CHINA MARKET
Li-Ning: China's sports brand



Frances Henzie WGSN 29.06.05
Li-Ning is a Chinese sports apparel and footwear brand with nearly 3,000 stores across China. WGSN examines a rare phenomenon: a Chinese brand with the potential to break big worldwide.



New store Beijing Wangfujing
Li Ning advert
Li Ning advert
Chinese brands have not made any significant impact in the global market. But Li-Ning, a brand founded in 1990 by Olympic gymnast Li-Ning, has the potential to change that over the coming years.
Currently, the company is opening stores at a rate close to two a day across China. In the countdown to the Beijing 2008 Olympics, Li-Ning is going all-out for growth in its core domestic market.
In an interview with WGSN, Abel Wu, Li-Ning vice president for marketing and international business, said international expansion was not yet a priority.
Wu said China will remain the primary focus for the next three years. "Before we enter the international market, we want to grow ourselves into a local brand with a global look."
Currently, Li-Ning has distributors in 20 countries outside China, including Russia, Italy and Spain. Two years ago, Li-Ning appointed a consultant, Lars Wiskum (a former president of US brand Champion in Denmark), through whom Li-Ning is pursuing distribution deals in Europe.
However, the US is not on its radar yet. Abel Wu said: "It has taken adidas 15 years to get 15% of the market share in the US. We have no time to do that at the moment."


That is good news for Nike, adidas and other international brands. And Li-Ning does indeed have a long road to travel before it can match such names.
The creation of a design centre in Hong Kong is one step on that road towards creating a product that can match the American and European giants.
Young Chinese aged 14-23 are the core market. Li-Ning, which undercuts its international rivals by around 20% in price terms, currently has about 16% of market share, ahead of adidas (12%) but behind Nike (18%).
The company has a slightly different approach to adidas and Nike. Wu said the company has been positioning itself as a mid-market brand, which has been very well-received among college students who cannot yet afford foreign brands. It is also targeting less affluent second-tier Chinese cities.
"Although the market is very competitive, we aim to boost our share to 20-25% in the next three years. We'll push the number of stores from the existing 2,500 up to 4,000 by 2008," Wu said.
Li-Ning is also currently spending one tenth of its sales income on marketing, including media advertising and industry sponsorship.
Media marketing includes events, internet and TV commercials, accounting for 70% of the company's marketing budget. The rest goes towards sponsorship of individual players, national teams or leagues.


Wu said TV commercials are the most effective marketing tool to reach its core market of young Chinese aged 14 to 23. A recent advert, produced by Leo Burnett Beijing for CCTV-5, a sports TV channel, marks a step forward in sophistication. It features a Chinese traveller stumbling across a basketball-worshipping African tribe and beating them single-handedly in a game, before fainting when he sees a cooking pot bubbling over a fire. Despite his fears, the tribe salutes him as its new leader – with Li-Ning's tagline Anything is possible.
Wu explained: "Unexpectedness is one of our brand equities. We want to differentiate our brand from our competitors. In this TV commercial, the tribal Africans are so impressed by the Chinese sports player who wears Li-Ning. A sense of globalisation coming from China instead of the West is suggested, which is quite extraordinary for Chinese audiences."
Sponsorships include the Spanish national basketball team, the China college basketball team, the China national football team as well as the national basketball team.
For the 2008 Beijing Olympics (home territory), Li-Ning is sponsoring four Chinese national teams including table tennis, gymnastics, shooting and diving.
The company has also forged marketing partnerships with NBA, Netease and Swarovski.


NBA Li-Ning has been eagerly grafting basketball into its marketing plans in China. With the enormous popularity of Chinese NBA player Yao Ming (currently signed up by Reebok), basketball has become the most talked about sport in the country.
Abel Wu commented: "Basketball has replaced football as the number one sport in China. Working with NBA can enhance our professional image as a sportswear company in the Chinese market, which is also helpful in the future when we decide to further expand our global presence."
The company recently signed a three-year marketing partnership with NBA to launch some grass-roots programmes to promote basketball among the young and to use NBA's logo in its TV commercials. The NBA is working with the company to develop suitable NBA players as its spokespersons.
Another reason why the company chose basketball is that basketball shoes can be worn more comfortably than soccer shoes as everyday footwear, Wu explained.
Netease Li-Ning has entered a three-year partnership with Netease, the number one website for Chinese college students.
"If you log into Netease's sports channel, it's basically a Li-Ning website. It's also using red, which is our colour – and our logo can be seen everywhere," Wu says. The two companies are also working together to launch co-marketing campaigns, such as online games.
Swarovski Li-Ning is keen to improve the quality of its product design, an essential ingredient if it is to compete as a global player.
A link with Swarovski is one of the ways in which this issue is being tackled. "Working with Swarovski is a short-cut," says Abel Wu. "We want to inject more oriental fashionable elements in our products. We're now working closely with Swarovski to introduce a new product series sometime next year."
The brand, the finances
Who is Li-Ning? It's not a question you need to ask in China, where he is a national hero. Li-Ning won three gold medals, two silver medals and one bronze medal at the Los Angeles Olympic Games in 1984 – the peak of an extraordinary career that made him a Chinese sporting legend. He continues to emphasise the "spirit" of sport and its potential to change lives and attitudes.
So when he founded his own sports brand in 1989, the label achieved high recognition among Chinese consumers very quickly.
In June 2004 Chinese sports apparel and footwear brand Li-Ning was finally listed on the Hong Kong stock exchange.
For 2004 net profit, rose 42% to CNY133m (US$16m), well above the forecast it made at the time of its IPO, as sales rose to CNY1.878bn ($227m) from CNY1.276bn ($154m).
The operating profit margin rose from 9.3% to 10.2%, but the net profit margin fell slightly from 7.4% to 7.1% because of the increase in the effective tax rate.
The product range (covering 1,000 products in 20 categories) includes sports footwear, apparel and accessories for sport and leisure use, primarily sold under the Li-Ning brand. The company also has the license for the Kappa brand for use in China and Macau.
Li-Ning has achieved a thorough penetration of the market across China with 1,000 licensed stores and 2,000 in-store shops in China, covering 95% of the key cities.
It plans to have expanded its number of stores to 3,200 by year-end, including more big city flagships and upgrading of existing sites. Li-Ning wants to have 3,900 stores by 2007 – the year before the crucial Beijing Olympic Games, when sales are expected to surge. Clearly a name to watch.
Contact
www.lining.comRelated reports
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