A new brand image, a larger market share, and a new success story for the Chinese sportswear brand. The name “Li-Ning” is often used to describe the best marketing strategy tips in China. The majority of Western media used to describe Li-Ning and Anta as the new substitutes for Nike and Adidas in China. Li-Ning marketing met a notable success. But is it still the case?
How did they benefit from the health and wellness context in China?
What are the pros and cons of their marketing strategy?
Let’s get right into the case study.
A Positive Context for Sports Fashion Brands
With the Covid pandemic and the Olympics organized in China, we often talk about a “Chinese rediscovery of outdoor sports in China” as stated by the magazine Luxus Plus. Li-Ning directly benefited from this new interest in sports and wellness content.
Viral Sports Content Online
Since 2020, Chinese long-term home quarantine during the epidemic has urged Chinese people to fitness at home, which drove fitness influencers’ creation to increase by +70% on Bilibili and +208% on Douyin – the early form of the online sports ecosystem.
In 2022, Eileen Gu, skiing champion of the Beijing Winter Olympics and now a sought-after brand ambassador working with top-tier luxury brands such as Louis Vuitton, has raised widespread awareness in China. She encouraged Chinese women to be healthy and beautiful through sports, and training to improve their physical body and mental health.
Government Support and Sports Influencers
In the meantime, the Chinese government released “The 14th Five-Year Plan for Sports Development” and launched “The National Fitness Program 2021 – 2025”.
With the online sports ecosystem, famous people incentives, governmental support, and long-term home quarantine environment, sports, and fitness approached their peak while lots of sports-oriented KOLs rose on Chinese social media, creating sports class video content in yoga, fitness, dancing, etc.
For example, Pamela Reif joined Douyin in May 2022 to train people in systematic and intense fitness by livestreaming.
After the epidemic, the habit of sports, the mindset of health first, and the appreciation of accessing nature finally, have made sports and outdoors become the new lifestyle for Chinese people.
“Global E-commerce Sports & Outdoor Goods Market Projected Revenue by 2023” from Statista estimated that China will generate $3.2 billion USD while the US will account for $2 billion USD, and the UK for $0.3 billion USD. From CBNData and TMIC Research, for the Chinese people, the frequency of outdoor sports has increased by 70% compared to last year, and the proportion of regularly exercising sports has reached 40% and is estimated up to 45% in 2025.
Through social listening, we monitored a change in sports and outdoor sports.
We also discover that as a new lifestyle, sports and outdoor goods are not only used in professional sports scenarios, but also and more in daily style: commute outfits, parent-child wear, and homestay clothes.
Let’s see the actual ranking of Li-Ning in the Chinese sportswear market now.
Li-Ning Gaining Market Share in China
After the “Xinjiang Cotton Incident“, Anta became the sports brand with the highest revenue in the Chinese market, with earnings of 29.65 billion yuan, up 14.2% year-on-year. The second is Li-Ning market share, with 14.019 billion yuan, up 13.0% compared to 2022.
Nike’s fiscal year 2022/2023 showed a 4% revenue decline in China.
While Adidas plunged by 36%.
Temporary Decline of Nike and Adidas
The key reason is the “Xinjiang Cotton Incident” in 2019 when Western countries called on global enterprises to boycott the import of Xinjiang cotton. Western brands such as Adidas, Nike, and Puma all responded. Adidas called for the cancellation of Xinjiang cotton certification and urged suppliers to avoid buying cotton from the region.
Eventually, Chinese celebrities canceled their contracts with Adidas. Adidas revenue continued to plummet. At the end of August 2022, the size of Nike’s inventory had increased to $9.662 billion while Adidas’ inventory reached 5.973 billion euros.
It is crucial to note that in the Chinese market, as the nationalistic sentiment grows, Nike and Adidas failed to capture the preferences of Chinese consumers in a timely manner, resulting in a decline in their market share. As a result, local Chinese brands spotted the opportunity to compete with Nike and Adidas, who were losing their foothold in the Chinese market.
And what is Li-Ning marketing strategy’s actual effect in China?
Let’s dive in.
Li-Ning Marketing Strategy Analysis
Li-Ning is implementing a strong marketing strategy. As a sports brand, when you look into marketing leverages, it’s also interesting to see how Chinese brands market at home. And here are Li-Ning top 5 marketing strategies implemented:
- Guochao Marketing
- Multi-Category and Multi-Channel
- Celebrity Endorsement
- Large Store Strategy
- Less Investment Technique
Let’s go over them in detail.
1. Patriotic Neo-Chinese Wave, Guochao Marketing
In 2018, Li-Ning appeared in the New York Fashion Week F/W show with the theme of “Enlightenment”, becoming the first Chinese sports brand to land in an international showroom. Following this success, Li-Ning hosted fashion weeks in various locations in China, such as the Himalayas and Dunhuang, that highlighted traditional Chinese history and civilization.
