Sports brands in the Chinese market are collectively encountering a cold winter, tending to saturation in market and channel space, and holding back the progress of these brands. Whether Nike's performance has shrunk, or the closing of domestic brands such as Li Ning and Peak and high inventory, it is an indication of the general trend of the industry.
Following the 12% drop in first-quarter net profit, Nike's net income fell by 18% in the second quarter of 2013 to $384 million. Among them, the Chinese market with sales of 577 million yuan dragged down its performance in the global market, showing a 11% decline, ranking first in its global market. While the performance is declining, its inventory burdens are getting heavier.
Sports brands in the Chinese market are collectively encountering a cold winter, tending to saturation in market and channel space, and holding back the progress of these brands. Whether Nike's performance has shrunk, or the closing of domestic brands such as Li Ning and Peak and high inventory, it is an indication of the general trend of the industry.
In this context, Nike's series of "downsizing" actions raise concerns, and the sale of Yonbo and Cole Haan, etc., will help them focus their resources on the core brands. But at the same time, it also gradually lost its space for transition to the fashion leisure field. On the other hand, Adidas, its old adversary, continued to promote the multi-brand strategy, so that it has more confidence in the winter.
Decline in performance, high inventory
According to the financial report, in the second quarter of fiscal 2013, Nike’s revenue increased by 7% to US$5.96 billion, slightly lower than the analyst’s forecast of US$6.11 billion; continuing operating profit increased by 9% year-on-year to US$521 million; diluted earnings per share An increase of 11% to $1.14.
It is noteworthy that Nike experienced a decline in revenue in Greater China and Western Europe. Among them, revenue in Greater China fell 11% to US$577 million, while growth in emerging markets outside China increased by 11%. In the same period, the Japanese market performance increased by 11%, and the North American market recorded a growth of 17%.
"The Chinese market became the most embarrassing topic for Nike when it released its financial report." Sports brand observer Ma Gang said that Nike’s sales in China last fiscal year totaled 2.5 billion U.S. dollars, accounting for its total sales of 24.1 billion U.S. dollars. More than 10%. According to investment bank estimates, the Chinese market contributed 30% of operating profit for Nike. Therefore, the decline in the performance of the Chinese market is difficult for Nike to accept.
In fact, Nike's declining trend in the Chinese market has already been revealed in its fiscal year. In the fourth quarter of fiscal 2012, Nike’s sales revenue in the Chinese market has declined. The sales revenue of Nike’s Greater China region, including footwear, clothing, and accessories, totaled US$667 million, a 3.89-point drop from the third quarter. %. According to the Morgan Stanley report, in the fourth quarter of fiscal year 2012, Nike’s global future order growth slowed down from 18% to 12%, and China’s order growth was significantly reduced from 20% to 2%.
Nike's inventory in the same period has begun to grow. As of the end of May 2012, its inventory amounted to 3.35 billion U.S. dollars, an increase of 23.39% compared with 2.715 billion U.S. dollars in 2012.
Zhu Qingyu, a light industry researcher with China Investment Advisors, said that the pressure on inventory of the two major Nike Greater China distributors, Belle International and Pou Sheng International, has also increased. Pou Sheng International's 2012 interim report shows that its inventory has reached US$555.4 million, a year-on-year increase of 37.16%. Belle International stated in its mid-year report that the overall inventory level in the channel during the first half of the year was relatively high and the discounted efforts increased compared with the same period of last year, and the gross profit margin was squeezed.
Saturated market
“The problem facing Nike is industry-wide.†Magang said that in 2012, the size of China’s entire shoe-wear market was 2 trillion yuan, while the sports brand as one of its subdivided areas had a market size of about 200 billion yuan. . In the past year, although the development of the entire shoe-wear market has slowed, it still has an increase. The sports category has surpassed the figure of 200 billion for many years, and its entire market scale has become saturated.
Judging from the channels of sports products, the top sports brands such as Nike, Adidas, Anta, and Li Ning, each with 6000~7000 stores, have penetrated into most cities in China, and their channels have become saturated. "Because each product line is very similar, in order to maintain growth in performance, in addition to improving the efficiency of their own stores, only to squeeze competitors' stores." Ma Gang said, but in the mature sports industry, this It is difficult to do.
Under the premise that both market size and channels tend to saturate, sports brands have been hit by the "cold stream". The situation of domestic sportswear brands in the second quarter of 2013 shows that the order volumes of Li Ning, Anta, Xtep, Peak and so on have all declined at different levels year-on-year.
In contrast, Adidas has become a highlight of the sports industry in 2012. After experiencing high stocks after 2008, Adidas suffered from a long period of pains such as channel rights and closing stores. However, after 2011, its performance has begun to recover, and maintained a high growth trend in 2012. The published data shows that in the first half of 2012, sales revenue in Greater China increased by 12% year-on-year.
