Zhang Zhiyong Talks About Financial Results And Brand Loyalty

"Financial results are not the same as brand loyalty" - interview with Lining, President and CEO of Zhang Zhiyong group, "you do CEO."

In early 2004, Lining told a young employee who had served the company for 12 years.

Lining has been low-key and strictly hidden behind this company since the beginning of this century. Zhang Zhiyong has been trying to portray Li Ning Co as an open, athletic, fashionable and globalized corporate image.

"Sports industry generally accounts for 1% to 2% of GDP in a country. China currently accounts for only 0.2%, and it will grow 10 times.

Within 5 years, China's GDP will double to 20 trillion yuan, and sporting goods will reach at least about 100000000000 yuan.

The first 3 of the industry will have at least 30% of the market share. Even if the first brand is only 10%, there will be a company with a sales volume of 10 billion yuan.

Zhang Zhiyong said.

In a sense, "Lining" depends on sponsoring the Olympic Games and the Asian Games.

Looking back, in 2005, you were more prepared, determined to win, but lost to Adidas in 2008 sponsorship of the Olympic Games.

Where did Lining lose?

Zhang Zhiyong: I think the most important thing is financial resources.

In Olympic partners, there are some requirements for financial resources.

In fact, reaching this threshold is not a standard, but in the whole weight rating, finance is a very important aspect.

From the perspective of those international companies, it is actually advantageous to share the cost because it has the benefit of the global market.

On the other hand, the positioning of each company is different. For some companies, the Olympic Games are its most important brand assets, and this competition is inevitable.

This is not the same as the competition in the past.

Besides, it has something to do with China becoming a more and more important market of global sporting goods.

Its capacity is growing and its status in the world is increasing, making international brands willing to invest in large scale.

Although we have planned to spend 16% to 18% of our revenue this year and next year for brand building including the whole Olympic strategy, the percentage is still very small compared with the large Brand Company abroad.

This is a commercialized competition and a fair competition.

The result of competition essentially promotes the development of sports goods in China.

Life week: I noticed that there was a change in the sponsorship of Lining. The previous sponsorship involved all aspects of Chinese sports, but the first international sponsorship in 2000 started with the French gymnastics team.

In recent years, the "Lining" sponsorship seems more purposeful, closer to business and business.

Zhang Zhiyong: Yes.

We used to have a lot of sponsorship projects, which are very related to brands and less related to business. For example, gymnastics, diving, shooting, including table tennis, actually it's not a big business. How many people do you think will buy gym clothes?

Since 2003, most of our sponsorship has shifted to the business of sports market. We call sports marketing investment, including three parts, sponsorship, team sponsorship and personal sponsorship. They are all included in the annual market input costs.

The standards we choose started to change, such as turning to basketball and running sponsorship. We sponsor basketball in Spain and Argentina because it is related to our growing basketball shoes business.

If I have more money, I will probably find a sports superstar who is unique and consistent with our brand personality. But sports superstars are more risky than sponsorship teams, because sports can cause sports injuries, and he will be in trouble if he is injured or other accidents.

Life Weekly: I believe that a large number of previous sponsors, even without commercial profits, have accumulated excellent brand connections, public images and government relations for Li Ning Co.

I am curious that Lining chose 20 years ago as a business model like Nike and Adidas to choose "brand" rather than most Chinese garment manufacturers, starting with OEM and taking advantage of China's labor cost advantage.

Zhang Zhiyong: sports shoes were a very new concept at that time. At that time, China had a brand called "ten best", and the international brand was earlier. Nike entered China in the early 80s of last century.

In the sporting goods industry, international brands first enter China and bring the concept of sports brand to China.

The formation of Li Ning Co's business sense is closely related to the Jianlibao group of China.

Jianlibao made a brand. At that time, it was a very advanced enterprise. It was also in Guangdong, and had many contacts with many businessmen in Hongkong area.

"Lining" was very much in contact with Henry Fok at that time, and in fact, he had a lot of input in business sense.

Lining insisted that he should be a brand enterprise, make a brand, do the whole supply chain management, make product innovation and development, and do not make factories or retail.

The boss's personal business sense usually determines the establishment of a business model during his startup.

Life cycle weekly: "light assets, heavy brand" business model determines the success of "Lining"?

Zhang Zhiyong: we are the first group of such companies.

We are now talking about "franchise". In fact, in 90s last century, this is especially rare. In 90s, there was little business development in this mode.

To tell you the truth, it was not a strategic choice at that time, but it was forced to do nothing.

At the beginning of 90s, it was not easy for a private company to enter a department store, so there was no way to rely on Lining's teammates at that time, one place to start franchising, plus Lining's own driving force.

Another reason is that Lining made some changes in the company's operation level at that time, and merged the 3 big companies under the "Lining" brand at that time.

Before 1995, we were 3 companies: there was a shoe making company in Beijing; there was a sportswear company in Guangdong, and another casual dress company in Beijing.

At that time, the channel was very confusing, because in the face of a customer, there were 3 companies competing separately, which might be beneficial in the initial stage of the business, but the more the latter felt, the greater the internal friction.

