Basketball star's shoes not for sale ...
Source: Agencies |
March 25, 2013, Monday
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Print Edition
Print Edition
China's biggest sportswear brand, Li Ning Co Ltd, launched its newest brand at a gala event in Texas last month with US basketball star Dwayne Wade, resplendent in gold bow tie and plaid suit, showing off sports shoes he helped design.
There's just one snag. His fans can't buy them yet.
Li Ning, founded by the Chinese Olympic gymnast of the same name, has no stores in the US and recently shut the e-commerce section of its US website.
While luring Wade from rival Nike Inc last year in a sponsorship deal worth an estimated US$100 million over 10 years was a major coup for the Chinese firm, it has left analysts puzzling the logic of splashing out on an expensive NBA superstar with no apparent US retail strategy in place.
Industry analysts said the Wade signing was more about marketing to Chinese consumers than trying to build brand recognition in the US, where Nike and its Jordan brand control 90 percent of the basketball shoe market.
The Chinese firm is paying top dollar for an elite athlete just as Nike and other established sportswear brands are scaling back on big-name endorsements because of disappointing returns.
A decade ago, Nike reportedly paid Wade's superstar teammate Lebron James more than US$90 million for a seven-year contract, but high-potential rookie players now command shoe contracts worth just US$1-US$2 million a year.
James is the world's fourth highest-paid athlete with endorsements bringing in US$40 million a year, according to a Forbes ranking as of June 2012. Wade ranked 35th, with US$12 million a year in endorsements.
"It (the Wade deal) has a positive effect in boosting Li Ning's image ... but it doesn't necessarily generate more sales," said Elyse Wang, an analyst at Haitong International Research in the southern Chinese city of Shenzhen.
Li Ning, valued at around US$600 million, is expected to report a net loss of close to 1.1 billion yuan (US$177 million) today, after spending as much as US$288 million to buy back unwanted inventory from its distributors. Turnover is forecast to have dropped 16 percent last year to around 7.5 billion yuan.
Like industry peers, Li Ning raced to open hundreds of stores in the afterglow of the Beijing Olympics in 2008, but has been forced to retreat as sales slumped. Its shares have tumbled 86 percent from an April 2010 peak.
A burst of excitement over new Wade gear would give a much-needed boost, but none was sighted in Shenzhen stores last week.
"They're out to prove they, and by extension Chinese brands, can compete head-to-head with the global giants. The issue is that they're having trouble being successful at it," said James Roy, senior analyst at China Market Research Group.
Will DeGirolamo, an executive at PR firm DiGennaro Communications that represents Li Ning's brand initiative director Brian Cupps, said there would be more news soon on the Wade deal, including the US launch of a new line of sneakers.
"The sneakers will be available for the first time in the US in early April," DeGirolamo said.
There's just one snag. His fans can't buy them yet.
Li Ning, founded by the Chinese Olympic gymnast of the same name, has no stores in the US and recently shut the e-commerce section of its US website.
While luring Wade from rival Nike Inc last year in a sponsorship deal worth an estimated US$100 million over 10 years was a major coup for the Chinese firm, it has left analysts puzzling the logic of splashing out on an expensive NBA superstar with no apparent US retail strategy in place.
Industry analysts said the Wade signing was more about marketing to Chinese consumers than trying to build brand recognition in the US, where Nike and its Jordan brand control 90 percent of the basketball shoe market.
The Chinese firm is paying top dollar for an elite athlete just as Nike and other established sportswear brands are scaling back on big-name endorsements because of disappointing returns.
A decade ago, Nike reportedly paid Wade's superstar teammate Lebron James more than US$90 million for a seven-year contract, but high-potential rookie players now command shoe contracts worth just US$1-US$2 million a year.
James is the world's fourth highest-paid athlete with endorsements bringing in US$40 million a year, according to a Forbes ranking as of June 2012. Wade ranked 35th, with US$12 million a year in endorsements.
"It (the Wade deal) has a positive effect in boosting Li Ning's image ... but it doesn't necessarily generate more sales," said Elyse Wang, an analyst at Haitong International Research in the southern Chinese city of Shenzhen.
Li Ning, valued at around US$600 million, is expected to report a net loss of close to 1.1 billion yuan (US$177 million) today, after spending as much as US$288 million to buy back unwanted inventory from its distributors. Turnover is forecast to have dropped 16 percent last year to around 7.5 billion yuan.
Like industry peers, Li Ning raced to open hundreds of stores in the afterglow of the Beijing Olympics in 2008, but has been forced to retreat as sales slumped. Its shares have tumbled 86 percent from an April 2010 peak.
A burst of excitement over new Wade gear would give a much-needed boost, but none was sighted in Shenzhen stores last week.
"They're out to prove they, and by extension Chinese brands, can compete head-to-head with the global giants. The issue is that they're having trouble being successful at it," said James Roy, senior analyst at China Market Research Group.
Will DeGirolamo, an executive at PR firm DiGennaro Communications that represents Li Ning's brand initiative director Brian Cupps, said there would be more news soon on the Wade deal, including the US launch of a new line of sneakers.
"The sneakers will be available for the first time in the US in early April," DeGirolamo said.
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