From Li Ning to Hongxing Erke: Do not waste every crisis

​”The times are calling”, are they ready?

The sports shoe brand that can represent the “national tide”, the light of domestic products, was first Huili , then Li Ning , and now Hongxing Erke.

Last week, Hongxing Erke became popular overnight because of donating 50 million yuan to the disaster-stricken area in Henan. The reason was that Hongxing Erke was still at a loss but still generously donated “small family for everyone”. Wu Rongzhao, the president of Hongxing Erke, responded, saying that Hongxing Erke is in a transition period, “although it is very difficult, but it has not been “on the verge of bankruptcy” as netizens ridiculed.

From Li Ning to Hongxing Erke: Do not waste every crisis

This detail also opened a hole in observing the ups and downs of domestic sports brands for decades:

In addition to Hongxing Erke, domestic sports brands such as Li Ning, Anta, Xtep , Peak, 361 Degrees, Guirenniao, and Jordan Sports have encountered various challenges. From foreign trade orders to independent brands, from rural workshops to global mergers and acquisitions, their main lines of growth have almost Consistent; the sequelae of crazy shop opening, the confusion of positioning caused by the expansion of all categories, the inventory crisis forced the transformation of the model, and the financial hidden dangers of international competition. Their crises are also very similar-only after the catastrophe, some people have rebirth, and some people are devastated.

“Don’t waste every crisis.” Churchill’s words can be said to be an appropriate footnote to the development of domestic sports brands. Nowadays, the national tide is popular, “the era is calling”, are they ready?

From foreign trade orders to independent brands

From the historical perspective, currently active Chinese sports shoes and apparel brands can be divided into Jinjiang and Li Ning.

In 1979, Lin Tuqiu of Chendai Town, Jinjiang founded Yangdai Shoes and Hat Factory (the predecessor of Crocodile Wright), which made the first shot of the future “Chinese shoe capital” entrepreneurship. Since then, “family joint production, hand workshop” shoe company The mode of operation is also popularized in Jinjiang. At that time, more than 80% of the world’s branded shoe production and trade were concentrated in Taiwan, and Jinjiang and Putian took advantage of their geographical location and labor advantages to take advantage of the shift of the footwear industry. Anta, Xtep, Hongxing Erke, 361°, Delhui and other brands are all from Jinjiang, Fujian, so they are also collectively referred to as Jinjiang series by the outside world.

Most of their entrepreneurial stories followed the path of fortune of Chinese entrepreneurs at that time-the small workshop of commoner farmers started, relying on low labor costs to complete the original accumulation along the foundry tide.

For example, Ding Jiantong, the founder of 361°, was originally a farmer and occasionally worked part-time to make money by blowing suona. Without money for the 4 children to study, they were all sent to be apprentices in shoemaking. Later, Ding Jiantong relied on farming, fishing and part-time labor to raise two thousand yuan to open a small workshop in his own house, and took four children to make leather shoes by hand, and then sold them; while Xtep founder Ding Shuibo and two The worshiping brothers each contributed 500 yuan to build a shack by the river in the village to make slippers.

However, it didn’t take long for the foundry bonuses to make foundries enter the “involving” link-more and more foundries. Since the 1990s, hundreds of sports shoes have appeared in this 649 square kilometer county. Brands, and profits are being suppressed less and less. By the late 1990s, the profits of a pair of foundry shoes were only one or two dollars.

This further stimulated the leap forward of the foundry. For example, after the foundry was abandoned by Nike , Xu Jingnan recruited skilled workers to form “Fengdeng”, the predecessor of Peak.

However, at that time, some companies had the idea of ​​making their own brands, and they made a lot of “jokes”. For example, the predecessor of 361° was called ” Buick “. At that time, Ding Jiantong thought that the logo of Buick was good, so he used it directly. Later, Buick wanted to enter China, and the two sides caused a dispute. Ding Jiantong’s shoe factory was renamed 361°. This can also understand the later “Jordan” and “Adi King”.

From Li Ning to Hongxing Erke: Do not waste every crisis

Attorney attorney holding classic photos of Michael Jordan with Jordan Sports

The image trademark used for comparison, the outlines of the two are completely overlapped after the mask is peeled off

With the pitfalls of the predecessors, the latecomers have taken a lot of detours on the road of building their own brands. Anta is the lucky latecomer.

