Sportswear giants get competitive in China

02 December 2009

BEIJING: Competition in the Chinese sportswear sector is intensifying, with Li Ning, the biggest domestic operator in the market, now looking to the web in an attempt to outmanoeuvre its major rivals.

The sportswear segment in the world's most populous nation is currently valued at $7.7 billion (€5.1bn; £4.7bn) per year, according to figures from Frost & Sullivan.

Within this, the consultancy suggests that Li Ning – founded 20 years ago by the athlete of the same name – held a market share of 11.1% in 2008, up from 8.7% in 2004.

However, this left it behind two large multinational operators, in the form of Adidas, on 14.9%, and Nike, on 18.8%.

The company operates some 6,800 bricks and mortar stores in China, and has now commissioned IBM to help redevelop its eCommerce portal, which was first launched last year.

This updated offering, which is set to go live in the opening quarter of 2010, is intended to give Li Ning a competitive advantage, as Nike and Adidas do not run online stores in China at present.

More broadly, it will also allow the apparel-and-footwear manufacturer to tap into changing consumer behaviour in the country.

There are around 350 million web users in China, and while this channel only contributed 1.2% of retail revenues in 2008, Credit Suisse predicts this total will rise by 89%, to $35.6bn, this year.

As such, Shelly Lin, Li Ning's director of e-business, argued "if analyst projections about the growth of e-commerce are correct, it will surely become significant within a few years."

Younger consumers are a key target for its internet operations, with the ability to make purchases on the mobile web, and to receive discount coupons on wireless handsets, likely to appeal to this audience.

Li Ning also established a presence on Taobao, the online marketplace owned and operated by Alibaba, nearly 18 months ago.

Procter & Gamble and Lenovo are among the other advertisers to have built dedicated pages on this service, which Credit Suisse says drives more than three-quarters of web value sales in China.

AliPay, Taobao's digital payment system, handles transactions to a value of $146.4m on a daily basis, with a total of 200 million registered users overall.

Data sourced from Wall Street Journal; additional content by Warc staff