Li Ning Fights for Dominance of China's Sportswear Market

Brand Revamp Followed by Evan Turner Endorsement and Skins Partnership Amid 11.2% Revenue Growth and New Store Openings

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SHANGHAI ( -- Like any professional athlete, Li Ning Co.'s top executives have learned a few things about going the distance.

The sportswear company added 229 stores in the first half of 2010, for a toal of 7,478 outlets. Revenue grew 11.2% year-on-year for the first six months of the year, and is expected to top $1 billion this year for the first time.

Li Ning, whose namesake and founder is the Olympic gymnast who lit the flame at the opening ceremony of the 2008 Beijing Olympics, has also retaken the No. 2 market share spot away from Adidas, according to most industry estimates.

Those growth figures are somewhat misleading, however. Sales of sportswear shoes and apparel are growing fast for all brands, especially in the lower-tier cities where cheaper domestic brands have an edge—for now. Incomes in the lower tiers are growing fast. So is the learning curve of multinationals like Nike and Adidas, marketers who are becoming adept at getting their products into China's smaller cities.

Li Ning's brand needs more energy
Li Ning leaders like CEO Zhang Zhiyong and Chief Marketing Officer Fang Shiwei saw clouds on the horizon during Beijing's big Olympic year in 2008. Foreign rivals were pouring millions into China to build their brands in the mainland, while the nation's interest was focused on sports. Young Chinese lapped up the energy, athlete affiliations and cutting-edge trends of the industry's big guns.

"In the past, the brand was like a decent hero, a big brother, but it didn't have much personality. We've given Li Ning a new look and new energy," Mr. Fang said.

Li Ning has been peeling the layers off its new look all summer, including a new logo and slogan ("Make The Change") unveiled in June, followed by an ad campaign created by Leo Burnett, Shanghai, as well as new products, athlete endorsements and global marketing tie-ups.

When Leo Burnett began working on the latest campaign one year ago, "Li-Ning was at an intersection, with business pressures and the aging of its brand image. [We] needed to address multiple issues [but] one thing was certain. 'Change' is essential for the brand," said the agency's group brand director, Angie Wong.

Change is also occurring with Li Ning's product portfolio.

The Urban Sports line launched this summer "is now the best-selling product in our stores," Mr. Fang said. Urban Sports combines sports and fashion, a wise move in a country "where consumers tend to use the same apparel and shoes at home, work and play."

Li Ning already has endorsement deals with two National Basketball Association players, veteran superstar Shaquille O' Neal and Baron Davis. Late last month, it signed a multimillion-dollar sponsorship deal with Philadelphia 76ers rookie Evan Turner, the second overall selection in the NBA draft.

Partnership with high-tech Skins brand
This month, Li Ning has already announced a partnership with Australian sportswear specialist Skins to sell jointly-branded gradient compression sportswear in the Chinese market. The clothes combine special materials with scientific tailoring targeted at different parts of the body. The goal is to increase muscle power and reduce muscle vibration, improve blood circulation, reduce lactic acid, thereby improving the wearer's performance in sports.

The high-tech sportswear has been tested by China's national diving, gymnastics, badminton, shooting and table tennis teams, all of which are sponsored by Li Ning, as well as global athletes the company works with like Russian pole-vaulter Yelena Isinbayeva.

The onion still has a few layers to go. Li Ning will finalize another endorsement deal in October with Asafa Powell, a one-time world record holder in the 100m sprint. And Li Ning will roll out a new ad campaign next month ileading up to the Asian Games to be held in November in Guangzhou.

Li Ning is also making small but significant moves overseas. with flagship stores and sponsorship of local athletes in countries like Singapore and Malaysia, where sports like badminton are also popular. Three years ago, it opened a high-tech design center in Portland to tap into that city's sportswear expertise.

Basketball over badminton
"I am bullish on the future of Li-Ning," said Terry Rhoads, a former Nike executive who now runs Zou Marketing, a sports marketing company based in Shanghai. Company executives like Mr. Zhang "are serious about hiring expert talent and building a blueprint for global success. For example, the slow but steady move into the U.S. market is smart."

Li Ning is believed to be negotiating with retired sports marketing legend Sonny Vacario, who has previously scouted talent for Nike, Adidas and Reebok.

Mr. Vacario persuaded Nike it should sign then-college ball player Michael Jordan to a long-term contract, and later talked Adidas into hiring Kobe Bryant and Tracy McGrady.

His specialty is identifying young talent for marketers, a valuable asset for Li Ning. The company is eager to expand its presence among basketball fans by signing up break-out players early in their career—because basketball is one of the most popular sports in China with tens of millions of avid fans.

Moving towards basketball—and shaking off its historical bond with badminton—would help Li Ning overcome its hip image problem at home, and represent the kind of "change" championed by its new slogan.

Li Ning is already improving "in hoops," Mr. Rhoads said, and "could become a $1 billion business in the basketball category. Smart analysts will judge Li Ning on how they are doing in sports such as basketball, running and tennis."

If successful, Li Ning's renewed focus on overall performance product, design, and marketing communications could put Li Ning on the path to become "one of the world's top four brands behind Nike, Adidas, Puma."

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