In 1987, Ding Shizhong came to Beijing with 10,000 yuan and 600 pairs of shoes, and successfully tested the water in Wangfujing Department Store and Xidan Shopping Center. But when he saw that the shoes he brought could only sell for 20 yuan, while the same shoes could sell for 100 yuan after OEM, Ding Shizhong realized the importance of establishing his own brand, and returned to his hometown four years later. Anta.

In 1999, Ding Shizhong spent almost a whole year’s profit to sign Kong Linghui, the world champion of table tennis, and advertised on CCTV, starting the “sports star + CCTV advertising” marketing model. This model has also been imitated by other brands:

  • In 2001, Hongxing Erke signed a contract with Chen Xiaochun;
  • In 2002, Xtep signed with Nicholas Tse;
  • In 2003, Del Hui signed Jay Chou for 10 million yuan;
  • In 2005, Peak became a sponsor of the Toyota Center, home of the Houston Rockets, for US$4 million.
  • Also in 2005, Xtep, which originally bid for the sponsor of the Nanjing National Games with 8 million, encountered a 10 million competition from Mizuno of Japan, so Ding Shuibo immediately raised the price to 15 million;

The run-through of the marketing model also led to the birth of new brands-according to statistics, in the first half of 2001, 47 sporting goods brands were born across the country. But everything has two sides sex, shoe already meager profits, high advertising costs and expenses for many shoe endorsement unbearable, which is later blessed with long , Del benefits of exit foreshadowed.

From Li Ning to Hongxing Erke: Do not waste every crisis

In stark contrast to the grassroots of the Jinjiang family, Li Ning wears the aura of the “Prince of Gymnastics”. In 1990, Li Ning founded Li Ning, a sporting goods company with the same name in Sanshui, Guangdong.

In August, Li Ning sportswear was selected as the Eleventh Asian Games torch relay designated clothing, the national team to participate in Yayun escorts to award service and foreign correspondents designated clothing. This Asian Games is of great significance because it is the first international comprehensive sports meeting held in China. At that time, Li Ning won the sponsorship rights for 2 million. Afterwards, at the 1992 Barcelona Olympic Games, Li Ning became the special award-winning suit for the Chinese sports delegation, which also ended the history of Chinese athletes wearing foreign sportswear at the Olympic Games.

Starting from a high starting point and playing high, Li Ning’s start-up stage went smoothly, but the crisis often quietly lurked at this moment. In 2004, Li Ning went public in Hong Kong and has always occupied the first position of domestic sports brands in China. Until the 2008 Olympics ignited the fuse of the crisis, in 2011, Li Ning was overtaken by Anta and fell to the altar.

From Li Ning to Hongxing Erke: Do not waste every crisis

Development History of Chinese Sports Brands

Source: CITIC Securities

Expansion and inventory crisis

Li Ning’s listing in 2004 also opened the prelude to the capitalization of domestic sports brands. In 2005, Hongxing Erke was listed in Singapore. In 2007, Anta landed on the Hong Kong stock market. Sports brands such as Xtep, Peak, 361° and Xidelong also followed suit. With the blessing of capital, their path of expansion has become more confident.

The Beijing Olympics became that turning point. At that time, the Beijing Olympics attracted the attention of the whole world, and it was logical that the Chinese sports brand “expanded”. In 2008, Li Ning, whose sales channels were mainly distributors and supplemented by direct sales, had increased the number of stores from 1985 in 2003 to 6,245.

Everyone knows that the Olympics is a great opportunity, but no one knows that there is also a huge uncertainty behind this opportunity.

Li Guanyi, who had worked for Adidas (China) Co., Ltd. for ten years, recalled that all sports brands in the Chinese market suffered an inventory crisis after the Beijing Olympics. It’s just that at that time, international brands paid more attention to the terminal, and they got the sales data of agents every week or even every day, so at the end of 2008 they realized that the market had changed (the expected order quantity did not match the actual sales of the terminal).

