for distributors to continue their business.

The distributor did not know that it was one of the strategies for Lining to encourage distributors to operate in many ways of integration.

In the coming year, for Lining's distributors and distributors, the survival of the fittest is indispensable.

Distributors: suffer unfair treatment

"Things haven't been solved yet. We have been reflecting on all levels of the company, but they are still opening their stores."

Mr. Lining, director of Hongda Sports Department of 6 stores in Maoming, Guangdong, complained to the daily economic news reporter.

Mr. Xu said that his last dealer "Guangzhou speeding" crossed them directly.

According to Lining's distribution network, the head office of Lining consists of East China and Southern China sub branches. Under each branch there are several major distributors, and there are many distributors directly facing the market under each dealer line.

Hongda sports is one of the distributors, from the upper level dealers speeding company to get the goods, the speeding company directly from Lining Beijing sporting goods Corporation, to earn the difference.

A two or three tier city like Maoming has always been an important market for Lining. On the two hundred or three hundred meter long road south of Maoming people's road, there are 3 stores, one of which is the new store opened by speeding company in September 5, 2010.

Let Mr. Xu of Hongda sports dissatisfied with speeding company.

Mr. Xu said that since the speeding company opened their stores, their annual turnover has decreased by about 20%.

In this case, Hongda still needs to increase the order of 23% per year according to the regulations. "According to the listed price, our order quantity is 10 million 830 thousand yuan in 2008, in 2009 is 12 million 100 thousand yuan, and in 2010 it is 13 million 970 thousand yuan."

Mr. Xu said that under such a system, the sales volume declined, and the increasing annual order task brought them great pressure. "The goods that can not be sold can only be stacked in the warehouse and sold at a special price."

He reflected the matter to all departments of Li Ning Co, but did not get a reply.

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Lining: integrating distributors to encourage direct operation

Mr. Xu of Hongda sports department does not know that Li Ning Co is planning to integrate sales channels, one of which is to encourage distributors to set up direct stores.

Looking at Lining's mid 2010 financial report, he found that as of June 30th last year, Lining had 129 distributors and more than 2000 distributors.

The company believes that most retailers' retail management capabilities, procurement capabilities and product lifecycle management are relatively weak, resulting in shop effect and operating profit margins are not ideal.

In addition, these distributors lack scale effect. "Most of the distributors are relatively small in scale, with an average of two stores, of which more than 1700 distributors operate only one store", Li Ning Co responsible person said, distributors and distributors are facing the pressure of rapid cost increase. For this reason, Li Ning Co must increase the efficiency of the integration of low efficiency distributors, so that larger distributors or distributors who want further development will buy low efficiency distributors' stores.

At the same time, Li Ning Co also encourages large dealers to increase the number of direct outlets.

Lining has repeatedly stressed to the outside world that they are "integrating channels" instead of "closing 500~600 shops".

But in any case, this will inevitably lead to the survival of the fittest of distributors.

Behind the "closed shop": slow growth in performance

The storm of integration channels stems from a gradual slowdown in performance growth.

The Li Ning Co announced earlier that in the second quarter of 2011, the average price of clothing and footwear products rose by more than 8% in the Lining quarter, but the average price of clothing products and shoes decreased by more than 7% and 8% respectively. The total value of orders for this order dropped by about 6% compared with the same period last year.

In recent years, the growth of the domestic sporting goods market has slowed down.

The 2008 Olympic Games is an important watershed for the domestic sports apparel industry.

In those days, Lining, Anta, XTEP and China Trends (3.5, -0.04, -1.13%, real time quotes) achieved an increase of more than 50% in the first half of the year, when XTEP's revenue increased by 174.3% over the same period of the year. In the first half of 2009, the highest growth rate in the 4 enterprises was the trend of China, which was only 33.5%. In the first half of 2010, the turnover of the 4 enterprises increased by 22.6%.

From the earnings report of Lining in the first half of last year, it seems that it is impossible to maintain the expansion simply by increasing the number of shops opened. The company's revenue in the first half of 2010 was 4 billion 504 million yuan, an increase of 11% over the 4 billion 51 million yuan in 2009. Meanwhile, the cost of sales in the first half of this year increased by more than 10% compared with the same period of 2 billion 115 million yuan in the same period last year.

Integration channels are commonly used by sportswear enterprises.

It is understood that from the beginning of 2009, Nike began to operate the channel vigorously, eliminating poor dealers and concentrating its sales business on larger distributors.

Adidas is more willing to bet on strengthening marketing and sales channels.

Lining's share price is also unsatisfactory.

Compared with the highest share price of HK $31.95 in April last year, it has been down to HK $16.22 since the end of last December, and its market value has shrunk.