China Lining Has Gone Before "Tide", But It Is Still Far Away From Returning To China'S Leading Brand.

Lining changed.

This domestic sports brand has set foot on the top stage of the top fashion week three times a year, so as to promote the brand of products. Prominent Chinese characters, Huang Hong color matching and Chinese style elements design overturn Lining's old image.

This year, "China Lining" has become one of the most familiar stories in the sporting goods market in China.

Behind the bustle, Lining handed in a good financial report: as of December 31, 2018, Lining group's annual revenue grew 18.45% to 10 billion 511 million yuan, net profit increased 39% to 715 million yuan. After 8 years of waiting, Lining finally completed the goal of breaking billions of revenue and gradually recovered its performance.

Among them, driven by the Chinese Lining series, in 2018, the retail sales volume of sports and fashion categories increased by 42% over the same period.

Ceng Huafeng, chief financial officer of Li Ning Co, revealed to the interface news that China Lining's profit margin is very high, and obviously promotes the brand premium capability. But because of his excellent performance, he did not intend to set a profit target for China's Lining.

At the press conference, the logo of China's Lining was placed in the prominent position of the background board, which is an important step in brand spanformation and high-end spanformation.

In the face of this first billion billion report card, the founder Lining's satisfaction is beyond words. In March 22nd, in the 35 floor of central tower in Hongkong, he set up the goal of "China first, Asia first, international leading" in public. It was quite empty to declare war on Anta.

However, with the rapid improvement of attention, the chaser should face the pain of low operational efficiency, core sports category and market acceptance. The spanformation of high-end brands is a matter that needs to be "worked for a long time", rather than the "two seasons of a season".

Obviously, the challenge of Anta, the first place to return to the domestic sports brand, is the same.

The tide brand China Lining led, Lining's premium ability is high

Lining went to the show, at first a hasty decision.

At that time, Tmall and New York fashion week co sponsored the "China Day" activities. We need to find a Chinese sports brand, and Lining, who was founded by a star athlete, became the ultimate option.

Lining, chief designer of fashion week in New York, said to "first finance and economics", "the official show in February 7, 2018, but we suddenly received the task at the end of December 2017." Chen Lijie I was very impressed. I came back after Christmas, and I knew we were going to New York fashion week as soon as we went to work.

From New York to Paris to return to New York, the fame of the fashion show is the new sports and fashion category China Lining.

As the main promoter of fashion week strategy, Hong Yuru, vice president of Lining group, started the concept of China Lining in October 2017. Its product positioning is very clear: fashion, fashion, targeting young people.

Lining said to the interface news: "sports, young people will always be the main force."

In order to cope with the young fashion strategy, this year, Lining brand promoted the joint name, which was jointly launched with Hongqi automobile, Losangeles Chao brand X-Large, graffiti brand OG Slick, fitness brand CHISELED, Debang express and Disney.

Judging from the figures of the past year, Lining's tide card has gained remarkable results. The growth rate of retail sales of sports and fashion categories is up to 42%, which is higher than that of all other categories. The annual sales volume of sports fashion clothing exceeds 5 million 500 thousand, and the sales turnover rate of new products is 70% in 6 months.

Lining explained that in addition to the star series China Lining, the sports fashion category also includes the styles of basketball, running, training and other product lines. "I think the sports fashion and sports life part may be more in line with the consumption of Chinese society at this stage, and will see more room for improvement."

By the end of 2018, there were 23 stores in the Lining Series in China. It is expected to increase to 100 in 2019, mainly in high-end and second tier cities. Despite being well known by the market, the current series of sales is just "very small".

Ceng Huafeng said: "last year, 23 stores were opened, and they were opened for less than two months by the end of 2018. Only 5 of them are self-employed, others are wholesalers. If you open to 100 this year, you may contribute to finance, because its profit margin is very high.

According to the financial report, as the independent store of Lining Series in China, Shenzhen Nanshan Vientiane store opened in November 2018 and Shanghai Raffles shop opened in December. The average monthly store effect in 2018 was more than 1 million yuan.

In addition to sales contribution, China Lining is more significant in premium and high-end brands.

In 2018, the pricing of Lining's new and old products increased. Among them, the average unit price of China's Lining series is more than 30% higher than that of traditional Lining products. "The price increase of old products represents the promotion of brand power," Ceng Huafeng said.

This change also shows that in 2018, Lining's gross margin increased by 1 percentage points to 48.1%.

Lining himself pointed out at the earnings conference that the promotion of brand power was largely due to cross-border China Lining, whose influence is feeding back the whole Li Ning Co. "China Lining will have the ability to lead in the future, and it is a rapidly upgrading category."

The concept of early 90's Lining

In fact, Lining, who was about to start thirty years ago, did not go through the fashion line in the early days, but the cost at that time was extremely heavy.

