Li Ning'S Transformation: Gradual Or Radical?

The transformation from the incremental model of new stores to the benefit model of deep digging stores is a difficult test

Hu Junhua

Ai Qing was a college student born in 1989. In June 2010, Li Ning [16.68 1.21%] officially changed the "L" shaped product logo to the "human" shaped product logo, which disappointed Ai Qing a little. She said, "The new trademark doesn't look as good as it used to be."

This is not very pleasant consumer feedback for Li Ning, turning to the "post-90s" consumer , which is an important reason for Li Ning to change its bid. Aiqing is undoubtedly one of the quasi target consumers after the "90" era.

In addition to replacing the product logo, a "revolution" has taken place in Li Ning, which celebrated its 20th anniversary in 2010. The brand positioning has begun to directly challenge Nike, Adidas and other international first-line brands; The sales channels began to close or integrate stores with poor efficiency, transforming from the incremental growth path of increasing new stores to relying on digging the growth path of existing stores

Any of the above actions may be a "good medicine" for Li Ning, but in such a short period of time, many "good medicines" taken at the same time may become a "strong medicine". Those who are as strong as Li Ning will also feel unwell. The stock price plunge at the end of December 2010 is the manifestation of the sequelae of the "strong medicine".

Farewell to the "Golden Age"

The "golden time" for the development of domestic sporting goods enterprises is 2008 when the Beijing Olympic Games are held. In that year, taking each semi annual report as an example, Li Ning, Anta, Tebu and China Trends [3.41 1.49%] achieved a year-on-year growth of more than 50% in revenue or turnover in the first half of 2008, when Tebu's revenue surged 174.3% year on year; By the first half of 2009, the highest year-on-year growth in turnover of the four enterprises mentioned above was China Trend, with only a year-on-year growth of 33.5%; In the first half of 2010, Anta replaced the four enterprises with the highest year-on-year growth in turnover, with a year-on-year growth of 22.6%.

Although Li Ning's performance showed signs of decline, Ma Gang, a sports goods observer, still felt Li Ning Corporate transformation Li Ning was the first brand to feel the change of wind direction

Ma Gang refers to the "wind direction change", which means that the high growth era of the domestic sporting goods industry has hit the "ceiling". This is not just Li Ning, but also Anta, Special Step and other domestic sports enterprises.

On December 21, 2010, when the stock price of Li Ning fell sharply, the stock prices of Anta, Tebu and other companies fell by varying degrees.

The declining year-on-year growth rate shows that the traditional growth path is coming to an end, which is especially obvious for Li Ning. The so-called traditional growth path is to open as many stores as possible and drive the company's performance growth through the increase of stores. PEAK CEO Xu Zhihua once told reporters that there is enough space for a sporting goods enterprise to open 10000 stores in the domestic market.

By the end of June 2010, the number of retail stores of the Li Ning brand had reached 7478, which is the largest number of stores among domestic sporting goods companies. It is still a long way from the border of 10000 stores, but the huge size has made Li Ning feel the unsustainable strategy of opening stores for the first time.

CEO of Li Ning Company Zhang Zhiyong said in Beijing in June 2010 that the employment cost of sports goods retail stores has increased, coupled with the increase of rents in urban commercial areas. Although China has a vast territory, some regions still have some space to open stores. On the whole, enterprises have hit the ceiling by expanding the number of stores to improve their performance, and it is necessary to improve the output efficiency of existing stores per unit area.

A sporting goods dealer introduced that the annual rent of stores in some prosperous commercial areas of prefecture level cities in Sichuan has exceeded 10000 yuan per square meter, and the rent has increased by 10% to 20% every year. The rent level in some areas is almost the same as that in first tier cities such as Shanghai. According to the 2010 Semi annual Report of Special Step, employee costs increased from 81.318 million yuan in the same period of the previous year to 95.345 million yuan, an increase of 17.2% year on year.

Ma Gang said, "Li Ning Company can continue to follow the old path. In fact, other brands are still following this path, and life can still go on."

However, Li Ning Company wants more than just living. {page_break}

The "post-90s" who are not very popular

Li Ning, the first company to feel the chill of the market, chose the group of "post-90s" as the breakthrough. As one of the sports goods enterprises with the longest history in China, Li Ning's original loyal fans, the "post-60s" and "post-70s", are slowly getting older, and the "post-80s" and "post-90s" are leading the trend of sports goods. In order to please young consumers, Li Ning changed the product logo from "L" shape to "human" shape.

At this time, the price increase gradually shook the foundation of Li Ning's standing in the domestic market. The main market of Li Ning is the second and third tier markets in China, which is a market that attaches great importance to cost performance. However, Li Ning's constant price increases make the cost performance of its products more and more vague.

In April 2010, Li Ning took the lead in announcing a 11.1% price increase for footwear products and a 7.6% price increase for clothing products; In June 2010, Li Ning Company announced again that the average price of footwear products increased by 7.8% and the price of clothing products increased by 17.9%. In September 2010, Li Ning announced that the price of shoes and clothing products would be increased by 7% and 11% respectively.

Behind the continuous price increase is that Li Ning hopes to align its brand positioning with the first tier brands such as Nike and Adidas. Zhang Zhiyong said that in the next 20 years, Li Ning will not only become the leader in the Chinese market, but also become the top five in the world sporting goods market.

Dong Bin, the post-90s generation, has a representative view. He admits that he occasionally buys Li Ning's products, but he is not a loyal "fan".

The main reason is that the prices of Li Ning's products are on the high side. Dong Bin said that either Adidas and Nike, which are expensive but famous, or Anta and Special Step, which are reasonable in price and do not count as a "drop".

"Li Ning has no special advantages and competitiveness." Of course, if Li Ning has a suitable commodity, he will still consider buying it, Dong Bin said.

The similar "post-90s" do not accept the transformation. The relevant personnel of Li Ning Company earlier responded that they had been psychologically prepared. They believe that after a period of running in and debugging, more and more people will like Li Ning's new products and new logos.

However, Li Ning must face the current difficulties: in terms of brand positioning, Li Ning hopes to become a multinational brand like Nike and Adidas. In reality, in the eyes of the "post-80s" and "post-90s" consumers that Li Ning hopes to catch, Li Ning looks more like a domestic brand; When this separation of awareness has not been solved well, Li Ning Company started the reform of sales channels, losing both consumers and dealers, which may be the worst result.

In 2010, Li Ning's news has been continuous. In addition to changing the logo, proposing a communication plan for the "post-90s" generation and actively approaching the emerging consumer groups, Li Ning has cooperated with Feifan China [0.36 7.35%] to enter the sports brokerage, sports marketing and real estate industry.

Behind the frequent actions, Ma Gang said: "At first glance, it seems to be a series of consistent actions, and businesses can borrow from each other. In fact, it deviates from the core sporting goods and footwear industry, which is too wide and too fast. These should be demonstrated by Li Ning's decision-making team, but whether there are differences of opinion in the decision is unknown to the outside world."

He further analyzed that the decline in performance was an appearance, and the underlying reason was still from within the enterprise. Li Ning wanted to get out of the shadow of "negative growth". Its main competitors were not Nike, Adidas, nor the Jinjiang system led by Anta, but Li Ning himself. Only by challenging himself, could Li Ning surpass himself.