Sports brands get competitive in China

01 September 2010

BEIJING: Competition between global sports brands such as Nike and Adidas and local rivals like Li Ning and Anta is intensifying in China, with price one factor shaping this contest.

Nike, the US giant, is set to roll out goods matching the budgets of customers in smaller cities and towns, thus expanding its penetration in the country.

"We are planning to introduce low-priced products in the second-tier, third-tier and even fourth-tier cities in China to appeal to more Chinese consumers," Charlie Denson, Nike's brand manager, told the People's Daily.

The multinational previously focused on urban centres including Shanghai, Beijing and Guangzhou, which house huge numbers of young, affluent shoppers keen on sports, especially basketball.

Adidas, the German firm, is similarly aiming all the way down to the sixth tier, where it currently holds around 5% to 8% of the market, while native organisations take over 60%.

"In the near future, we want to bring our innovative products and the Adidas experience to more Chinese consumers," said Christophe Bezu, managing director of Adidas' Chinese arm.

"This is why we are planning to widen our product offering in lower-tiered Chinese cities.

"Even though we are a premium sports brand, we plan to offer competitively priced products to different segments of the market."

UBS Securities, the financial services specialist, has reported trainers costing between 170 yuan and 250 yuan generate the greatest demand in second and third tier cities.

By contrast, Nike's sneakers generally retail at 500 to 1,500 yuan, meaning items at the top end of the spectrum cost approximately half of the normal monthly salary of a white-collar worker in Beijing.

"[Nike's] launch of low-priced products is surprisingly fast but it confirmed our conclusion that the US brand will compete with domestic brands in low-end markets," Liang Yuchang, an analyst at UBS Securities, argued.

"If Nike insists on maintaining the high price strategy in China, it will definitely yield the fast growing market to its domestic rivals Li Ning and Anta."

However, Liang also warned Nike's new tactics could exert a "serious impact" on indigenous operators, which have typically been cheaper.

Li Ning, the biggest Chinese player in this sector, undertook a rebranding exercise earlier in 2010 to gain momentum among what it called a "new breed" of shoppers.

Fang Shiwei, the company's chief marketing officer, stated that it overtook Adidas to claim second position behind Nike last year in sales terms.

"To catch up with our rivals, Li Ning is increasing its strength in second- and third-tier cities and also changing tack and spreading its focus in top-tier cities," Fang added.

Tom Doctoroff, head of JWT in China, suggested domestic and international enterprises have been active in different spaces to date, but it appears any gap may now be closing.

"Li Ning and Anta are not competing directly with Adidas and Nike but the pie they are eating is growing larger and larger, while Adidas' and Nike's pie is not growing at the same rate," he said.

"The moment that a local brand can command the same price as a multinational brand is the day that a breakthrough has been made."

Data sourced from China Daily/Financial Times; additional content by Warc staff