Lining's Recent Performance Is Not Satisfactory.

Just as the old and new year alternated, the Li Ning Co fell into a storm. Because of the drop in orders in the second quarter of this year, there were four rumours in the shop. In this regard, Lining had to clarify: not to close stores, but to integrate sales channels.

It seems that Lining attributed the decline in performance to the problem of distribution channels. At this time, there were distributors in Maoming, Guangdong, who reflected 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.

Unfair treatment or integration of distributors?

"Things haven't been solved yet. We have been reflecting on all levels of the company, but they are still opening their stores." Mr. Xu, director of Hongda Sports Department of 6 Lining stores in Maoming, Guangdong, complained.

What he said was that the dealers at their previous level "Guangzhou speeding" passed them directly in Maoming.

According to Lining's distribution network, the headquarters of Lining consists of East China and Southern China sub branches. Distributor 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 three stores, one of which is the new store opened by speeding company in September 5, 2010.

Let Xu dissatisfied with speeding company. Wholesaler Because of cost advantage, it has grabbed Hongda's market. "As distributors at the next level, we need to get goods from speeding, they earn us 7-8% for each item, and when they open their stores, they advertise that they are selling at factory prices, which is cheaper than the goods we store." What makes him feel more unfair is that Li Ning Co has special products for sale every quarter, and the price for speeding is 15% of the listed price, but the price for speeding is 45-50%. Xu said that the annual turnover of the company has been reduced by about 20% since its opening.

Under such circumstances, Hongda still has to increase the order quantity at the rate of 23% per year according to the regulations. "According to the listing price, our order quantity is 10 million 830 thousand yuan in 2008, 12 million 100 thousand yuan in 2009, and 13 million 970 thousand yuan in 2010."

Xu said that under such a system, 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."

But he doesn't know. Li Ning Co is planning to integrate. Distribution channel One of the measures is to encourage distributors to set up direct outlets.

Li Ning Co's mid 2010 financial report revealed 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. {page_break}

The company has repeatedly stressed to the outside world that they are "integrated channels" instead of "closing 500-600 stores". But in any case, this will inevitably lead to the survival of the fittest of distributors.

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 products and shoes increased by more than 8%, but the order volume dropped by more than 7% and 8% respectively compared with the previous year in the Lining quarter. According to the retail listing price, the total value of orders for this order decreased by about 6%.

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 sporting goods industry. In those days, Lining, Anta, XTEP, and China's trend in the first half of the year saw a year-on-year increase in revenue or turnover. At that time, XTEP's earnings surged by 174.3% over the same period of the year. In the first half of 2009, the highest growth rate of turnover in the four enterprises over the same period was only 33.5% in China. In the first half of 2010, the largest increase in turnover in four enterprises was Anta, which was 22.6% over the first half of 2010.

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. At the same time, the cost of sales in the first half of this year increased by more than 10% compared with the 2 billion 115 million yuan in the same period last year.

Integration channels are commonly used by sporting goods companies. From the beginning of 2009, Nike began to "operate" on channels, eliminating poor performance dealers, concentrating sales business on larger distributors, and Adidas was 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.