Business / Companies

Li Ning getting leaner, meaner, firm says

By Emma Dai in Hong Kong and Wang Zhuoqiong in Beijing (China Daily) Updated: 2014-03-25 07:16

According to Kim, Li Ning's inventory turnover has declined from the more than eight months it was two years ago to fewer than seven months by the end of February this year. The share of new products had grown to 38 percent by the end of February from 27 percent a year ago.

While the total number of stores dropped from 8,255 in 2011 to 5,915 by the end of 2013, the share of the company's subsidiaries in retail revenue grew from 21 percent in 2011 to 35 percent in 2013.

Apart from restructuring the retail network and tipping the scale toward new products, Li said the company also is investing heavily in innovation and branding.

According to Kim, the company cut operating costs by 2 billion yuan in 2013 and invested 637 million yuan into marketing, nurturing talent and expanding self-owned retail channels.

"We are repositioning the brand to offer the best value-price equilibrium to take the lead in the mid-end market and target a growing number of middle-class consumers," Li said, adding that the company is focused on the five most popular sports in China: basketball, running, badminton, training and sports life. "We intend to be the No 1 or 2 in each of these areas."

"Homogeneity is in the products and the business model. Some of the sportswear makers are very capable of copying popular designs because they have a strong background in manufacturing," he said. "But the consumers now are seeking experience, which makes the business more complicated. We believe Chinese consumers will demand more functional products because more people are taking part in all kinds of sports."

Li Ning's improved results, achieved through its direct retail sales, inventory digestion and transition from a wholesale model to retail sales contributed to its narrowing loss, said Zhang Qing, founder and CEO of Beijing Key-Solution Sports Consulting Co Ltd.

He said that the fact that one-third of its retail sales are direct sales improves its channel efficiency and fast response to customers' needs. Its focus on basketball, running and women's sports shoes also put the brand back on track.

He added that after being sandwiched awkwardly between high-end international brands and low-end domestic brands, Li Ning now must develop premium products at reasonable prices in order to compete with its rivals.

The uptrend of domestic brands, led by Anta and Li Ning, does not mean the return of all Chinese brands.