“Li-Ning is really getting more and more expensive.”
A few years ago, consumers complained like this. However, at that time, Li-Ning was riding high, with long lines at offline stores and limited edition releases selling out for thousands of yuan, so such criticisms were not widespread.
In the past, as the “leader of Chinese fashion,” Li-Ning never lacked fans. Whenever someone complained about the prices, there would always be others arguing back, “Is it only Nike and Adidas that can raise prices? Why can’t good-looking domestic products also increase in value?”
However, the speed at which it fell from grace was even faster than the rise of Chinese fashion.
At its peak in 2021, Li-Ning’s total market value was over 280 billion Hong Kong dollars. But now, in the blink of an eye, its total market value has fallen by over 80%, leaving around 50.7 billion Hong Kong dollars.
Recently, China’s domestic listed sports brands have released their financial reports for 2023, and Li-Ning became the only company among them with declining profits. Its revenue was 27.598 billion yuan, a year-on-year increase of 7%, and net profit was 3.187 billion yuan, a year-on-year decrease of 21.58%. Meanwhile, Anta, firmly holding the top spot, had a revenue of 62.356 billion yuan and a net profit of 10.236 billion yuan, a year-on-year increase of 34.9%.
Compared to others, Li-Ning’s situation indeed seems precarious.
Even so, Li-Ning, once known for its “wild consumption,” did not garner much sympathy, with some consumers even turning their backs on it. From the affordable “plausible” to the avant-garde “Chinese fashion,” and now to high-end sports brands, how did Li-Ning lose its popularity?
Ups and downs, anything is possible
The rise of domestic brands is no longer a novelty. Looking back, Li-Ning definitely belongs to the first group to benefit from the rise of Chinese fashion.
In 1990, with the help of Li Jingwei, the founder of Jianlibao, Li-Ning, a retired gymnastics prince for two years, established his own sports brand using his own name. In that year, at the 11th Asian Games held in Beijing, Li-Ning convinced the organizing committee to sponsor the event, becoming instantly famous under the guise of “using a domestic brand is conducive to building national confidence.” As the first domestic brand to sponsor the Asian Games, Li-Ning undoubtedly had a high starting point. Subsequently, it also secured the sponsorship rights for the Chinese delegation at four consecutive Olympic Games.
In the 1990s, foreign brands had not yet entered China or had not yet gained popularity in China, and domestic Jinjiang-based brands had not yet become established. Li-Ning, a newcomer, had almost no competitors in the domestic sports market. According to “People” magazine, Li-Ning’s shoes were in high demand at that time, with “factory trucks arriving at the warehouse without unloading, and distributors’ trucks directly taking them away without touching the ground.”
From the successful bid for the Olympics in 2001 to the hosting of the Beijing Olympics in 2008, it was a period of rapid growth for the domestic sportswear industry. In 2002, the brand established its slogan, “Li-Ning, Everything is Possible.” In 2004, Li-Ning was listed on the Hong Kong Stock Exchange, riding high. Despite being overtaken by Nike and Adidas later on, Li-Ning still firmly held the position of the leading domestic sports brand for a considerable period thanks to channel expansion and consecutive years of growth in performance.
However, as the Beijing Olympics held at its doorstep came to a successful conclusion, the Chinese people’s enthusiasm for the Olympics began to wane. Experienced international brands keenly anticipated that the market would soon cool down and began discounting and clearing inventory; however, domestic brands using the wholesale-distributor model failed to slow down their expansion in time. From 2010 to 2012, major domestic sports goods companies fell into inventory crises.
Unfortunately, Li-Ning not only failed to brake and clear inventory in time but also stepped on the “high-end + youth” accelerator, quickly seeking transformation.
Previously, Li-Ning targeted the mass market, mainly appealing to those born in the 1970s and 1980s. The brand was determined to attract young people, even changing its logo and brand slogan to “make the change.” However, the aggressive new advertising campaigns were difficult for old customers to adapt to, and research and design did not keep up with the aesthetics of post-90s consumers.
Subsequently, Li-Ning suffered losses for three consecutive years, its capital chain was on the verge of breaking, and it even reached the point of massive store closures.
In 2014, persuaded by executives, Li-Ning, who had been away from the front line for more than twenty years, returned to the company as the acting CEO, changing the slogan back to “everything is possible,” and personally adjusting the strategy. This time, the brand seized the development dividends of internet marketing and e-commerce, finally turning losses into profits and making a comeback.
Thus, there was a glimpse of Li-Ning at the New York Fashion Week in 2018. The newly established sub-brand “Chinese Li-Ning” took to the stage with the theme of “Enlightenment,” showcasing eye-catching retro-style clothing in striking red and yellow, causing a sensation and firmly attaching the “Chinese fashion” label.
