Nike is a bit difficult.
The financial report disclosed by Nike shows that it has “lost” the Chinese market for three consecutive quarters. After the financial report was disclosed, the stock price fell, and Nike’s market value evaporated by more than 80 billion yuan overnight.
Nike is not alone.
Adidas’ performance in the Chinese market is also lackluster. Since the second quarter of fiscal year 2021, Adidas’ sales in the Chinese market have expanded year-on-year, with sales in the first quarter of fiscal 2022 falling 35% year-on-year.
The downturn of Nike and Adidas contrasts with the rise of Anta and Li Ning. Currently, competition between domestic brands represented by Li Ning and Anta and international brands such as Adidas and Nike is in full swing, and more intense competition is yet to come. Looking at the global market, “Lee Ang” still needs to make huge efforts to surpass “Anais” in terms of market share.
Is “checkmark” wrong?
On June 28, U.S. stocks closed down nearly 7%. Nike’s stock price fell to $102.48 per share during the session, setting a new low since August 2020. From the historical high of $178.18 in November last year, Nike has fallen sharply. Retracement 40%.
Just the day before, Nike had just announced its fourth quarter financial report for fiscal year 2022. Its operating income in the Chinese market was US$1.561 billion, a year-on-year decrease of 19%, and its operating profit decreased by 55% year-on-year. In the third fiscal quarter as of February 28, 2022, Nike’s operating income in the Chinese market fell 5.2% year-on-year to 2.16 billion yuan.
Adidas’s revenue in the first quarter of this year reached 5.302 billion euros, excluding exchange rate factors, down 3% from the same period last year. Among them, operating income in the Chinese market fell by 35%.
Nike and Adidas have “dominated” the Chinese market for decades, and there was a situation where new products were launched and had to be queued up and priced higher to be purchased. The prices of many limited edition and signature products have been raised to tens of thousands of yuan. Why are such popular brands Nike and Adidas suddenly no longer popular?
Nike stated in its financial report that the decline in performance in the Chinese market was mainly affected by the increase in inventory, logistics and transportation costs caused by the new coronavirus epidemic. The impact of the epidemic covered more than 60% of its business scope. The financial report released by Adidas in May also attributed the decline in performance to the impact of the epidemic.
“The epidemic is an excuse for the decline in performance of Nike and Adidas in the Chinese market, but it is unconvincing. The biggest reason is probably that there has been an obvious consumption stratification phenomenon in the domestic consumer market in recent years. ‘Anais’ have not Keep up with the changes in the Chinese market.” Lang Li, a lecturer at the School of Clothing, Wuhan Textile University, believes that the purchasing power of consumer groups has changed in recent years, and the stratification of consumer groups has become more obvious. Many consumers are more rational and no longer one-sidedly follow the trend. Instead of chasing foreign brands, you choose products and services with good quality and cost-effectiveness based on your own preferences and market evaluations.
For example, many Chinese consumers say that the price premiums of Nike and Adidas are too high, and product prices and quality do not match. Some netizens commented, “If I have money, wouldn’t it be nice to buy Hongxing Erke? I can buy two pairs at the same price.” “Domestic products are of good quality and affordable.” In the online market evaluation list, “quality” was mentioned More times. Some netizens said: “Nike shoes are produced in Vietnam and the quality is so poor that any Chinese brand’s shoes are better than them.”
Lang Li also said that China’s comprehensive national strength has improved significantly, and Made in China has become a globally renowned brand. Some domestic brands are full of family and country sentiments. When the country and society are in need, they can step forward and proactively fulfill their social responsibilities, which will naturally gain more recognition from consumers.
In July 2021, severe floods occurred in Zhengzhou, Henan. Hongxing Erke still donated 50 million yuan in materials to aid Henan despite its own operating difficulties. For a time, words such as hot search, Internet celebrity, out of the circle, and hot orders appeared frequently on this company. The company’s popularity increased significantly, its sales performance increased rapidly, and even Hongxing Erke’s inventory was bought out.
How eye-catching are the “Lee Angs”?
In contrast to the recent decline of the “Anais”, the “Li An”s, represented by domestic sports brands such as Li Ning and Anta, have performed very well in the market.
In 2021, Anta’s total operating income in the Chinese market reached 49.32 billion yuan, which has exceeded the scale of Adidas’ operating income in the Chinese market and is very close to Nike’s operating income level in the Chinese market. Although Li Ning’s operating income is less than half that of Anta, it has increased by more than 56% year-on-year; Xtep’s operating income exceeded the 10 billion yuan mark for the first time; 361°’s operating income has stabilized at 5 billion yuan for six consecutive years.