Therefore, the result of the reform is to turn 3 companies into one management, contributing to the company's high growth in 1995 and 1996.

Life Weekly: I see that the brilliant growth in the company's history has come to an abrupt end in 1997, and the annual sales of "Lining" have stopped at 1 billion yuan.

Zhang Zhiyong: at the end of 1996, Lining and the management of the company were very optimistic and yearned for the breakthrough of second years and 1 billion yuan.

I remember that in the second quarter of 1997, we suddenly began to drop in business volume.

Li Ning Co's 18 years of history, a total of 27 months of negative growth, that is, from the second quarter of 1997, until 2000, the negative growth of more than two years.

I think this negative growth is caused by several reasons.

The first reason is the whole macroeconomic environment. The impact of Southeast Asian economic crisis on China is not as big as expected, but it is declining in the retail and consumption sectors.

I never thought that was the main shock, but the main problem was that our company had some problems.

What kind of problems?

Zhang Zhiyong: on the surface, the structure of the product is impacted.

At that time, the biggest category of consumption - T-shirts were seriously overloaded in the second quarter, and about 600000 were overloaded. By the autumn, our casual jacket products were also overloaded.

At that time, we were also considering that this was brought about by competition.

The price of our products is much higher than that of many products in the south, because we feel that we have a brand, but at that time, the brand was useless.

Why?

Because the product features of your brand are consistent with your brand.

At that time we mainly made cotton products, just some ordinary T-shirts.

In those days, "Lining" had a T-shirt, and there were millions of sales in one year, but it was easy for people to copy you, so it would be easy to beat you if you were 20% cheaper than you.

Life Weekly: that is to say, you did use the same model as Nike from the beginning, but you didn't build brand content like those of international brands, and relied on Lining's "golden character" sign.

In this way, if the market competition is full, it will not work.

However, when you took over the company management in 2001, you still focused on the brand operation first, but continued to develop the channel and expand the marketing network.

Why?

Zhang Zhiyong: the biggest problem at that time was that our turnover was very low. How to expand the market share was a problem I was facing at that time.

From this point of view, there are only two: limited resources. Do you want to invest or sell?

Investment line is to do brand restructuring, advertising, image, product development.

What is the bottom line?

Put money in the way.

How much is financial pressure?

Zhang Zhiyong: we have been down for more than two years and continue to decline.

At the highest time, we made almost 650 million yuan in 1996 and fell to less than 500 million yuan in 27 months.

The more than two years' period is very painful, and the monthly turnover is decreasing. This pressure is very large.

Insufficient financial resources is, of course, a fundamental problem in the operation of a company and its brand.

If you want to develop a brand, you must invite people, and all you need is a wallet.

It is hard for you to do without money.

How can you say you want to sponsor a superstar?

You have to live first, and the biggest challenge is cash.

Life Weekly: expanding shop is the most direct choice.

Zhang Zhiyong: I made a decision at first.

What are the advantages of making first line?

Fast and realistic.

What is under the line?

If you open a store more, you will have more income and more income. Your company will have more money, more money, multiplied by percentage, and more investment in the next step.

That's the logic.

In 2000, we had hundreds of stores, and then gradually developed to more than 4000.

Frankly speaking, what is called online is not so clear at that time.

We didn't begin to do it until 2002. Only this year did we establish a marketing department.

How to do online?

At that time, it was only based on personal feelings to promote.

But as a company, we must set up some organizations and do it professionally.

This is a logical step, from today's point of view, because you can't be the same as the growth of multinationals. They have the advantage of global capital.

We should first do offline work, do well in your basic network, have certain financial resources, and then make continuous improvement of products, then invest resources in products, and make continuous improvement of products and then make brand reorganization.

But from a marketing point of view, it is different to locate the brand first, then locate the product, and then locate the channel.

Why?

One phenomenon can explain that Chinese companies grow and develop first.

I will do so in the future when I enter the international market, because when I enter the international market, I must have accumulated enough financial resources. This is a basic problem.

If you accumulate enough financial resources and go to a place, you can build up your brand positioning, then make products and make channels.

But at present, no company in China is capital driven.

In this way, in essence, Li Ning Co and the "Jinjiang Department" have not chosen two opposite paths.

On the contrary, the commonality of the two lies in accumulating capital first and then making brand.

The difference is that "Lining" is a marketing leader. "Jinjiang Department" is a low-cost production leader, because Li Ning Co has the natural advantages of Lining.

Zhang Zhiyong: we have completed the second strategic pformation in 2000. We really started thinking about the brand problem. We really considered what a company's sustainable growth depended on, its business model and core competence.

Inside the company, there is such a view that it is not a company that makes shoes and clothes, but a company that promotes sports.

This is a completely different concept.

If you really turn into a sports promotion company, as a product, as a body connected with consumers, it must be closely related to sports.

Although it is for cotton products, what may be added to cotton products?

For example, to add more functional materials, such as plus Lycra, elasticity will be better and sweating will be better.

This is different from the general non sports products.

If you are a sports product, your shoes will not be able to be worn everyday. It is really appropriate for basketball to be distinguished from the latitude of this sport, because each item has different athletic characteristics and different functions.

Actually, we didn't think about it from this latitude before.