However, domestic brands are still doing their best. After the Olympics, the idea of ​​blindly expanding channels has continued. Li Ning’s number of stores reached 8,000 at its peak. In fact, the dealer mode, the brand just need to lay the ad, then the bulk goods sold to dealers, distributors as long as there is demand desperately production, domestic sports brand sales ratio (ie, inventory and sales volume of the ratio) The highest has reached 10:1. With the decrease in market demand after the Olympics and the lagging feedback of distribution models, domestic sports goods companies are still expanding blindly, causing the entire industry to be impacted by overcapacity, inventory backlogs, and store closures.

Since 2011, hidden dangers have emerged, and Li Ning’s performance has been declining. In 2012, Li Ning lost nearly 1.8 billion yuan. Although it survived and made a comeback with its former size and brand reputation , other Jinjiang-based companies were not so lucky.

“In 2012, the industry broke out, and Jinjiang shoes can still be sold for 3 years.” In the face of the industry’s cold winter, Xidelong, Kinglake and Delhui chose to directly transform fashion. As a result, due to the failure of brand positioning, they were unable to fight against fast fashion brands such as ZARA and H&M. , Aggravated the inventory crisis, but dragged down oneself. In 2011, Hongxing Erke was suspended due to financial fraud. Peak was delisted in 2016, and Guirenniao and 361° were greatly injured. Xtep did not complete inventory clearance until 2017.

From Li Ning to Hongxing Erke: Do not waste every crisis

In the crisis, most sports apparel companies chose to seize the low-end market and even offered a promotional price of “200 yuan 7 pieces”. However, the low-end market at this time is flooded with foreign big-name knockoff brands, coupled with the lack of innovation of domestic sports brands and serious homogeneity problems, so low-priced “Adibas” have an opportunity to take advantage of. The decayed Delhui was handed over to Kaitian Sports as a whole, and Kaitian is also producing and selling fake American sports brands New Balance and Skechers.

At this time, the high-end market was mainly occupied by international brands such as Nike and Adidas. Due to the large elasticity of demand, the sinking of these brands’ channels went smoothly. When the national retail industry was in trouble in 2012, Adidas Greater China’s performance increased by 15% year-on-year. Compared with Nike and Adidas, product research and development accounted for as much as 5% to 10% of sales, while domestic brands headed by Li Ning only accounted for 1% to 2%. Although Li Ning chose to raise prices to benchmark international brands in the face of the crisis, it was far behind international brands in product design and innovation, and the brand’s competitiveness was not high. The obsolete old products added to the inventory pressure.

Under the squeeze of counterfeit brands, the sinking market targeted by Jinjiang shoe companies is shrinking; and the high-end market is also strongly occupied by international brands, and even Li Ning, a domestic sports brother, cannot compete with it. At the same time, the Jinjiang brand has been carrying out long-term clearance sale promotion activities, which not only undermined the brand value, but also gave the brand impression of consumption downgrading, such as the “boys wearing Xtep blind date and ridicule” incident that caused a sensation.

Although Li Ning did not go astray from the “cottage”, his radical “self-help” was not effective. In 2010, Li Ning changed the brand logo, and the slogan was replaced by “Everything is possible” with “Make the change”, and at the same time the target consumption was changed. The group is converted to “post-90s”, and the goal is to become one of the world’s top five sports brands within 10 years, and directly benchmark international brands. But as soon as the new logo and slogan came out, the previous backlog of goods instantly turned into old models, and the inventory pressure multiplied. What is even more embarrassing is that Li Ning raised prices three times in a row when the product strength did not keep up at that time, further increasing the accumulation of inventory.

Hongxing Erke tried the wrong “cross-border fast fashion”. In fiscal year 2010, Hongxing Erke had financial problems. The audit found that its cash and bank deposits were actually only 263 million yuan, and the inflated cash and bank deposits reached 1.154 billion yuan. Due to suspected financial fraud, trading of its stock has also been suspended since February 28, 2011.

Looking back now, the root cause of the crisis was blind expansion and extensive management. In the past, the distribution-oriented model with direct sales as supplementary made brands lack control over terminal channels and insensitive feedback; at the same time, agents control terminal sales resources, and the brand’s sole responsibility for the bottom line terms can easily lead to inventory backlogs and accounts receivable. Difficulties in the collection of funds, which eventually deteriorated the operating conditions.