In 2010, Lining enjoyed a 9.7% share of the Chinese market, second only to Nike. The company then put forward the concept of "post-90s Lining", locking the target consumers "post-90s" and brand positioning "fashion, cool, global perspective". In order to match the positioning of the international brand, Lining raised the price of the product to the international standard.

However, the core competitiveness and strategic positioning are out of touch -- the colorful but lack of design clothes, the superficial slogan of the post-90s has failed to impress the young people, but it has damaged many of the old customers. This positioning error has nothing to do with the subsequent performance plight.

For the past, Lining said he did not personally participate in the "post-90s Lining" plan, but I remember it was more like a slogan at that time, and was imposed on the company level.

Compared with the lack of "post-90s Lining", the layout of "China Lining" in the products and channels has become convincing in the face of young people.

But it is worth noting that China's Lining is popular in the market. Apart from the breakthroughs in product design, it has also catered to the recent boom in domestic products. The prefix and the Chinese style design of China have captured the mentality of consumers in domestic products, while Li Ning Co should be vigilant against such a market.

Zeng Hua Feng admits that tide cards need to be able to cope with the trend quickly. "China Lining is fashion oriented and fashionable things often change. This is popular in the first 6 months. What is popular in the next 6 months? So many new products are coming out. The products sold well last year may not be good this year.

Behind the earnings report, the efficiency of making money is low.

Lining repeatedly mentioned a word in his earnings conference: efficiency.

Lining's low operating efficiency is an old problem. 2018 the medium-term results show that the net profit margins of Anta, XTEP and 331 degrees are 18.54%, 13.68% and 11.26% respectively, while Lining has only 5.69%.

Judging from the latest annual performance, Lining's efficiency has improved, but the net profit margin of 6.8% is still quite different from that of Anta's 17% and XTEP's 10.3% in the same period. The advantage of high margin is not reflected in profits.

Lining said: "the interest rate is only 6.8%, which is not our ideal goal. Next, we need to raise efficiency to a level that meets the requirements of the whole industry. "

At this stage, the important factor affecting the net profit margin of Lining is distribution expenses. In 2018, its distribution cost was as high as 3 billion 273 million yuan, accounting for 35.3% of the total revenue, which was far higher than that of the domestic industry. The proportion of XTEP, Anta and Anta was below 30%.

Zhitong financial research newspaper has pointed out that Lining has higher rental costs. "From the amount of money, the rent and related costs of Anta and Lining are very small, but the difference is very large. In 2017, Lining had 6262 sales points, and the number of Anta shops was 9467. Similar rent, the number of points of sale exceeds 3200.

The difference between the two sides is that Anta's market channel advantages have been consolidated, while Lining, who is in the high-end spanformation, is shifting the retail channel to the second tier city with higher rents. As China's Lining opens stores in big cities this year, distribution costs will remain high.

Lining's retail channel turned to a second tier city with higher rents. Photo source: visual China

For the situation of low net profit margin, Ceng Huafeng explained it in a larger space -- Lining, who is in the brand spanformation period, is the most important input in recent years, such as products, channels, supply chain and manpower.

Lining predicted that the cost ratio of these inputs will begin to decline from 2019, and the rate of decline will be faster and faster. "The efforts of the past three years have laid some foundations. I believe that 2019 and 2020 will be the process of our healthy growth."

In the case of higher distribution costs, the low investment in R & D is another old issue of Lining's controversy.

The latest annual report shows that Lining's R & D expenditure accounts for only 2.2% of the total revenue. From 2015 to 2018, the company's index is at the bottom of the four major local sports brands. By contrast, Anta's R & D spending has been over 5% for many years.

The high-end sports brand has obvious technical threshold and needs support from R & D investment. Consumer feedback Lining technology lack of breakthrough highlights, is not without basis.

In 2018, under the promotion of tide brand clothing, Li Ning Co clothing revenue reached 5 billion 316 million yuan, an increase of 26.84% over the same period last year. But footwear with relatively high technical content is growing at a rate of 10.63%.

At present, Lining, who has high distribution costs, has already been caught in a dilemma. The easiest way to free up capital space for R & D is rent, but at present, Li Ningzheng is at a critical stage in the layout of a second tier city.

A systematic solution to the cost of operation may be Lining's next priority.

Lining, a domestic brand leader, is going to catch up with Anta with a single brand.

In the past year, Anta has also had a good story. The difference is that when Li Ningkao takes off and shows her new look, Anta is making headway with its high performance and capital operation.

At the end of February, Anta sports handed in a brilliant report card. In fiscal year 2018, revenue rose 44.4% to 24 billion 100 million yuan, and net profit increased 32.9% to 4 billion 100 million yuan. The two core indicators have hit a record high since Anta went public.

