A fight is breaking out in China’s locker room. In a country mad about branded goods (both real and fake), the market for branded sportswear has never been more competitive. Domestic brands have been dominated until recently by Li Ning, the eponymous chain founded by the gold medal-winning Olympic gymnast. Now rival Anta is starting to eat Li Ning’s lunch. But this may be a fight as much for survival in a fickle market as for dominance of it.
Li Ning tripped up when it raised prices in 2010 in the belief that it could compete with global powers such as Nike and Adidas. That may have backfired: the company has braced investors for a 7 per cent fall in 2011 sales to around Rmb9bn. Anta has been taking advantage: it said on Monday that its 2011 revenue jumped by one-fifth to Rmb9bn;?net?profit?rose?by?12?per?cent.
The news still saw 3 per cent shaved off Anta’s shares. That may be justified. Competition is starting to take its toll. Other than Nike and Adidas, Li Ning and Anta compete with the likes of China Dongxiang, Peak and Xtep. In addition, Chinese non-sports fashion brands have become cheaper and more ubiquitous. That has left branded sportswear chains with mountains of stock that are proving hard to shift. Anta held inventory for an average of 38 days last year. That is much better than Li Ning’s 72 days. But Li Ning is addressing the problem by aggressive discounting and rationalising distribution.