Fortunately, the crisis has forced the reform momentum of Chinese sports brands.

In 2013, Anta took the lead in launching a retail transformation strategy, promptly transforming brand wholesale to brand retail, with the goal of improving store efficiency rather than quantity, and establishing a direct sales model that is more sensitive to market changes and consumer demands. Anta also took the lead in laying out the ERP system to control the data of the store, changing the franchisee’s order into a single-store order, so it was the first to withdraw from the industry’s inventory crisis, and then completely surpassed Li Ning.

And Li Ning also got out of the crisis in 2015-Li Ning focused on product research and development, combining sports and fashion. The two fashion shows in New York and Paris in 2018 made “China Li Ning” shine, and the national trend helped Li Ning regain the favor of consumers. On the other hand, Li Ning closed low-efficiency stores, optimized the product structure according to different market needs, and carried out differentiated product distribution, which significantly improved the effectiveness. Since 2015, Li Ning has turned losses into profits, and its operating income has been rising year after year. After the big show in 2018, it has also been widely favored by capital and consumers.

From Li Ning to Hongxing Erke: Do not waste every crisis

Buy honey and arsenic

Crazy shop opening is a means of expansion, the other is global mergers and acquisitions. But “buy, buy, buy” is far from simple addition. How to integrate, how to position, and how to digest are all problems that brands need to face.

In this matter, Guirenniao and Anta took a completely different path.

After Guirenniao went public in 2014, it gradually revealed its ambitions for diversified expansion. In 2015, Guirenniao launched the “all-round sports” strategy, and invested in Hupu , football brokerage company BOY, Kangpais and Mingshoe Library during 2015-2017, and acquired the license of the AND1 brand in mainland China. While Guirenniao is busy with cross-border investments and acquisitions, the high-end market and the second and third-tier markets have been divided up by leading international and domestic sports brands. Guirenniao’s main sports shoes and apparel business is becoming increasingly unsuccessful.

Beginning in 2017, Guirenniao’s performance turned from positive to negative, offline stores ushered in a wave of bankruptcy, and the debt left by diversified expansion was about to expire. In 2018, Guirenniao sold assets such as Hupu, Kangpaisi and Jiezhixing , but it has already missed the best time to occupy the market, and it is difficult to turn the tide in the face of the decline of its main business.

From Li Ning to Hongxing Erke: Do not waste every crisis

On the other hand, Anta, in the face of the industry crisis, did not seize the low-end market, but chose to focus on sports brands and enhance its brand image by acquiring and cultivating high-end sports brands. In 2009, Anta Sports acquired the trademark rights and operating business of the international high-end sports brand FILA in China, and acquired the trademark operation rights in Singapore in 2017. Its Anta brand serves second- and third-tier cities with high cost-effective advantages. The FILA brand has become the springboard for Anta Sports to enter the high-end sports market, and complements the Anta brand.

FILA China began to make a profit in 2014 under Anta’s efforts. From 2009 to 2019, the number of FILA stores in China and Singapore (including FILA KIDS and FILA FUSION independent stores) continued to increase, and there have been more than 1,900 stores so far. The 2020 Anta Sports interim financial report shows that due to the impact of the epidemic and the growth of e-commerce, the FILA brand’s revenue accounted for 48.76% during the reporting period, surpassing the Anta brand for the first time.

In 2015, based on the acquisition of FILA, Anta proposed a “single focus, multi-brand, omni-channel” strategy, which not only enhanced the brand image, but also focused on opening up the international market. In 2018, Anta acquired Amer Sports, a Finnish sports brand management company. At this time, Anta’s brands have formed three major brand business groups: professional sports, fashion sports and outdoor sports, and the multi-brand international pattern has begun to take shape.

From Li Ning to Hongxing Erke: Do not waste every crisis

Source: Anta Sports 2020 Interim Report

The same choice of multi-brand strategy, Anta counterattack became the domestic industry’s first, but Guirenniao is facing high debts on the verge of restructuring. The reason is that Anta has stabilized the market position of its main brand in the second and third tier cities, and has successfully entered the high-end market by acquiring international brands; and Guirenniao’s “all-round sports” strategy has not yet been built, and it is facing the emergency of its main business. Embarrassing situation.

