Lining, China Trend 1 Billion Recycling Inventory, Disrupting The Sporting Goods Market

　　 Lining and Kappa A total of 500 million yuan will be repurchased from the channel traders, and the figure will be about 1 billion yuan after being converted into retail prices.

After the repurchase, how will the inventory be handled? Some people in the industry jokingly say that it is impossible to destroy locally, triggering sporting goods. market A new round of price war seems to be expected.

Inventory crisis?

Previously, Li Ning Co said that in order to speed up the retail terminal inventory clearance, plans to recover some of the dealer inventory, and said that this year will invest 300 million yuan. China's move also indicated that a 220 million yuan pre tax non regular provision would repurchase the excess inventory of dealers, which would reduce its net interest rate to 17%-19%.

"Lining bought a stock of about 300 million yuan and converted it to retail price between 500 million yuan and 600 million yuan, which is about 6.4% compared with the 9 billion 300 million yuan sales of Li Ning Co in 2010. Objectively speaking, this proportion is not very large, but it is also slightly higher. " Zhang Qing, general manager of sports consulting strategy Co., Ltd.

"Lining's sales volume declined in the fourth quarter of 2011, and expected annual performance to decrease by about 5%. China's trend dropped by 59% in the first quarter of 2012. The order will be terminal franchisers and distributors. This reflects the problem is that their historical inventory is relatively large, so the order for next year is conservative, which can reflect the situation of larger inventory of the two companies from the side. Sports industry observer Ma Gang said.

At the same time, Ma Gang reminds us that the current amount of Lining's three hundred million yuan and China's two hundred million yuan repurchase amount may not be exact. Specific data need to be released after half a year's report in the first half of this year.

What will be the impact of the repurchase stock on the sales of enterprises? Ma Gang takes Lining as an example to make the following analysis: after three hundred million yuan repurchase is enlarged into retail price, then the terminal discount price will be taken into account, which is usually about 480 million yuan. In terminal retail, if an average store is annual sales of 1 million yuan, then 400 discount stores are required to sell the inventory in order to digest.

According to the data released by Li Ning Co, Lining has 191 existing discount stores. It can be seen that it is difficult to digest the inventory of 480 million yuan with these discount stores. "About half of the inventory can be digested in a physical store, and the rest will go through e-commerce channels and sell online. There may be some remaining goods that will be sold through other channels, such as selling to the trading company that purchases the tail cargo. " Ma Gang analysis.

As for China's trend, the role of online sales is even more important, "because China's discount stores are not currently in the market. However, the effect of Internet channel cleaning up inventory will not be as good as we imagined. With China's trend as an example, its annual sales volume of about 100 million yuan in e-commerce will not exceed two hundred million yuan at most, and these sales will not completely digest inventory, but also include sales of seasonal products. Ma Gang believes that there should be too much hope for e-commerce channels.

"Keeping stock at a certain value is also a necessary condition to support retail sales. Inventory is not terrible. The key lies in turnover speed. If it can not be increased to an effective speed, it will affect the entire capital chain. While Lining and China are moving to be listed companies, cash reserves are very abundant, and they can take out funds to recover inventory in the channel. Zhang Qing believes that there is no need to worry too much about the two stocks.

Turning to the reasons for the stock formation, Ma Gang believes that this goes back to last year's orders. The two companies' expectations for the market outlook may be too optimistic, which is similar to Adidas's inventory difficulties in 2008. "As far as the impact is likely to last until the end of next year, these commodities need to be cleared for nearly a year." {page_break}

Channel labor pains

Zhang Qing believes that Lining's inventory backlog should also be seen as the beginning of last year's terminal reform.

After Lining implemented the channel policy, the phenomenon of big fish eating small fish appeared. That is, Lining encouraged large distributors to annex small distributors, so the sales of small dealers were affected. At the same time, Lining put forward the task of brand remolding, enhancing brand value and improving product price, and upgrading the brand value to the retail price of single product should have been a long process. Lining's pace was too fast. From this point of view, dealers will have some stock in hand. In the short run, the retail price will rise, and the sales channel will be adjusted. Therefore, regular shipments will be affected and inventory will be generated.

