Lining, Reflection And Rectification At The Crossroads

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In March 30th, the company announced the third quarter of this year, Lining products.

Before and after the publication of these data, Li Ning Co has more than once reminded investors: the era of high growth of sporting goods has ended, and the industry growth rate is expected to be around 13%-14% in 2011.

In March 17th, Zhang Zhiyong, CEO of Hongkong, admitted in the company's performance conference that the company's brand strategy reform since last year will undergo a period of labor pains, and sales revenue growth will be under pressure in the short term.

Zhang Zhiyong also said he was not optimistic about whether the company's performance could be suppressed in the short term, because "change takes 2-3 years."

But at this time, sporting goods.

Labor pains

It is not too bad to describe the experience of Li Ning Co in the past six months with "internal and external troubles".

In June 30, 2010, chairman Lining personally led Li Yongbo, Wang Yifu and other representatives of the five national team athletes who won many gold medals in the world sports events. They issued the new Li Ning Co slogan: "Make The Change (let change happen)" and made a design adjustment to the "L" logo with a certain memory.

On the same day, Li Ning Co launched the brand remolding plan at the same time, and adjusted accordingly to brand DNA, target audience, product positioning, brand connotation and development system.

The whole brand remodeling campaign was launched at the time when the Li Ning Co was founded 20th anniversary, followed by a series of keynote ads for the post 90's Lining. The most influential local sports brand conveys a sense of urgency to communicate and communicate with younger consumers.

Lining is indeed make the change. At least, its brand remolding has aroused heated debate, but the market has voted with feet.

At the end of the year, the Li Ning Co did not receive positive feedback from agents and distributors.

This is the first time that Li Ning Co has declined in the order meeting since 2008. The decline in the order of Q2 quarter immediately affected the performance of Li Ning Co in the capital market: from December 20th to 21, Lining's share price plummeted, and its market value was evaporated at HK $4 billion 500 million for two days.

Pressure is also coming from outside: compared with the slowdown of Lining's growth, Anta expects that the order will increase by 20% this year, and the order volume will increase by 23%, 21% and 20% in the first three quarters of 2011, respectively.

And the information released by Nike is also optimistic.

According to the information disclosed by Nike, the order for delivery in the Greater China region from December to April of this year increased by 18% over the same period last year. Excluding the exchange rate factor, the order amount increased by 14% over the same period last year.

Zhang Zhiyong did not comment on the development momentum of his opponent. "The expansion of most Chinese brands is basically based on scale and shop expansion. In the current situation, the number of stores that basically opened last year is more than 800."

But he believes that this situation is not sustainable. "We ourselves judge that the growth trend of the industry is declining, which means that the most important expansion factors and driving factors will change a lot in the past. We do not think that there will still be a driving force for the expansion of the store level, but this momentum may be replaced by its driving force. If this is not replaced, this situation is unsustainable."

From the number of stores released by Li Ning Co, from 2004 to 2009, the number of shops opened every year remained at around 1000, and then began to slow down.

According to the data, there were 7249 stores in 2009, and 7915 in 2010, an increase of 666.

The number of shops is expected to be 8300, 8900 and 9400 in 2011-2013 years, and the number of shops opened annually is 500.

The slow growth of sales slowed down the growth of sales scale, and Li Ning Co said that the focus of its development should be on the integration and optimization of distributors and the promotion of single store sales and profit margins.

However, Zhang Zhiyong also said that there was a test of time cost: "retailers can make profits at random, but when suddenly the growth rate from 30% to 11%, he needs to improve efficiency, but there is time for efficiency improvement and capacity improvement."

Reflection and reconstruction

"The first thing we should do in the last year is brand, and the second is the reform of the channel."

To reshape the brand, it is necessary to straighten out the distribution channels. The pformation of these two aspects almost involves the fundamental lifeline of a consumer company.

Zhang Zhiyong said, "we put forward an integrated distributor in July of 2010.

This background is due to the rising cost of access, and it is also difficult for two stores to operate. This is a fundamental factor in the market environment.

We entered the market in September. By the end of February this year, as a whole, we have eliminated about 179 customers. Next we will go to 400, or follow our plan.

It is understood that as of June 30, 2010, Li Ning Co has 129 distributors and more than 2000 distributors.

Most distributors are small in size and operate on average 2 stores.

More than 1700 distributors now operate only 1 stores.

The Li Ning Co believes that "rectifying the movement" is inevitable.

The notice on Lining's website pointed out that "the group noted that most retailers' retail management capabilities, procurement capabilities and product lifecycle management are relatively weak, resulting in their shop performance and operating profit margins are not ideal, and they lack the scale effect of the number of shops."

In this way, "integrating low efficiency distributors is through acquiring more efficient and larger distributors or distributors who want further development to purchase low efficiency distributors."

Earlier, Adidas's excessive inventory dragged down its performance in China.

Its annual report in 2009 shows that its net profit has dropped by 61.9% compared with the same period last year, and the business in the Greater China region has fallen by 16%.

This year, Adidas closed some stores and adjusted the dealer team accordingly.

Since then, the company has gradually recovered its vitality in 2010, and the net sales in Greater China in 2010 amounted to 9 billion 330 million yuan.

In the same market competition, the integration of different brands may affect each other, because the majority of sports brand distributors in China represent many brands.

Therefore, how to create better profit margins for distributors is obviously something that brands need to think more about when they are being incorporated and rectified.

At the 2011 Q3 ordering meeting, Li Ning Co raised the retail price of shoes and clothing products by 10%, hoping to further enhance the brand premium and enhance the profit margins of distribution partners.

And this is closely related to brand upgrading. In Zhang Zhiyong's view, "when the industry changes, costs change, and consumers change, if you want to increase the premium, how to achieve your brand premium will become a new challenge for the team."

At this point, Lining's team stood on the crossroads of the challenge.

When to run?

Previously, Zhang Zhiyong set three goals for the management performance appraisal: at the end of the year, the brand recognition and slogans of the new brand should reach 20% of the consumers' cognition and memory; in the super large tier cities, the brand preference of Lining's core target group should reach over 27%; and the third is that if the competitors discount the price in a big way, Lining must know where her bottom line is.

But in an interview, Zhang Zhiyong admitted that he did not achieve the desired goal.

For example, "there is no obvious increase in customer base, because in our pformation, the most important thing is to increase new customers besides the original customers."

In addition, "we think that the whole process of creative pformation is not clear enough", and after forming concern, there is no correlation with consumers in time.

However, Lining, who has changed, has no way out. "We think that the driving force of the industry will change in the future, so we are willing to take a step forward and make some management changes."

Although Li Ning Co is not optimistic about this year's market, next year's London Olympics may become a new stimulant.

"Our whole team is preparing for the London Olympic Games.

We still have five gold medal teams. According to past experience, they get about 50% to 60% gold medals in the Olympic team, so we have to pass this opportunity to connect our brand with their performance in the arena and SLogan (advertising language) of the product.

This is also the further exploration of Lining's internationalization process. Its goal is to complete the stage of preparation for internationalization by 2013.

Whether the local sports brand can achieve its goal on schedule depends on whether this year's "dual task" is in place.