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Li Ning Caught In The Middle

Li Ning logo

Li Ning is slipping, and has been losing its market share to other Chinese brands in the smaller cities.

From Caixin:

On May 24, Li Ning announced the resignations of three senior executives – COO Guo Jianxin, Chief Marketing Officer Fang Shiwei, and Director of E-commerce Lin Li. A source blamed the exodus on the failed campaign.

That same day, Li Ning’s Hong Kong-listed shares declined 8.4 percent. The stock has continued losing ground ever since, falling to HK$ 13.38 on June 9, far below the past year’s peak of HK$ 29.35. The company’s market capitalization has declined more than HK$ 16.8 billion.

Third-quarter shoe and apparel orders fell 17 percent from a year earlier, and 6 percent from the previous quarter, the company said in April.

Li Ning managed to report a 1.1 billion yuan net profit for 2010. But it was badly beaten in the earnings race by major rival Anta Sports Products, which registered a 1.5 billion yuan net profit last year.

While Li Ning  trying to raise its profile in the North American market, companies like Anta, Peak and 361 Degrees have been catching up domestically in 2nd- and 3rd-tier cities. According to the Caixin piece, three main reasons contribute to Li Ning’s recent loss:

  • Focusing too much on upscale professional sportswear and less on leisure-wears
  • Closing of small dealerships in consolidation of sales channels
  • A lack of production factories

The company’s new logo announced last year

Li Ning has been found inconsistent in its business strategy and branding. “Sometimes it wants to get international, sometimes fashion and then sporty. Nobody can really tell what the brand has been trying to deliver all these years. It’s caught in the middle of the industry,” said someone close to the Li Ning management earlier this month to Jiangsu Business News (江苏商报).

With the “make the change” campaign launched last June, Li Ning turned its focus to more high-end product lineup and younger consumers, which have not been received well by the market. As a Beijing dealer quoted in the Caixin piece, people can afford Li Ning would simply “buy a top brand with a little more money.”

 

Links and sources:

  • Caixin - Li Ning Loses Way after Wrong Business Turn
  • Jiangsu Business News - Li Ning “capricious” facing the competition (Chinese)
  • Time – Can China’s Big Shoe Brand Make Tracks in the U.S.?

Previously:

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