Nike is facing unprecedented challenges in the Chinese market.
During this year’s 618 promotion in China, Nike sales fell 24.1% year-on-year, while in sharp contrast, Chinese brands Li Ning and Anta grew 31.8% and 38.5% respectively during the same period.
Nike’s top management is also aware of the crisis of “losing the Chinese market”. In a conference call in June, a Nike executive mentioned the word “China” 30 times, and its CEO even said publicly that “Nike belongs to China”. But this gesture of goodwill did not stop Nike’s weakness in China: at the end of September, Nike officially lowered its full-year expectations, and the third quarter Nike’s growth rate in the Chinese market fell by more than 10 percent year-on-year.
It is worth noting that the Vietnam capacity dilemma may make Nike’s report card even more ugly: with the arrival of two key shopping cycles, the Double Eleven shopping festival in China and the Christmas period in Europe and America, Nike has entered the peak season preparation period.
A super anchor team leader said that according to the usual practice starting in October, anchors need to start stocking up on brands such as Nike and Adi. But according to her, the situation may change dramatically this year on Double Eleven “Many anchors are discouraged by Nike and Adi, and people are not willing to choose to work with such brands at this time.” According to her, as early as September this year, the major anchor team has been actively communicating with local brands such as Li Ning, Anta and Hongxing Erke, “This year’s Double Eleven will likely be a milestone node for local brands.”
A leading local sports brand operations manager said, for Li Ning, Anta two local brands, Adidas advantage has been very small or even can be said to be “about to be completely overtaken”, but “rational point of view, Nike’s current advantage is still obvious, this year’s double eleven may become a watershed. “According to the person in charge, the five major local brands are taking this year’s double eleven as a key node, “even if you can’t surpass Nike, you can also further share Nike’s market share”. It is noteworthy that during this year’s 618, Nike’s category market share on the e-commerce platform has dropped to 9.5%, which is also Nike’s lowest share over the years.
An analyst who did not want to be named said that the development of Vietnam’s production capacity, in fact, let Nike and Adidas take a detour. “In terms of foundry capacity and product quality, China’s footwear and apparel production capacity is the first in the world, and currently Vietnam, Thailand, Malaysia, and India are far behind China in terms of foundry capacity.”
In the analyst’s view, Li Ning, Anta and other brands based on China’s local production capacity model, may become one of the key points in the process of this “local and international big brand showdown”, “quality advantage, is the basis for improving the customer unit price.”
In fact, around 2008, China’s local brands had a similar opportunity: due to the impact of the Beijing Olympics, local brands encountered a bonus cycle at that time, Li Ning, Anta and other brands sales rose significantly, while Nike, Adi and other brands sales ratio fell significantly.
But this window period did not allow local brands to replace the dominant position of Nike and Adidas.
“The product itself did not work at that time, which was fundamental; together with the traditional channel model, China’s local brands were too restricted; as well as the main consumers at that time, the recognition of local brands was limited.” Tian Zhao, an analyst in the field of textile and apparel, believes that the Vietnam capacity dilemma and the cotton incident only brought a new window for local Chinese brands, but compared with 2008, local Chinese brands have changed a lot.
“Li Ning and Anta are in the deep transformation to the DTC model.” In Tian Zhao’s view, the inventory crisis in 2015 and the live impact after 2018 “forced” the batch of local head companies that survived to evolve, “Li Ning and Anta are now much more responsive to the market than Nike and Adidas.” It is worth noting that in the process of transformation of this group of head brands DTC, “electrification” and “localization of the Guochao” is the common playing method. From 2018 onwards Li Ning, Anta’s e-commerce sales accounted for a significant increase, and in the field of market rapid response, these head brands have embarked on the “Guochao” route. According to a head brand in July this year to reveal, the current SKU iteration speed of the brand has been more than double than before the epidemic, in the design, the brand will be more substantial to “localized aesthetic tilt”.
The key “missing” in the Chinese market is Nike’s efforts to promote e-commerce and Guochao. In April this year, Nike’s sales in the e-commerce platform once fell nearly 60%, and in the “Guochao” wind in China, Nike has not yet launched the Chinese market for the Guochao explosive products. On the contrary, in May this year, Nike united with South Korean artist Kwon Chi Long to launch the joint shoes KWONDO1, and regarded it as a heavy product to be released at the end of the year. What is interesting is that there are already creators of Xiaohongshu and Jitterbug who have received “KWONDO1” related business list and started to plant it – according to some creators, KWONDO1 is considered by Nike as one of the products that may become explosive in the Chinese market. But is Kwon really the golden key to the Chinese market?
Right now, there is not much time left for Nike. As of the end of September, nearly 20% of foreign brands have already started to evacuate their factories from Vietnam, and the Nike side has also started to think about new production capacity base locations, and in August this year, there were analysts who suggested that Nike move its production capacity back to North America. But the high cost of labor that comes with it is something that Nike can afford today? Perhaps, what Nike needs to do is to respect and understand the Chinese market again and return to the product itself. Source