Meanwhile, Anta has set off the largest overseas acquisition in the history of sporting goods industry in China.

In December 2018, Anta sports and the consortium of Chinese private equity fund founder capital, Lululemon founder Chip Wilson and Tencent set up a takeover offer to amamin sports. After half a year's consultation, in March this year, the two sides have successfully completed the offer and entered the privatization stage.

Alamin sports owns Wilson, Salomon, Louisville, Slugger, outdoor equipment, and ski equipment Atomic.

Ding Shizhong, chairman of the board of directors of Anta group, bluntly said that the international brand was not built in a short time. The acquisition of international brands, hoping to bring them to China, and also to bring Anta to the world.

At present, Anta has the international brand in China, including sports and fashion brand FILA, Korean outdoor brand Kolon, mountaineering brand Sprandi, winter sports brand Descente and children's wear brand Kingkow. As the acquisition is finalized, Anta will further expand its brand strategy to cover the sporting goods market from the public to the subdivision.

Driven by FILA, the retail sales of non Anta brands increased by 85% to 90% in 2018. There is a consensus in the industry that Anta is rapidly pulling away from its local brand. The key factor is the multi brand strategy. Under this strategy, it has clear positioning and strong executive power.

However, Lining did not plan to catch up with Anta in Anta.

In 2019, Lining put forward the strategy of "single brand, multi category and multi channel" for the first time, which is somewhat antagonism with Anta's "single focus, multi brand and all channels".

Prior to accepting the first financial interview, Lining's response is more clear, "Li Ning Co will not do such a thing, Lining will be based on its brand to develop all kinds of products and products. In the future, from the group level, it will consider developing into multi category and multi brand, but it is Lining's brand rather than buying another brand. "

In fact, local brands have always had common pain in the high-end spanformation.

The brands such as Anta, Lining and XTEP, which have grown up from the high cost performance positioning, have occupied the mass market by relying on price war at the early stage. They have accumulated quite a few consumer groups in the low-end market. The brand image is firming, and the distance between them is obviously different from that of Nike and Adidas.

Nowadays, despite the continuous upgrading of local brands in the field of technology and design, how to persuade consumers to pay at a higher price is not a simple matter.

At present, Anta group's positioning under the multi brand strategy is clear. The Anta main brand, which has grown from the mass market, has not given up easily the consumers who pursue cost-effective. Only basketball, running and other products are tentatively explored and touched on high-end areas with some star products.

FILA, winter sports brand Descente, and the brand of old outdoor old bird, which have just been acquired, are responsible for Anta group's high-end, entry into the field of subdivision and contribution to profits. The image of the main brand is upgraded to "blood spanfusion".

"The brand purchased by Anta has a very precise product positioning itself, so what Anta needs to do is to let more Chinese consumers accept them." experts from the Chinese cultural, educational and Sporting Goods Association told the China Commercial Daily that Anta's acquisition of amamin is equally accurate. European and American blood brands are easily recognized by consumers, and are willing to pay high prices for them.

In contrast, Lining's determination to enter the middle and high-end field with single brand is strong. Lining's price has been improved in an all-round way, and the cost performance has been weakened.

A sentence has spread in the sports consumption market: before it had no money to wear Lining, now there is no money to wear Lining.

For this doubt, Lining himself focused on the current earnings data. He responded with a slight understatement. "If no one wants to buy, where will these sales come from?"

As Lining's chief financial officer, who is most familiar with company data, Ceng Huafeng remains cautious. He believes that the promotion of brand premium is only four or five months' time, and it takes a long time to observe.

In March 1, 2019, the sneaker evaluation platform "geek shoes talk" has launched a program called "Lining Tucao conference". Many of Lining's old customers carry out the omnibearing evaluation of the brand "love and hate".

"How can a pair of actual basketball shoes get more than 1000 yuan, so expensive?"

"Now Lining's attention has been given to those new consumers, ignoring our old black card users. The standard of black card is to spend 2588 yuan at Lining shop.

"Lining shop Wade's new shoes draw, a friend only 39 yards after winning," the host said, "it doesn't matter, it can be sold in 39 yards. Their values are merchants' values.

"The product should be done with care. Lining's shoe last is too wide, like Wade's gills."

"Their focus is on fashion week. Look at the design of basketball shoes over the past two years, and now we have no time to design."

Market feedback is more or less subjective, but it reflects that a company's petty action is a big thing in the eyes of consumers.

As a positioning professional sports brand, if the core of the sports category is not solid enough, and the product development has not been fully recognized by the market, then even if the investment of Chao brand "China Lining" is bigger and repercussion is repeated, the use of "Lining" brand power will eventually be limited and short-lived.

Over the past year, Chinese Lining has gained too much praise, but as a company's Lining group, we need some cool thinking from loyal customers.