Ma Gang believes that compared with Nike, Adidas's product line in the fashion field is more abundant and more investment, which allows it to have more buffer space in the face of the crisis. In addition to Adidas’s main brand, Adidas also has more fashionable sub-brands such as Y-3 and Shamrock. In terms of spokespersons, celebrities such as Fan Bingbing, Yao Chen, and Eason Chan were also introduced. Adidas walks ahead of Nike in multi-brand operations.
Zhu Qingxuan said that the core of Adidas’s inventory crisis is to cooperate with distributors, not only allowing distributors to open discount stores, but also allowing dealers to update the number of new-for-sale terminal sales products. At the same time, it is sending personnel to supervise the dealers and spend the crisis with the dealers. However, Nike did not form the same risk and advance and retreat in the relationship and maintenance with distributors, which is not conducive to its rapid digestion of inventory. After Adi suffered a high inventory after 2008, they established a quick response mechanism for stores. Nike’s decision-making cycle is much longer now. This is also a factor that causes a higher inventory.
Nike slimming
After announcing the sale of its Umbro brand for $225 million, Nike plans to divest its shoe bag brand Cole Haan again. According to foreign reports, Nike plans to sell Cole Haan, its shoe bag brand, to Apax Partners, a private equity fund company, for US$500 million. At present, both sides have entered the final stage of negotiations.
From a marketing strategy point of view, Nike is still adhering to the preferences of its various brands of investment, and Adidas's regardless of clover, Reebok or Y-3, have a relatively independent promotion plan.
Before that, Nike had already closed its sole shoe factory in China, stopped placing orders with several Asian shoe factories, and ended cooperation with several Asian apparel factories. Now it continues to lose weight. Ma Gang said that behind the frequent turnover of sub-brands, Nike is actually integrating core brands and removing brands that may compete with the main brands. For investors, some of its own brands are more valuable.
Nike "slimming", in addition to focusing resources on the development of core brands, but also increase cash flow in the market downturn. But there are also drawbacks. First of all, the decline in the sales of the brand has been reflected in its financial report. Second, when the professional sports market becomes saturated, whether it is Adidas or Nike, it needs some other brands that focus on casual fashion and other positioning to seek breakthrough. And compared to Adidas, Nike's transformation has not been much room.
Zhu Qingyi said that Nike’s current major challenge in the Chinese market is high inventory. On the one hand, Nike needs to cooperate with distributors to advance and retreat together, giving distributors support in funds, products, management, and sales, thereby accelerating the process of destocking. On the other hand, it is necessary to strengthen the management and treatment of terminal sales personnel to avoid excessive loss of personnel and thus affect sales performance.
Sports brands in the Chinese market are collectively encountering a cold winter, tending to saturation in market and channel space, and holding back the progress of these brands. Whether Nike's performance has shrunk, or the closing of domestic brands such as Li Ning and Peak and high inventory, it is an indication of the general trend of the industry.
In this context, Nike's series of "downsizing" actions raise concerns, and the sale of Yonbo and Cole Haan, etc., will help them focus their resources on the core brands. But at the same time, it also gradually lost its space for transition to the fashion leisure field. On the other hand, Adidas, its old adversary, continued to promote the multi-brand strategy, so that it has more confidence in the winter.
Decline in performance, high inventory
According to the financial report, in the second quarter of fiscal 2013, Nike’s revenue increased by 7% to US$5.96 billion, slightly lower than the analyst’s forecast of US$6.11 billion; continuing operating profit increased by 9% year-on-year to US$521 million; diluted earnings per share An increase of 11% to $1.14.
It is noteworthy that Nike experienced a decline in revenue in Greater China and Western Europe. Among them, revenue in Greater China fell 11% to US$577 million, while growth in emerging markets outside China increased by 11%. In the same period, the Japanese market performance increased by 11%, and the North American market recorded a growth of 17%.
"The Chinese market became the most embarrassing topic for Nike when it released its financial report." Sports brand observer Ma Gang said that Nike’s sales in China last fiscal year totaled 2.5 billion U.S. dollars, accounting for its total sales of 24.1 billion U.S. dollars. More than 10%. According to investment bank estimates, the Chinese market contributed 30% of operating profit for Nike. Therefore, the decline in the performance of the Chinese market is difficult for Nike to accept.
In fact, Nike's declining trend in the Chinese market has already been revealed in its fiscal year. In the fourth quarter of fiscal 2012, Nike’s sales revenue in the Chinese market has declined. The sales revenue of Nike’s Greater China region, including footwear, clothing, and accessories, totaled US$667 million, a 3.89-point drop from the third quarter. %. According to the Morgan Stanley report, in the fourth quarter of fiscal year 2012, Nike’s global future order growth slowed down from 18% to 12%, and China’s order growth was significantly reduced from 20% to 2%.
