There is evidently a potential for a stronger role by this Chinese brand outside its big home country, considering especially its success on the Norwegian market through a recently new distributor, Fair Deal. By backing the Li-Ning brand with TV and radio advertising and by offering goods margins, it managed to sell some 20,000 pairs of its shoes to more than 170 retailers in Norway for this past summer.
Abel Xu, Li-Ning’s vice president of marketing, who took over the responsibility for the international department from the departed Neil Niu a few weeks ago, he said to working on a new strategy designed to raise the Chinese footwear and apparel producer’s sales outside of China from 1.3 percent to 20 percent of its total turnover by 2018. To achieve this, Li-Ning will try to make its products more appealing to foreign markets by giving them an oriental touch. It plans to invest more in R&D, which currently represents just 3 percent of the company’s turnover. A near-term event that could give Li-Ning some leverage abroad is the 2008 Olympic Games in Beijing, where the Li-Ning brand is sure to gain exposure.
Outsourcing its sales activities allowed Li-Ning to shrink its workforce from 2,890 to 2,274 employees in its 1st half. During the same period, the company’s profits jumped by 65.9 percent to 129.90 million renminbi (€12.8m-$16.4m) on a 24.2 percent rise in revenues to CNY1.37 billion (€135.5m-$173.3m). The gross margin grew by 170 basis points to 49.8 percent. Turnover from apparel increased by 13 percent to CNY736.2 million (€72.8m-$93.1m). Footwear sales were up by 44 percent to CNY528.0 million (€52.2m-$66.8m) and sales of accessories rose by 22 percent to CNY107.7 million (€10.6m-$13.6m).
The Li-Ning brand’s turnover expanded by 33 percent to CNY1.36 billion (€134.5m-$172.0m), while other sales came from a former contract with Kappa in 2005 and from a new one with Aigle in 2006. The company says it remains open to further opportunities for cooperation with other “reputable” international brands. Last October, the company entered into a joint venture with Aigle, the French fashion sports brand, to produce and distribute the brand for the Chinese market for 50 years. Li-Ning was operating a total of 21 Aigle stores at the end of the period.
The company currently has 370 company-owned Li-Ning stores in China, accounting for less than 20 percent of total turnover. It also has 3,272 franchised doors in China. Most stores are very small, but 736 follow newly set standards and 21 are larger flagship units. The number of doors increased by 257 in the first six months of the year, and the company plans to take the total network up to more than 5,000 units by 2008.