Combining Chinese culture with modern art, the Li-Ning basketball line DADFIVE has collaborated with lots of modern Chinese artists, such as product series based on the Chinese city and history.
In 2019, during the “Xinjiang Cotton Incident,” Li-Ning quickly capitalized on the situation by using Xinjiang cotton as a label and other promotional moves.
This strategy brought Li-Ning substantial growth.
In total, Li-Ning’s April and May sales account for more than 50% of their total sales.
2. Single Brand, Multi-Category, Multi-Channel
Li-Ning has created dedicated divisions for table tennis and badminton, two sports segments popular in China.
For the professional sports line, Li-Ning boosts its influence by partnering with sports stars and sponsoring events. The company has worked with Shaquille O’Neal and Dwyane Wade and sponsored the game attire for the table tennis, diving, and shooting teams during the Tokyo Olympics.
Li-Ning is expanding its multi-channel strategy, focusing on directly managed offline stores and online channels. They’ve built a member service system and cross-channel member circulation service mechanism. Moving forward, they’ll focus on membership recruitment, consumer education, membership service, and membership data insights.
3. Celebrity Endorsement
Li-Ning appoints the trendiest Chinese celebrities in the eyes of Generation Z as brand ambassadors for Li-Ning fashionable sportswear COUTERFLOW and China Li-Ning. For DADFIVE, its Basketball line, in 2012, Li-Ning partnered with NBA all-star Dwyane Wade to create a new sportswear brand called “Way of Wade”. The product line has since reached its third generation.
However, from 2022/2023 Li-Ning Financial Report, shows Li-Ning’s gross margin is 48.4%, which is close to Nike’s 46% and Adidas’ 47.3%. Compared to a much higher amount of sales than Nike and Addidas, Li-Ning hasn’t been more profitable in this opportunity. Where is Li-Ning marketing strategy missing the shot in China?
4. Large Store Strategy
Li-Ning is focusing more on setting up offline stores, especially for directly managed stores.
Financial report data shows that by the end of 2022, Li-Ning’s offline stores grew by 360 (excluding Li-Ning YOUNG) to 6,295. Directly-managed stores increased by 265, and distributors channel by 95.
An intensive opening program so far.
Opening a large store for Li-Ning is a significant test from an operational standpoint. While larger stores bring in more revenue, they also incur higher operating costs, require efficient merchandise management and staff training capabilities, and must have store furnishings that create a unique and fresh atmosphere for consumers.
Cheng Weixiong, an independent analyst in the footwear industry, emphasized that large store investments must correspond to high returns; otherwise, there is no future for them.
And what the increasing costs of the “large store strategy” brings to Li-Ning is the highest discount rate compared to competitors, even a 70% discount for last season. Thus, during the first half of 2023, Li-Ning experienced a significant reduction in store size. The group closed down 155 stores, with the Li-Ning and Li-Ning YOUNG brands experiencing net reductions of 128 and 27 stores, respectively.
Notably, Li-Ning was the only group without any new store openings during this period.
5. Less Investment in Technique
In 2020, Li-Ning invested only 2.2% of its revenue, 323 million yuan, in R&D. In the first half of 2021, Li-Ning’s R&D investment was still only 1.8% of revenue. However, the competitors Adidas and Nike invest over 4% in R&D annually, sometimes up to 7-8%.
In the highly competitive field of cushioning technology for sports products, Li-Ning has introduced several new technologies in recent years, including the structural cushioning Li-Ning Bow, the material cushioning Li-Ning Cloud, and the 䨻 technology based on PEBAX material. These technologies were developed to compete with Nike’s Zoom-X and Adidas Boost.
However, according to discussions on sports website Tiger Poker, the actual cushioning effect of Li-Ning Cloud and Li-Ning Bow is inferior to Anta’s A-Flashfoam and Adidas Boost.
It’s estimated that although Chinese brands such as Anta and Li-Ning account larger part of the market share, Western brand still has great potential in China if they play right in the Chinese localization marketing strategy.
Bright Future for Western Sports Brands
For example, the yoga brand Lululemon’s Q2 2023 financial results announced on September 1 showed remarkable growth in China. Sales rose by +18% YoY to $2.2 billion USD, gross margin improved to 58.8%, and net income exceeded expectations with an 18% increase.
Swiss running brand On’s Q2 2023 results show a sixth consecutive revenue record, with a jump of 52.3% to CHF333 million. Net sales in Asia-Pacific increased by 90.2% to CHF34.1 million. French Hoka, Japanese ASICS, and French Salomon have all reached greater growth in the first half of 2023 by 80%, 72%, and 202% respectively.
This is the comeback of Western sports brands in China.
We are Reverse Group, specializing in bridging the gap between China and the West. We supported 75+ projects from Western brands to thrive in the Chinese market with Market Research, Business Intelligence, Marketing Strategy, Chinese Digital Marketing, Influencer Marketing, and Celebrity Endorsement.