Li Ning'S Experience In Searching For The Rise Of Domestic Products From Nirvana

Speaking of domestic brand Li Ning, you must not be unfamiliar. The company was founded in 1990 by Mr. Li Ning, Prince of gymnastics. Founder Li Ning is undoubtedly a legend in China. He created a myth in the history of World Gymnastics in the last century. He has won 14 World Championships and won more than 100 gold medals.

For Li Xiandu, the company's most important brand recognition of sportswear in Hong Kong in June 2004 was the most important brand identification of Li Xiandu. In 2019, Li Ning's market share in China's sportswear market is 6.3%, second only to Nike (22.9%), Adidas (20.4%), Anta (16.4%) and SKECHERS (6.8%).

As the pride of domestic products, Li Ning has become a very popular consumer target in the Hong Kong stock market. However, looking back on the company's development, we find that it has not been smooth sailing. After the peak, it has experienced a period of gray low tide, and many offline stores are closed. We may have some perception of this.

Li Ning's Phoenix Nirvana is worth savoring. It has a certain reference value for the rise of Chinese consumer brands. Since its establishment, Li Ning's development has been like a Dunning Kruger curve. Today, we will review the ups and downs of this domestic product company.

From peak to trough

In 1988, Li Ning, the prince of gymnastics, announced his retirement, ending his legendary sports career. Two years later, that is, in 1990, Li Ning founded Li Ning sporting goods Co., Ltd. in Sanshui, Guangdong Province, and opened a new chapter in his life.

In the early days of its establishment, the company was mainly engaged in the production and sales of "Li Ning brand" sportswear. In August of the same year, "Li Ning brand" sportswear was selected as the designated clothing for the torch relay of the 11th Asian Games. Therefore, the "Li Ning brand" quickly spread across the country. The starting point of Li Ning is very high, and it can even be said that Li Ning was born with a golden key. Behind all this is the strong commercial value of Li Ning label. One more thing to say here is that Li Ning was eager to set up a company within two years after his retirement, which also fully considered the timeliness of commercial value. With the passage of time, people will gradually forget the glory of Li Ning, and the commercial value will also be quietly lost. If the brand of Li Ning is only established today, how many people are willing to pay for it?

In the 21st century, especially after China's accession to the world trade organization, China's economy has taken off rapidly. From 2001 to 2009, the compound annual growth rate of China's GDP exceeded 15%. With the rapid development of sports shoes in 2008, people's demand for sports shoes and sports shoes is rising. In the face of development opportunities, the company rapidly expands its sales channels, seizes market share and expands brand influence by rapidly increasing the number of sales outlets. This extensive channel expansion development model has achieved remarkable results in the early stage of enterprise development, and the driving factor behind this is the strong domestic demand market which rises with the economic development. In 2008, the company seized the opportunity of the Beijing Olympic Games to expand the channel scale and achieve a new high performance. In 2010, the company's revenue and net profit reached the peak of the industry at that time, with an operating revenue of 9.49 billion, a year-on-year increase of 13%, and the net profit attributable to the parent company was 1.11 billion, with a year-on-year increase of 18%.

The most serious hidden danger is the high-speed development. Since 2005, the amount of 31-60 days and 61-90 days in Li Ning's accounts receivable age structure began to rise significantly. This shows that in the process of expanding the number of stores, the ability of dealers to recover funds is weakened, and the quality of new stores is gradually declining.

Crisis is the result of long-term accumulation. It changes from quantitative change to qualitative change, and it will be ignited by a special event. In 2008, Li Ning's business income increased by 83% to 66.9 billion yuan. However, in the aging structure of accounts receivable, the amount of 0-30 days increased by only 1.1%, while the amount of 31-60 days and 61-90 days increased by more than 100%, and the amount of 91-180 days increased by more than 80%. In other words, the growth of the company's operating income did not translate into cash flow in time, but turned into accounts receivable with long aging and high risk. The cash withdrawal of dealers was blocked, and the overstock of products slowed down the company's performance.

In 2010, China's market environment has changed dramatically. The environment that used to be considered as a huge business opportunity has become extremely competitive. More and more competitors enter this industry, homogenized operation intensifies competition, and channel expansion development model is no longer suitable for the new environment. At the same time, the aftershocks of the financial crisis continue to affect the macro environment of the industry, and the lack of consumer confidence makes the development of the industry even worse. Due to misjudgment on the future development trend of the industry, the company started a series of radical and controversial reform programs at that time, including the "brand reconstruction + channel integration plan" implemented in 2010 and the "three-step" transformation plan after the introduction of TPG team after 2012. All of them ended in failure, and the company's revenue and profit level declined year after year.

At the same time, Anta, on the contrary, caught up with others. In 2012, Anta surpassed Li Ning to become the first in the industry, and continued to consolidate its position in the industry in the following years.

Li Ning's return to Nirvana

As mentioned above, Li Ning carried out two rounds of reform in 2010 and 2012, but both failed in the end. However, from today's perspective, the two rounds of reform at that time were feasible, and the reasons for the failure were quite different.

In 2010, under the leadership of then CEO Zhang Zhiyong, the company officially launched the "brand reconstruction" plan, and changed the logo, proposing "post-90s" Li Ning, pursuing the younger brand, hoping to attract more post-90s consumer groups. The original intention was good, but the result was to hit itself with a stone.

