Analysis: Nike, Adidas trounce China sportswear players

Wed Sep 21, 2011 12:11am EDT
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By Charlie Zhu and Donny Kwok

SHENZHEN/HONG KONG (Reuters) - Drawn by a handwritten notice, a handful of customers sift through stacks of sports shoes and rows of clothes at a Li Ning discount outlet in China's boom town of Shenzhen on a Sunday afternoon.

"Last day! Enjoy 50-55 percent discount on all goods. Buy three, get another 10 percent off," the note read.

A few yards away, on the same floor of the giant shopping complex, another Li Ning retail store looks empty. The brightly lit Nike and Adidas outlets are busier, with youngsters and teenagers trying on sneakers and garments.

"Nike and Adidas products are very good," grumbles a Li Ning store employee, declining to be identified. "The materials they use, the soles and the designs are much better than ours."

After years of breakneck expansion, local brands such as Li Ning and China Dongxiang (Group) Co Ltd are grappling with shrinking margins, slowing sales growth and mounting inventories of outdated products, threatening the sector.

While the Chinese brands struggle, Nike Inc and Adidas, armed with heavy investment in research and development plus marketing expertise, are gaining market share in the world's second-largest economy.

In the sportswear industry's battle for China's booming consumer market, the situation is bad and getting worse for the home grown retailers.

China's fashion apparel market, dominated by sportswear brands and local casual clothing brands, is expected to triple in size to more than 1.3 trillion yuan ($201.3 billion) in the next 10 years, Boston Consulting Group said in a report.   Continued...

<p>Nike shoes are displayed at a Niketown store in Beverly Hills, California, March 16, 2010. REUTERS/Lucy Nicholson</p>