In March this year, Guirenniao issued an announcement announcing an open recruitment of reorganized investors. If the recruitment fails, it will face the risk of bankruptcy and delisting. Guirenniao, which was once the “first share of A-share sports brand”, had a market value of more than 40 billion yuan at its peak, but now it has shrunk to less than 2 billion.

Last year, Li Ning acquired the British shoe brand Clarks. I wonder if he can learn the lessons of the famous bird and reproduce the miracle of Anta’s acquisition of FILA?

From Li Ning to Hongxing Erke: Do not waste every crisis

Changes in market share of domestic sports brands

Source: Euromonitor, SPDB International

The times are calling

Do not waste every crisis.

Although the Chinese sports brand started late, difficult to start, and stumbled during the development process, and encountered challenges, it is these trainings that have given the driving force for the rise of the national tide.

After the crisis, Li Ning made a comeback, made a decision, and restarted the “anything is possible” brand slogan. Clean up inventory, change from a wholesaler to a retailer, close loss-making stores, establish a big data center, and refocus attention on products and supply chains. In 2015, Li Ning turned losses into profits. At the same time, Li Ning also vigorously develops e-commerce channels, enhances product research and development capabilities, and maintains both R&D and marketing.

After clarifying the product motivation and marketing is the icing on the cake, Li Ning reduced advertising and sponsorship costs and turned to relatively cheap and powerful social media promotion, but the effect was not bad at all. Since 2021, Li Ning’s market value has increased by more than 70% from the beginning of the year. As of press time, Li Ning’s market value has exceeded 200 billion Hong Kong dollars, compared with the 19 billion Hong Kong dollar market value in mid-July 2018, an increase of more than 12 times in three years.

And Hongxing Erke, which has become popular recently, is not a “hot spot.”

After the crisis, Hongxing Erke also chose to focus on products-successively launched structural cushioning technologies such as energy storage, arrow feathers, and cage bones. According to reports, Hongxing Erke has exclusive trademark rights in more than 100 countries around the world, and has more than 200 patented inventions. Hongxing Erke is equipped with 40 international shoe production lines and 120 clothing production lines, with an annual production and sales of 30 million pairs of sports shoes and nearly 20 million sets of clothing. In 2020, Hongxing Erke’s revenue reached 2.84 billion yuan, which is close to the revenue scale of the 2008 Olympic Games.

From Li Ning to Hongxing Erke: Do not waste every crisis

Li Ning stock price trend (2017 to present)

Feng Chongguang, chief industry analyst at CITIC Securities , believes that the industry still has a sustained and good boom and growth. On the one hand, the proportion of sports population has increased. China’s current sports population ratio has reached more than 40%, but compared with developed countries, there is actually a big gap. Europe and the United States have basically reached the level of more than 60% -70%. In addition, in terms of dressing habits, people used to be more formal in work scenes, but now you will find that casual and sports style clothing can also meet the needs of most work scenes.

According to SPDB International’s report, China has developed into the world’s second largest sportswear market driven by the macro economy in the past 20 years. However, the low per capita consumption level of sportswear (especially in lower-tier cities) and the low proportion of sportswear to overall footwear consumption means that China’s sportswear market still has strong potential for expansion. It considers including the upgrading health-conscious consumers, consumption in the field of sports apparel, sports apparel category segmentation, the rapid development of social media as well as during exercise popular yet other new consumer trends will continue to improve in the next five years in China sports The penetration rate and repurchase rate of apparel have helped China’s sportswear industry maintain a trend of rapid growth.

From Li Ning to Hongxing Erke: Do not waste every crisis

Sports Brand Baidu Index Ranking

Source: SPDB International

Under the general trend of market growth, domestic sports brands are ushering in a cyclical opportunity.

Although still facing tremendous competitive pressure from international brands, it is clear that domestic brands at this moment already have the strength in product and consumer insight, coupled with the unprecedented increase in brand power under the national tide, I believe that in the near future In the future, Zhihu will no longer ask such questions as “Are college students wearing 361 degrees, Anta, Li Ning, and Hongxing Erke really low?”

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