Lining Nike "Shouting" Price Increase: The Game Between Brand And Price

In March 25th, consumers seemed to be a "compulsory course" for the Spring Festival every year.

Recently, the famous sports brand Lining released the 2010 earnings report, with special emphasis on the fact that the price of products will be substantially increased because of the heavy burden of cost and price, and the amplitude will be "two digits".

At the same time, the world's top ranked sporting goods business.

In the face of rising prices, it is not just consumers who need to spend more, but the domestic brands represented by Lining also need more investment.

For garment enterprises, the rising cost is an indisputable fact.

Since last October, the prices of all kinds of raw materials for shoemaking have been rising.

Severe weather has seriously affected the supply of natural rubber.

At home, the output of the two major rubber producing areas is not good. Yunnan suffered severe drought. Hainan experienced a torrential rain. In other countries, Southeast Asian countries such as Malaysia, Indonesia and Thailand, which occupy nearly 3/4 of the world's rubber exports, were also curbed by heavy rainstorms this year.

This directly led to the price of natural rubber soaring from 35 thousand yuan / ton a year ago to 40 thousand yuan / ton.

In addition, with the volatile situation in the Middle East where crude oil is mainly exported, oil prices have not seen a drop in growth this year.

The rubber used for shoe production is generally made of synthetic rubber, which is refined from crude oil. Therefore, with the price of crude oil per barrel exceeding 80 US dollars and rising, it also increases the cost of shoe materials.

The price of cotton, one of the main raw materials of the clothing industry, has also been expanding.

After the Spring Festival, the spot price of domestic grade 328 cotton reached 30 thousand yuan / ton, up more than 10% from the end of last year.

Not only that, shoes such as shoe stickers have increased by 0.5 times as much as in the past.

Coupled with the appreciation of the renminbi, the labor shortage in the Pearl River Delta and other environmental impact, whether or not it will go up?

Lining Nike announced price increase

After raising prices last year at a number of orders, Li Ning Co (02331.HK) raised its price in 2010 at its earnings briefing.

At the meeting, Zhang Zhiyong, chief executive of Li Ning Co, said that the price of raw materials has risen sharply, and that the cost of the company will rise by an average of 20% this year, so the chain reaction will be "the two digit increase in product prices this year".

Although the price of products will increase significantly, Zhang Zhiyong said that the company will introduce new sales discount policies accordingly to control the pressure brought by the rising cost.

It is estimated that Lining's gross profit margin may drop slightly this year in the context of product price increases.

Besides, the enterprises that used to claim to raise prices are mainly domestic brands, and now the big international brands have joined the ranks.

Nike's latest third quarter earnings report shows that sales in the quarter were $5 billion, up 7% from the same period last year, but not Wall Street analysts' average of US $5 billion 180 million.

Net profit of $523 million, earnings per share of $1.08, also did not meet expectations.

Affected by this, the stock price fell more than 5% after the day of the earnings announcement on Nike.

For the performance, Nike Group executives mentioned the macroeconomic situation is not good at the meeting. The money, tax rate and labor costs are fluctuating. The company is doing its best to resist the adverse effects of these factors.

At the same time, Nike executives clearly indicated that to raise the cost pressure, we only need to raise prices.

However, according to Nike's remarks, the real big price increase plan will not start until 2012.

{page_break}

The balance between brand and price

Also known as the impact of rising cost pressures, the same price is brewing, Lining and Nike have different situations.

"The high inflation point in China will appear in the first half of this year, which is generally expected, but this does not mean that consumers can fully understand the price rise caused by rising costs."

Apparel industry analyst Song Yang said that no matter which industry, if the enterprise wants to raise the price to the product, how much to add additional value to the product.

"Or you can package your brand more beautifully, or let the consumer feel that the price is high but things are very valuable.

Otherwise, how to be accepted by the market? "Song Yang, for example, said that the same price increase of 50 yuan, a pair of Nike shoes and a pair of Li Ningxie's situation is completely different.

In this way, the price increase of Nike must be less than that of Lining.

In addition, foreign brands' consumer groups generally have higher incomes and are less sensitive to prices. The side effects of price increases are much smaller than those of local brands.

Since last year, Nike has said that it will promote the two or three tier market in China. When a Nandu journalist asked whether the planned price increase would affect the strategy, Nike China responded that "brand sinking is not equal to price decline, which is Nike's consistent strategy in product sales."

As for Lining, the evaluation of Song Yang is that the advertisements of Lin Chiling endorsed by him almost spread all over the station billboards in Guangzhou, but the contents are rather confusing. What does this have to do with the new positioning of the company's post-90's brand? In fact, this nearly confused brand positioning has "cut" Lining.

In addition to digesting the unfavorable factors brought about by the rising cost, Lining's price increase should also provide support for the expenditure of brand publicity so as to relieve consumers' negative emotions when facing the price increase.

Song Yang believes that this is also a common problem faced by other domestic sports brands.