Licensor's bankruptcy reflects Li Ning’s “internationalization”

Every night rain leaks, inventory pressure and executives have left, the country's largest sports goods company Li Ning seems to have experienced some unexpected twists and turns.

Recently, some media broke out. Li Ning's Spanish company announced that the bankruptcy incident led to many sports clubs in Spain unable to obtain sports equipment to deal with the next season. However, Li Ning’s official rumor said that this rumor does not correspond to the facts. However, according to the reporter's understanding, the fact that the capital chain breaks is Li Ning's authorized dealer in Spain. This undoubtedly conspires with Li Ning’s “going international route” strategy from another side.

International business accounted for only 1%

According to Spanish media reports, Li Ning's authorization for bankruptcy has prevented many sports clubs in Spain from getting equipment to deal with the next season. The main victims were the football clubs in Zaragoza, Las Palmas, Celta Vigo and Recreativo, as well as the basketball clubs in Málaga, Kahalabela and Badalona y Ventut. Local media even quipped that the players in these clubs need to be ready for nudity.

However, with respect to the term “authorized dealer”, Li Ning responded that this is not Li Ning’s own local branch in Spain, but only a local partner named LNPLU SIBERO AM ERICA SL. “They signed the sponsorship of some clubs in their own name. There is no direct relationship with Li Ning’s headquarters. As for the Spanish Basketball Association, because it is signed directly with Li Ning, it will not be affected.”

Since the brand logo was changed more than two years ago and a new route has been established, internationalization has also become a new goal of Li Ning. However, after years of development, from the public information, Li Ning's overseas business accounted for only about 1% of total revenue, and the vast majority of the business is still in the country.

Economic downturn pressure defense

However, even this 1% also bears the dream of local sports brand “Li Ning” going abroad. In this process, Spain is more of a benchmark. It is understood that 11 years ago, Li Ning's first overseas brand image store opened in Spain. In 2007, Li Ning signed a contract with the Spanish Olympic Committee and the Spanish basketball team to become a clothing sponsor. Therefore, the Spanish bankruptcy of the authorized dealers represented to a large extent Li Ning's "dream of going to the sea".

According to Li Ning’s previously announced internationalization vision, 2009-2013 is the first quarter, mainly for the preparation of internationalization; 2014-2018 will be fully internationalized. However, from now on, Li Ning in the “preparatory period” failed to do so. Domestic prices, signs, and other actions failed to achieve the desired result. On the other hand, according to Liang Fenluo, an analyst at Huajie Consulting Apparel Industry, Li Ning also lacks some “luck”. “The Spanish economy is not able to take a downturn in the European economy. This is a major cause of Li Ning’s authorization to break commercial funds. The point is not that Li Ning is subjectively capable.

Planning to solve inventory problems

At this point, the internationalization of Li Ning can only ease slowly. Li Ning officials also said that at present, more experience will be spent on the domestic market. Last week, Li Ning Company just announced that the original CEO Zhang Zhiyong had retired to the second line, and Li Ning, the founder, had been in charge of the company and was responsible for the overall work of the company.

Li Ning himself also said that the domestic second and third line market still has a lot of room for growth, and will focus on reducing the price to clear inventory.

Although this statement is more than two years ago when Li Ning decided to compete with Nike and Adidas in a big city, it was like a 180 degree turn, but it clearly received support from the secondary market. Rose more than 7%.

Regarding the details of the inventory clearance, Jin Zhenjun, a senior executive who co-starred with Li Ning, said during a conference call with investors that it is expected that inventory will return to normal levels in the next 6-12 months. Prior to this, it was necessary to carry out sales network and structural transformation, otherwise it would be difficult to carry out more large-scale changes. The entire process of change is expected to take 3 years to complete.