Nike Q1 China's Sales Decline Declined: "The State Retreats in Foreign Trade"

Nike announced its first-quarter financial report. The company’s sales revenue was 4.8 billion U.S. dollars and its profit was US$510 million. Among them, Nike brand sales in Greater China, footwear sales fell 17% to 218.4 million US dollars; apparel sales fell 16% to 168.1 million US dollars; sports equipment fell 16% year-on-year to 29 million US dollars. Total revenue fell 16% to $415.5 million.

Nike said that sales have seen a decline in global sales, particularly in the European and Chinese markets.

Foreign brand China is frustrated

It is understood that Nike has not only experienced a shrinking sales in the Chinese market, but also closed its own factory in China for some time. From June to November 2009, Nike apparel orders decreased by 12% year-on-year.

Another sports giant Adidas is not optimistic about the Chinese market. According to Adidas’s financial report, Adidas’ net profit attributable to shareholders in the second quarter of this year was only US$13.11 million, a sharp drop of 93% year-on-year. Adidas's net profit for the first half of the year dropped 95% year-on-year to 18.93 million U.S. dollars, of which sales fell to 3.584 billion U.S. dollars in the second quarter, and sales revenue fell 2% to 7.328 billion U.S. dollars in the first half of the year.

Domestic sports brands contrarian growth

Compared with foreign brands, domestic sports brands have seen rapid growth both in sales revenue and net profit in the first half of this year. It is understood that Li Ning's first-half revenue increased by 32.4% to 4.052 billion yuan; net profit rose 41.6% to 473 million yuan. In terms of net profit, Li Ning surpassed Adidas, the world's second-largest sporting goods supplier, for the first time in the first half of this year.

In addition, Anta’s net profit, which ranks fourth in terms of sales revenue, was 608 million, an increase of 40.1% year-on-year. Following China’s move, Li Ning, Anta, Xtep and 361°, Peak Company landed on the Hong Kong capital market on September 29 and became the sixth sporting goods company listed in Hong Kong.

“Retreating from the State to Foreign Countries” Influenced by the Cost-effectiveness and Agency Model

Faced with this situation of “advancement of the country”, Yi Xiaoyu, executive vice chairman of the Beijing Association of Culture, Education and Sporting Goods, said that some import orders were cancelled under the financial crisis, and the market share of Adidas and Nike was reduced in the domestic market. The decrease in overall purchasing power has made domestic brands with more price advantages buoyed by the market.

In terms of sales model, international brands are represented by Nike. They are only responsible for R&D, brand management, and other production and retail links are outsourced. The local sports brand is distinctly different from the one from product R&D and design, raw material procurement, manufacturing, distribution and logistics, marketing and promotion, and retail. Through participation in all aspects of the industry chain, it is possible to obtain the profits of every link in the industry chain, thereby increasing the company's profitability.

Peak CEO Xu Zhihua said in an exclusive interview with NetEase that some of the foreign brand Olympics are expected to be too high and the channels are under pressure. Ultimately, the actual market demand is lower than expected, causing inventory problems this year. Most foreign sports brands adopt a “many-to-many” channel model, and the relationship between manufacturers and distributors is relatively loose. As the market performance of the Olympic Games is lower than expected, the relationship between manufacturers and distributors is relatively tight, some channels are withdrawn, and channels are withdrawn. Increased inventory pressure and sales pressure.

In addition, Xu Zhihua said that after the financial crisis, consumer behavior changed, they demanded lower prices, while the domestic sports brand's price advantage is very obvious. Under this circumstance, it is not difficult to understand that "the country will retreat into foreign countries."