On the day the New York show ended, Li-Ning’s WeChat index surged by 700%. According to relevant research reports, in that year, the “Chinese Li-Ning” series sold a total of 5.5 million pieces of clothing, over 50,000 pairs of shoes, and more than 70% of the new products were sold out within six months. With the rise of “Chinese fashion,” Li-Ning’s revenue surpassed the 10 billion yuan mark for the first time.
Similarly, Li-Ning rose to another level in 2021, also due to controversies surrounding international brands, as consumers massively turned to domestic brands, and Li-Ning seized the opportunity.
Industry insiders said: “This is related to Li-Ning’s product price. Previously, consumers who bought Nike and Adidas would only shift their demand to products of similar price; whereas in the choice of domestic products, Li-Ning could provide consumers with a sense of high-end and fashion at that time.”
This year, Li Ning’s revenue exceeded 20 billion yuan for the first time, a year-on-year increase of 56%, and its net profit reached 4 billion yuan, a year-on-year increase of 136%, setting a record for the fastest growth since the company went public.
Judging from the fact that profit growth is significantly higher than revenue growth, Li Ning has obviously not given up on its high-end plan, and the “Guochao” shareholder style has obviously brought new opportunities to Li Ning.
Li Ning is expensive, but not expensive enough
After the 2018 boom, China’s Li Ning took advantage of the trend, fully embracing the “trendy brand” concept, making multiple appearances at Paris and New York Fashion Weeks, and producing many appealing designs. From dragons, Dunhuang, bronze ware, blue and white porcelain to various traditional auspicious patterns, Li Ning has explored almost every aspect of the new Chinese style. It has also collaborated with Jackie Chan, Chinese rap artist GAI, Disney, Moutai, and even People’s Daily. In addition to traditional sports events and athlete sponsorships, Li Ning has also begun to focus on internet marketing, hiring internet celebrities as endorsers.
Naturally, marketing comes at a high price. From 2020 to 2022, along with Li Ning’s popularity, its marketing expenses skyrocketed from 1.28 billion yuan to 2.279 billion yuan, nearly doubling in just two years. At the same time, prices for Li Ning’s various product lines have also steadily risen. Positioned as a trendy sports brand in China, Li Ning’s prices are already considerably higher than those of mainstream brands. The “Li Ning 1990” sub-brand launched in 2021 is even more focused on luxury, with a down jacket selling for over 6,000 yuan. As for the main Li Ning brand, the prices of its “Ultra Light” series increased from 499 yuan in 2018 to 599 yuan in 2021, and the new models of the “Fierce Horse” series sold for 699 yuan in 2020, reaching 1,099 yuan by 2023.
The speed of price increases has been so rapid that consumers can’t help but notice, leaving the impression that while Li Ning has become trendier, it has also become more expensive. If it were to fully commit to a high-end positioning, that would be one thing. What’s more unsettling is Li Ning’s mysterious strategy of simultaneously moving upscale and offering discounts, with price reductions occurring at the same pace as price increases. On social media platforms, there are still plenty of consumers complaining about Li Ning’s price reductions. For example, some consumers have reported buying Li Ning products only to find the same items discounted time and time again. “I bought a 650 yuan shirt online, and within a month it was discounted by 300 yuan. They wouldn’t even give me a refund after the price protection period.” “I don’t recommend buying Li Ning shoes over 200 yuan, because they might soon be discounted to 200 yuan.” Obviously, such fluctuating pricing strategies hardly benefit the brand’s high-end image. When a product can be sold for either 600 yuan or 300 yuan, people will perceive its value as closer to 300 yuan. Thus, in the minds of consumers, Li Ning remains closer to being a mass-market brand, to the point where some astutely conclude: Li Ning isn’t actually expensive; just buy it when it’s on sale.
Smart consumers share information to determine the most cost-effective prices to purchase products.
However, Li Ning also faces its own dilemmas, as inventory has always been a challenging issue in the apparel industry. In 2022, under the dual pressures of the pandemic and shifting trends, Li Ning’s inventory reached 2.428 billion yuan, nearly double that of 2020. Balancing inventory clearance through discounts while maintaining a high-end image has become a dilemma. Li Ning is aware of the drawbacks of frequent discounts and prohibits distributors from selling products at excessively low prices. However, with direct sales stores accounting for only around 20% of its business, the brand’s oversight is limited. Some distributors, eager to sell inventory, even black out the anti-counterfeit codes and sell at discounted prices, and consumers who are aware of this are willing to buy.
Anyway, “those who know, know it’s authentic.”
