"Discounts to clear inventory," "a wave of store closures," and "declining order volumes"—along with the overall downturn in the apparel industry, even sportswear brands that were once considered "safe bets" are not immune and are now grappling with poor overall performance. This year, news of discounts and promotions by sportswear brands has been constant, especially recently, where the attention sparked by discounts has far surpassed the discounts themselves. High inventory levels and declining profits mean domestic sportswear brands are undergoing a "collective dive."
Highly homogenized products reduce consumer expectations.
Statistics show that domestic sportswear brand Li Ning saw its profit drop 85% year-on-year in the first half of this year, with revenue falling 10% to 3.88 billion yuan. The company’s stock price has also cumulatively declined 35% over the same period. Meanwhile, Li Ning has closed nearly a thousand stores in succession. Back in 2011, Li Ning’s annual sales revenue was 8.93 billion yuan, down 5.8% year-on-year, signaling the initial signs of a slowdown in growth.
Li Ning is not the only major player struggling—other domestic sportswear brands are also performing poorly. According to the 2013 second-quarter order data for domestic sportswear brands, orders for companies including Anta, Xtep, and Peak all declined to varying degrees year-on-year. Among them, Xtep’s orders fell 15% to 20%, Anta’s dropped 15% to 25%, and Peak’s decline was even steeper at 20% to 30%.
Order data often serves as a barometer for an industry’s market, offering some insight into the current plight of domestic sportswear brands. Why is this happening? "A sluggish economic environment, aggressive marketing strategies from foreign sporting goods companies, and an overall downturn in the domestic apparel industry are external factors," analyzed an industry insider with years of experience in sportswear brand management. For domestic brands like Li Ning and Anta, the lack of differentiation in product structure and marketing models is the real culprit.
Sportswear brands once created a miracle of strong production and sales in past years, and consumers were deeply impressed by the endless stream of emerging sports brands. Around the year 2000, China’s Olympic bid swept the nation with a wave of sports enthusiasm. Especially after Beijing won the bid to host the Olympics, the Chinese sporting goods market experienced explosive growth. Sportswear brands, along with traditional clothing brands, went through a "golden decade" of development, maintaining double-digit growth rates every year. By the peak of the collective boom of domestic sportswear brands, people realized that, unlike other countries where typically only three to four major sportswear brands dominate the market, China had over 20 well-known sportswear brands.
Today, after surviving fierce competition, Li Ning, Anta, Xtep, 361 Degrees, Peak, and China Dongxiang have become the six dominant brands in the domestic market. But a closer look at these brands’ products and positioning reveals astonishingly high similarity. For example, in terms of products, basketball, jogging, comprehensive training, and sporty casual wear are categories all these brands have developed—let alone similarities in product design and logos. Moreover, almost all brands have followed the same advertising and marketing path of "signing celebrities" and "sponsoring events." Blind rapid expansion and an inverted focus on marketing over R&D have gradually weakened the overall competitiveness of sportswear brands.
At the same time, industry insiders also point out that shifts in consumer demand in recent years are another major reason for the frequent downturns in domestic sportswear brands. "Ten years ago, wearing sportswear out felt great, and everyone considered visiting sportswear stores a fashion trend." At that time, brands like Li Ning and Anta also took a share of the market from international giants like Adidas and Nike, capitalizing on the wave of demand to secure a significant market share. But a few years later, the fashion trends brought by international brands like ZARA and H&M quickly overshadowed the appeal of sportswear. To this day, the concepts of fast distribution and fast consumption remain prevalent, and the young demographic that used to be the main consumers of sportswear has largely been captured by fast fashion. The shift in demand is another reason why sportswear brands have struggled.
Focus on the core business and hone internal strength in "climbing the mountain."
After going through store closures and leadership changes, Li Ning is undoubtedly at the center of this industry adjustment. It is reported that over the next two years, Li Ning aims to increase its market share in China by 40%. After scaling back plans to dominate the global athletic footwear and apparel market, Li Ning is transforming, aiming its brand positioning at consumers migrating from rural areas to big cities, hoping to gain a larger share of the domestic market and win recognition from the mass market. Industry insiders believe that Li Ning’s strength—and what it should stick to—is building category resources and putting effort into managing these categories well.
Looking at the development paths of international brands, whether it’s Mizuno’s focus on volleyball, Adidas’ long-standing dominance in football, or Nike’s absolute monopoly in basketball, tightly grasping category resources is particularly important. With this in mind, this year Li Ning signed a five-year cooperation agreement with the Chinese Basketball Association and inked a deal with NBA Miami Heat guard Dwyane Wade to launch a signature "Dynasty" series. This custom product is akin to Nike’s long-popular "Air Jordan" basketball shoes, but in Li Ning’s version. As Li Ning’s current executive vice chairman Kim Jin-gyu put it, Li Ning is striving to understand the brand DNA that consumers want—even though this has been a weak spot for Li Ning in the past.
Even though it still faces competition from fashion brands encroaching on its market, Li Ning believes that staying committed to excelling in the sports field is key to maintaining the foundation of the company’s development. "After all, sports consumption spans all age groups and essentially covers all consumer segments. Consumers may chase fast fashion, but they will also choose sportswear when needed." In Li Ning’s view, having a solid professional foundation rooted in the spirit of sports is essential for a company to "branch out" and grow stronger.
Aside from Li Ning, reporters observed that Anta, Xtep, 361 Degrees, Peak, and others are also upgrading and transforming based on new market changes. Experts say that while sportswear brands collectively faced a harsh winter this year, next year’s outlook may still not be optimistic. "Step out of the plains and start climbing the mountain," described Chen Dapeng, vice president of the China National Garment Association, the challenging road ahead for sportswear companies. Under these circumstances, domestic sportswear brands can only emerge from the cold spell and welcome a new spring by focusing on market demand, persisting in continuous innovation, and pursuing differentiated development.