Sportswear brands in China feeling the heat

Sportswear brands in China feeling the heat
Nike's advertisement is seen at a chain store in Yichang, Hubei province, Oct 27, 2012. The US sportswear maker plans to open 40 to 50 factory outlets to clear its high inventory in China.

BEIJING - US sportswear maker Nike Inc's plans to open 40 to 50 factory outlets to clear its high inventory in China is a sign that the days when Chinese sportswear brands could compete against international peers through price advantages have gone.

At a Nike factory outlet store in downtown Beijing, a men's sports sweater is selling for 199 yuan (S$40), down 300 yuan from its original price. A pair of sports shoes cost around 300 yuan, a price range found more often among domestic brands.

Zhao Nan, manager of the store, which is often crowded on weekends, said it offers discounts of 30 per cent to 80 per cent on products manufactured no earlier than two years ago.

Li Pan, a 28-year-old customer shopping in the store, said he enjoys buying at discount stores, but some of the items are not available in all sizes. "It is good quality but a better price," he said.

The National Business Daily reported on Monday that Nike will open more factory outlets to sell discount products in China. The shops will offer discounts ranging from 60 per cent to 70 per cent, and open in second- and third-tier cities.

Nike's public relations office in Beijing did not comment on the report.

Overseas sportswear brands like Nike, confronted with high inventories in China, are drawing up ambitious plans to enter smaller markets, targeting customers with a low-price strategy.

Nike saw an 11 per cent year-on-year drop in revenue, but with inventory of US$3.3 billion (S$4.1 billion), up 9 per cent from the same period of 2011.

Adidas Group's sales in China increased 15 per cent year-on-year, according to its 2012 full-year results, with group inventories up 1 per cent.

Along with many other competitors, Adidas recognised that expansion in lower-tier cities will have a significant impact on its overall performance in China.

Colin Currie, managing director of Adidas Group, Greater China, said: "This year, we will continue to grow our store base, and we will continue to focus on lower-tier cities. We believe two thirds of the growth of our industry will be in lower-tier cities."

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