Returning to the point, Li Ning has made more than one misstep. Brand endorsers such as Xiao Zhan and Hua Chenyu have both been embroiled in controversies. Despite their strong fan bases, they don’t necessarily contribute positively to the brand’s reputation among the general public. Many consumers have even expressed explicit intentions to boycott. Some have said, “Although I understand Li Ning’s desire to expand its market, it has annoyed its core customers. After signing new spokespeople, boys wearing Li Ning on the court are laughed at. I’ve encountered it several times, so I stopped wearing Li Ning shoes.” What’s more impactful is a fashion show in 2022, where Li Ning’s green clothing and hats were accused of harming national sentiments. Subsequent arrogant PR statements further damaged the brand’s reputation, leading to a 14% stock price drop in a single day.
Fast forward to 2024, the trend of national pride has waned. After its market value plummeted, rumors emerged in March this year of the company potentially going private, with Li Ning himself responding, “Any proposal that can improve investment returns will be considered.” The Li Ning brand, which once caught the wave of national pride, now stands at a perplexing crossroads. As the tide recedes, the wind changes.
Along the way, Li Ning became more fashionable and more prominent, but it seems to have strayed from its original focus on professional sports. In other words, while its brand power increased, its product power did not keep pace. To be fair, Li Ning has indeed put effort into research and development. Qian Wei, the current co-CEO, has stated in media interviews that Li Ning remains a professional sports brand. Li Ning himself has also stated that “footwear products must be the main focus” because sports shoes have a higher threshold and are easier to establish technological barriers. Over the years, Li Ning has introduced technologies such as “Bounse” and arch technology (structural cushioning technology), and the sales of its three major core running shoe series, “Ultra Light,” “Chi Tu,” and “Fei Dian,” have been good. However, in 2023, both the revenue and revenue share of Li Ning’s footwear category slightly declined.
The reason for this is that the technology of these running shoes has not been well integrated with the product positioning. Many products face awkward situations: the same feel can be found in cheaper competitors, and at the same price, there may be more professional options. Xiao Yu, a sports enthusiast who shares shoe reviews on social media, believes that some of Li Ning’s running shoes lack clear positioning. For example, a cushioned running shoe priced around 700 yuan aims at an advanced audience with “professional shock absorption,” but advanced runners tend to choose racing shoes that can also be compatible with slow running, while slow running shoes cannot be compatible with fast running. “From the perspective of running itself, being only able to run slowly is not a problem, but consumers will choose products that are compatible with more scenarios.”
In September 2021, according to China News Network, Olympic champion Chen Yufei wore Li Ning shoes in the National Games and was cut by iron wires exposed by the shoes, temporarily putting Li Ning in a precarious position. Li Ning’s official response the next day stated that they had contacted both the Zhejiang team and Chen Yufei herself in a timely manner to further follow up on the injury and situation. However, netizens found that many badminton players had worn Li Ning shoes and suffered similar injuries, which were not common among top badminton players.
Ultimately, netizens pointed their fingers at Li Ning’s strategy of “heavy marketing, light research and development”—a common phenomenon in sports brands, but comparisons are always troublesome, and Li Ning’s investment in research and development does lag behind its peers.
From 2020 to 2022, Li Ning’s R&D expenses as a percentage of revenue were 2.2%, 1.8%, and 2.1%, respectively, all lower than those of domestic counterparts such as Anta, Xtep, and 361. In 2023, Anta’s R&D expenses accounted for 2.6% of revenue, reaching 1.614 billion yuan. According to Economic Observer, Li Ning’s main brand had accumulated R&D expenses of around 3 billion yuan over the past decade. Even during its peak development in 2021, Li Ning only invested 414 million yuan in R&D.
It’s worth noting that today’s outdoor sports arena is far from comparable to the “wild era” of the 1990s.
In recent years, outdoor sports have become the hottest fashion trend, and the domestic sports market has gradually shown a trend towards segmentation, specialization, and diversification. However, Li Ning hasn’t found its footing in either direction. Initially rising largely due to the trend of domestic products, its strategic weaknesses were masked by its good fortune. But as the tide recedes and the wind changes, Li Ning ultimately lacks a bit of momentum.
As the company’s founder, Li Ning has always placed his hopes on the professional management system of the company. Even during his tenure as interim CEO, he never gave up on finding suitable managers. However, over the years, the company has changed CEOs multiple times, to some extent leading to strategic inconsistency. In July 2023, Li Ning stated in an interview with the media that he is “trying to be a good businessman, but hasn’t quite succeeded yet.” As an athlete himself, he has always dreamed of making “China’s best sports brand,” but in the harsh business world, there is no “best,” only “better.”