Nike's inventory in the same period has begun to grow. As of the end of May 2012, its inventory amounted to 3.35 billion U.S. dollars, an increase of 23.39% compared with 2.715 billion U.S. dollars in 2012.
Zhu Qingyu, a light industry researcher with China Investment Advisors, said that the pressure on inventory of the two major Nike Greater China distributors, Belle International and Pou Sheng International, has also increased. Pou Sheng International's 2012 interim report shows that its inventory has reached US$555.4 million, a year-on-year increase of 37.16%. Belle International stated in its mid-year report that the overall inventory level in the channel during the first half of the year was relatively high and the discounted efforts increased compared with the same period of last year, and the gross profit margin was squeezed.
Saturated market
“The problem facing Nike is industry-wide.†Magang said that in 2012, the size of China’s entire shoe-wear market was 2 trillion yuan, while the sports brand as one of its subdivided areas had a market size of about 200 billion yuan. . In the past year, although the development of the entire shoe-wear market has slowed, it still has an increase. The sports category has surpassed the figure of 200 billion for many years, and its entire market scale has become saturated.
Judging from the channels of sports products, the top sports brands such as Nike, Adidas, Anta, and Li Ning, each with 6000~7000 stores, have penetrated into most cities in China, and their channels have become saturated. "Because each product line is very similar, in order to maintain growth in performance, in addition to improving the efficiency of their own stores, only to squeeze competitors' stores." Ma Gang said, but in the mature sports industry, this It is difficult to do.
Under the premise that both market size and channels tend to saturate, sports brands have been hit by the "cold stream". The situation of domestic sportswear brands in the second quarter of 2013 shows that the order volumes of Li Ning, Anta, Xtep, Peak and so on have all declined at different levels year-on-year.
In contrast, Adidas has become a highlight of the sports industry in 2012. After experiencing high stocks after 2008, Adidas suffered from a long period of pains such as channel rights and closing stores. However, after 2011, its performance has begun to recover, and maintained a high growth trend in 2012. The published data shows that in the first half of 2012, sales revenue in Greater China increased by 12% year-on-year.
Ma Gang believes that compared with Nike, Adidas's product line in the fashion field is more abundant and more investment, which allows it to have more buffer space in the face of the crisis. In addition to Adidas’s main brand, Adidas also has more fashionable sub-brands such as Y-3 and Shamrock. In terms of spokespersons, celebrities such as Fan Bingbing, Yao Chen, and Eason Chan were also introduced. Adidas walks ahead of Nike in multi-brand operations.
Zhu Qingxuan said that the core of Adidas’s inventory crisis is to cooperate with distributors, not only allowing distributors to open discount stores, but also allowing dealers to update the number of new-for-sale terminal sales products. At the same time, it is sending personnel to supervise the dealers and spend the crisis with the dealers. However, Nike did not form the same risk and advance and retreat in the relationship and maintenance with distributors, which is not conducive to its rapid digestion of inventory. After Adi suffered a high inventory after 2008, they established a quick response mechanism for stores. Nike’s decision-making cycle is much longer now. This is also a factor that causes a higher inventory.
Nike slimming
After announcing the sale of its Umbro brand for $225 million, Nike plans to divest its shoe bag brand Cole Haan again. According to foreign reports, Nike plans to sell Cole Haan, its shoe bag brand, to Apax Partners, a private equity fund company, for US$500 million. At present, both sides have entered the final stage of negotiations.
From a marketing strategy point of view, Nike is still adhering to the preferences of its various brands of investment, and Adidas's regardless of clover, Reebok or Y-3, have a relatively independent promotion plan.
Before that, Nike had already closed its sole shoe factory in China, stopped placing orders with several Asian shoe factories, and ended cooperation with several Asian apparel factories. Now it continues to lose weight. Ma Gang said that behind the frequent turnover of sub-brands, Nike is actually integrating core brands and removing brands that may compete with the main brands. For investors, some of its own brands are more valuable.
Nike "slimming", in addition to focusing resources on the development of core brands, but also increase cash flow in the market downturn. But there are also drawbacks. First of all, the decline in the sales of the brand has been reflected in its financial report. Second, when the professional sports market becomes saturated, whether it is Adidas or Nike, it needs some other brands that focus on casual fashion and other positioning to seek breakthrough. And compared to Adidas, Nike's transformation has not been much room.
Zhu Qingyi said that Nike’s current major challenge in the Chinese market is high inventory. On the one hand, Nike needs to cooperate with distributors to advance and retreat together, giving distributors support in funds, products, management, and sales, thereby accelerating the process of destocking. On the other hand, it is necessary to strengthen the management and treatment of terminal sales personnel to avoid excessive loss of personnel and thus affect sales performance.
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