"Of course, these inventories are not concentrated on the small retailers affected by the channel reform. They still come mainly from the larger distributors. They will get more goods in order to get low discount points and rush the performance." Zhang Qing explained.

In the strategic spanformation, Lining put forward that from vertical growth in the past to horizontal growth, that is, by promoting brand value to drive growth. In the whole strategy, a very important link is to enhance the overall business efficiency. In particular, the Lining channel has formed a small and scattered situation in the past. There are many small distributors in the country, especially in the three or four tier cities.

Li Ning Co also acknowledged that Lining currently has 129 distributors and more than 2000 distributors, most of which are small in scale, and they operate 2 stores on average. And 1756 distributors operate only one store.

It is precisely because of the status quo of this channel that Lining proposed reform, while Zhang Qing believed that the general direction of the reform was correct, but there was a "one size fits all" disadvantage.

Theoretically, the distributor's marketing ability is stronger, but there are no perfect channels in China that can better concentrate on the 345 line cities, and still rely on the small retailers who are familiar with the local situation to maintain their flexibility in the local market.

"And Lining, after raising the retail price, means that the price advantage will decrease in the four or five line market, so this requires Lining to exert himself in the two or three line market. This is somewhat idealistic. " Zhang Qing thinks.

For China's sports brand channel management mode, Ma Gang mentioned Anta, "unlike Lining and China, Anta has relatively narrow channel management, and Lining has weak control over terminal channels." Ma Gang introduced Lining headquarters to sell goods to distributors and dealers to terminal, which is more like a trade relationship. And for what form of goods sales, such as festivals, what goods to sell, what price to buy, what effect is expected to achieve, for the follow-up process, they do not do Anta well, Anta in the channel to control better.

The trend of China is different from that of Lining. Its inventory problem is affected by both internal and external factors.

Zhang Qing said that in the internal cause, China's trend is mainly in the field of sports and fashion. The popularity of fashion is fast, and its problems lie in product design. In the early years, China gained market through big patterns, such as big LOGO, national flag, including self-cultivation edition, cutting design and so on. At that time, its profit rate was at a higher level in the industry. "But the trend of fashion is over. China needs to re recognize fashion and enhance R & D and design capabilities. Meanwhile, KAPPA's brand gene is a sport. It should dig more of its sports elements and reflect it at the level of communication."

From the external factors, the success of KAPPA has brought others' imitation. Nowadays, the pace of fashion brand movement and sports brand fashion is accelerating, which constitutes a competitive pressure on China's trend.

Or trigger a price war.

JP Morgan believes that the adjustment of inventory by Lining and China will slow down the growth of other domestic second-line sports brands, although it has a negative impact on domestic second-line sports brands, but this effect is controllable.

In the face of Lining and China's trend may be low discount sales inventory situation, 361 degrees (China) Co., Ltd. vice president Hou Zhaohui believes that its impact on the industry is relatively short time, probably in about 3 months will return to normal. Guo Shoutan, director of marketing of mingle sports, said that in order to better stabilize its market share, mingle will do some corresponding brand promotion to push the terminal market sales.

Zhang Qing believes that the current annual turnover of the top ten sports brands in China is about 23 billion yuan, and the larger discount of Lining and China's stock market will not lead to a big impact on other brands.

Ma Gang is even more worried, "this kind of impact may be relatively large, and it may drive the normal industry environment into the price war pattern. The discount of these major brands will eat up the market share of the second tier brands in the country, while the domestic second-line brands usually have to deal with the price war, which will fall into a vicious circle.

Ma Gang reminds us that online promotions are already in full swing. A reporter survey found that the footwear e-business platform represented by Yue Tao and Hao Le buy has been quite discounted recently. Nike and Adidas have seen many products under 50 percent off.

Of course, in e-commerce, the amount of sports brand operation is not very large, some two hundred million or three hundred million yuan, and some only tens of millions of dollars, so online discount on the physical store sales will not be big impact, Zhang Qing think, may give investors, channel business psychological adverse effects. But because the price is a killer in the electricity supplier, price war is inevitable, which will impact the retail market of virtual market. Zhang Qing believes that the price slaughter of sporting goods must spread from line to line, and the era of competition without borders has arrived.