The target group of "post-90s" didn't fully accept the brand because they didn't understand the brand story and connotation. However, the original mainstream purchasing group (such as the Post-70s generation) felt abandoned by the company's brand of "post-90s Li Ning". While positioning the brand as high-end, it raised the price, which greatly damaged the original loyal core consumer groups.

In 2012, Li Ning, who was in trouble, got the investment from TPG, and then TPG sent eight people, including Jin Zhenjun, the person in charge of Greater China, to intervene in the specific management of Li Ning company. If only from the perspective of reform measures, the plan brought by Jin Zhenjun played a key role in Li Ning's later rise. It can be summed up in two aspects: implementing the "channel rejuvenation plan", speeding up the processing of overstocked inventory and improving channel profitability; and creating a retail oriented business model to improve the end consumer experience.

Subsequently, the company made drastic changes in the number and quality of its stores, evaluated the profitability of all stores and closed the inefficient stores. This is what you can see. At that time, Li Ning's offline stores in many supermarkets were closed. While closing inefficient stores, the company increased the number of factory stores and discount stores.

After the reform, the number of stores of the company decreased sharply from 8255 in 2011 to 5266 in 2014, a decrease of more than 30%. Meanwhile, retail stores showed an upward trend in the same period, from 760 in 2011 to 1202 in 2014. Li Ning is realizing the transformation from horizontal channel expansion mode to retail oriented business model.

At the same time, the company's aging structure is also constantly optimized. According to the statistics of the daily financial report, from 2012 to 2014, Li Ning's total accounts receivable decreased from 2.425 billion yuan to 1.857 billion yuan, and the accounts receivable aged 91-180 days decreased from 764 million yuan in 2012 to 560 million yuan in 2014, with a compound annual decrease of 14.39%. Accounts receivable aged over 181 days decreased from 696 million yuan in 2012 to 473 million yuan in 2014, with a compound annual decrease of 17.54%.

Despite the success of the reform, the sluggish profitability is an unavoidable topic. In 2012, the loss of net profit attributable to parent company of Li Ning Company reached 1.979 billion yuan. Although the loss of net profit attributable to parent decreased to 392 million yuan in 2013, the loss increased to 781 million yuan in 2014. Unlike the reform in 2010, the failure of Li Ning's reform in 2012 was caused by a huge shock of management. At that time, Jin Zhenjun introduced a large number of external executives in order to improve decision-making efficiency and execution. However, the company's top management and executives of CMO left the company's internal management system, such as Li shining, who were familiar with the company's top management and the company's top management, were unable to implement the company's management system.

Suffering from successive reform failures and internal shocks, what Li Ning needed most at that time was to unite people's hearts and reshape culture. The return of founder Li Ning was an unexpected surprise. At the end of 2014, the board of directors officially appointed Li Ning, the executive chairman, to serve as the acting chief executive officer, returning to the front line of the company. In July 2015, Li Ning company announced that its strategic direction will change from sports equipment provider to "Internet + sports life experience" provider. On August 8, 2015, on the 25th anniversary of the company's establishment, Li Ning restarted the founding slogan "everything is possible".

In addition, the company began to gradually strengthen the cost control. At the end of 2014, the company officially announced that it would give up sponsoring the national gymnastics team. Since then, the company has continuously reduced its expenditure and reduced unnecessary TV advertising and non sports star endorsement. In 2015, the net profit of the company's parent company changed from negative to positive, realizing a small profit of 14 million yuan. After that, the company's operating income continued to rise, and the net profit attributable to the parent company gradually recovered and reached a new high. In 2019, the company's operating income increased to 13.88 billion yuan, a year-on-year increase of 31.85%, and the net profit attributable to the parent company could increase to 1.499 billion yuan, with a year-on-year growth rate of 109.59%.

From 2015 to 2019, the number of stores of the company has also stepped into the upward channel again, with the total number of stores increasing from 6133 in 2015 to 7550 in 2019. At the same time, the turnover efficiency of the company is also constantly improving, and the turnover days of accounts receivable decreased from 68.54 days in 2015 to 20.97 days in 2019. Li Ning has returned to the right track.

Finally, in addition to the success of the channel reform, there is a more important reason for Li Ning's rebirth from nirvana, which is innovation. According to the daily financial report, the company has attached great importance to original design since its inception. Li Ning, the founder of the company, always believes that originality is a cause worth upholding and striving for. Since 1998, the company has established China's first clothing and shoe product design and development center, taking the lead as a Chinese sporting goods company with independent development. Since then, the company has successively set up design and development centers in Hong Kong, Portland, Beijing and other places to consolidate the product design and R & D capability. Since its listing, Li Ning's R & D expense rate has been maintained at 2% - 3%, even when the company is facing difficulties, The company still insists on investing in R & D.

On the morning of February 7, 2018, Li Ning appeared at the New York Fashion Week autumn / winter show with his own shoes and clothes under the theme of "Enlightenment". As the first Chinese sports brand to land on the international show, Li Ning's first appearance surprised the whole audience.

Li Ning's amazing appearance in fashion week is not achieved overnight, but stems from the company's long-term insistence and precipitation on original design. Mr. Buffett said that time is a friend of high-quality enterprises. I hope all domestic brands can encourage this.