Li Ning Seeks Greater Share of Domestic Market

Chinese sports brand Li Ning is undergoing a major overhaul and aims to increase its China market share by up to 40 percent in the next two years, its new chief executive said.

The Beijing-based company is currently going through a period of instability having brought in four new senior executives since replacing its chief executive in July.

First-half profit was down 85 percent from a year earlier, with revenue falling 10 percent to $621.6 million. The company has closed nearly a thousand stores this year, as its share price has fallen 35 percent.

The brand is now embarking on a three-year transformation programme to win a bigger share of the domestic market and improve profitability.

Li Ning plans to increase market share to 14 percent from its current 10 percent by overhauling its retail outlets, brushing up an image tarnished by vast inventories that forced clearance sales, and adjusting prices that have been “too high or too low,” said Jin-Goon Kim, executive director and vice chairman.

The company’s goal is to win the mass market in China by targeting consumers moving to big cities from the countryside, said Kim. “We want to be the leading brand in China, as opposed to the leading brand here and overseas,” Kim said. He also explained that Li Ning is aiming to sell to the 70 percent of Chinese consumers who aren’t yet buying branded shoes from companies such as Nike and Adidas.

“I don’t think we’re trying to compete with Nike,” Kim said.

Li-Ning h once made a big push into the U.S. by signing high-profile endorsers like basketball star Shaquille O’Neal, but has been discounting products to clear its shelves.

Excess apparel was ordered years ago in anticipation of sportswear shopping sprees by Chinese consumers following the 2008 Beijing Olympics. But many shoppers bought their clothes from new market entrants.

At the end of 2011, Li Ning had roughly 8,250 stores in China, 90 percent of them franchised. Li Ning has been reducing the number of stores to 7,303 as of June 30.

Kim said Li Ning plans to win market share by becoming a better retailer, analysing merchandising data to understand regional and product preferences, and creating innovative products, Kim said.

Kim said the company would likely cut prices on its basketball shoes to appeal to younger players. “We see the growth market with the middle tier,” he said.

Li Ning has already taken significant steps to try to change its image. The company recently agreed a five-year partnership with the Chinese Basketball Association and signed a contract with NBA Miami Heat star Dwyane Wade to create a Wade-signature “Dynasty” collection.

“We’re trying to understand the brand DNA that consumers want,” said Kim. “That wasn’t done well in the past.”{jcomments on}