From the perspective of market share, the performance of domestic brands is also remarkable. Euromonitor data shows that in 2021, Nike and Adidas’ market share in China has dropped to 40%, with Nike’s market share at 25.2% and Adidas at 14.8%. Anta Group’s market share increased to 16.2%, surpassing Adidas for the first time and rising to second place. Li Ning rose to fourth place with a market share of 8.2%.
“In the past, domestic sports brands lacked innovation capabilities and would imitate some foreign brands in terms of styles. However, in recent years, Li Ning’s design quality and configuration are not inferior to Nike at all. In some details, Li Ning is even better than Nike and more in line with Chinese consumers. “People’s habits.” Retail expert, CEOHu Chuncai, general manager of Shangyi Consulting, said that because domestic sports brands have differentiated competitive advantages in the industrial chain and supply chain, the price/performance ratio is often better than that of international brands. Moreover, domestic brands are better at grasping the psychology of Chinese consumers and have more advantages in promoting through e-commerce, social media and other channels.
In July last year, Hongxing Erke, which set off a wave of “wild consumption” online, saw sales on Tmall and JD.com increase by 797% year-on-year to 497 million yuan, exceeding the sales of Nike and Adidas on these two platforms respectively that month. Since January this year, Anta’s total orders on Vipshop have surged by more than 50% year-on-year, and the consumer group is mainly young people. During the mid-year sales festival, the sales of Guochao brands Huili and Xtep increased by as much as 91% and 103% year-on-year respectively.
Some e-commerce companies are also proactively serving domestic sports brands and helping them accelerate their rise. JD.com has launched the “100 Billion Plan” to help domestic products export overseas. In the next five years, it will help more domestic brands gain popularity. Vipshop also proposed the “New Brand Plan” to fully support domestic brands.
Is it not easy to fully transcend?
Competition between domestic brands such as Li Ning and Anta and international brands such as Adidas and Nike continues, and more intense competition is yet to come. Looking at the global market, it will take some time for the “Lee Angs” to fully surpass the “Anais” in terms of market share.
International brands such as Adidas and Nike have already established themselves in the global market. In 2021, Adidas’ operating revenue in Europe, China, and North America was 7.76 billion euros, 4.6 billion euros, and 5.1 billion euros respectively. Nike’s operating income in the North American market is approximately US$18.35 billion, and the total operating income in other regions is approximately US$28.36 billion. Among Li Ning’s operating income of 22.572 billion yuan in the past year, operating income from other countries and regions outside the Chinese market was 296 million yuan, accounting for 1.3% of total revenue.
In the segmented track of sporting goods, strong R&D capabilities are required. Bain Consulting data shows that among consumer groups, 60% will consider the functions of sports products and 44% will consider intelligence.
Many domestic brands have realized the importance of technological innovation and continue to increase investment in R&D. In 2021, Anta’s R&D costs are 1.13 billion yuan, with R&D expenditures accounting for 2.3% of total revenue; Li Ning’s R&D expenditures are 414 million yuan, with R&D expenditures accounting for 1.8% of total revenue; Xtep’s R&D expenditures are 252 million yuan, with R&D expenditures accounting for 2.5% of total revenue. .
It should be noted that the ratio of Nike and Adidas’ R&D expenditure to total revenue is generally around 10%. In contrast, domestic sports brands’ investment in R&D and innovation is far from enough.
In addition, in terms of brand positioning, international brands such as Nike and Adidas have been deeply involved in top international sports events for many years. Nike has strengthened its brand image in the basketball field, and Adidas has strengthened user awareness in the football field.
Faced with poor sales in the Chinese market, Nike and Adidas are also taking active actions. Men Lijun, vice president and general manager of market development of Nike Greater China, told reporters that Nike is accelerating the transformation of its own digital platforms in the Chinese market, including App, official website and WeChat mini-programs.
Adidas has announced the replacement of the person in charge of its Chinese business in an effort to restore the Chinese market. In Adidas’ development strategy, digitalization is listed as one of the three key areas. By 2025, a total of more than 1 billion euros will be invested to promote digital transformation.
The “Anais” are gearing up and ready to “make a comeback” at any time. For “Lee Angs”, they must focus more on technology research and development, pay more attention to changes in the needs of target consumer groups, and pay more attention to innovation in consumption scenarios in order to seize more new competitive advantages in market competition.
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