The Global Consumer Market Is Sluggish. Why Do Nike, Skycar And Lululemon Set Up Stores In China Against The Trend?

[Editor's Note]

New consumption power in the "post epidemic era"

The epidemic in 2020 will have a huge impact on the global consumer market, and retaliatory consumption has not yet arrived. In 2020, when the epidemic prevention and control is normalized, the consumer market is also changing dynamically, and consumers' lifestyle, consumption habits and spending structure are also changing. For consumer enterprises, how to break through the "post epidemic era" of China's consumer market? Under the epidemic, many consumer enterprises have changed along the trend, making more breakthroughs in the digital and new retail fields. Some traditional consumer enterprises with earlier digital transformation layout have been able to flexibly respond to the impact during the epidemic.

On July 9, the world's first Nike Rise retail concept store, Nike Guangzhou Brand Experience Store (hereinafter referred to as Nike Guangzhou), opened in Guangzhou, dedicated to creating a home of selected exclusive members.

On June 26, Nike released its financial reports for the fiscal year 2020 (June 2019 to May 2020) and the fourth quarter of the fiscal year 2020 (March 1 to May 31). With the global market hit by the epidemic, the revenue of the Greater China market in the fourth quarter increased by 1% year on year, which is the only region in the world where Nike has achieved sales growth. As a region of China where the consumer market has recovered rapidly, Nike has launched an unprecedented inventory clearing activity of discount promotion in the past two months.

In the fourth quarter of fiscal year 2020, the revenue of Greater China market increased by 1% year on year, which is the only region in the world where Nike has achieved sales growth. IC photo

According to the National Bureau of Statistics, from January to May 2020, the retail sales of clothing, shoes and hats, needles and textiles fell 23.5% year on year. Influenced by the epidemic, several well-known footwear and clothing brands around the world have experienced a crisis of store closures and layoffs. As an industry greatly affected by the epidemic, how to deal with the epidemic crisis?

The reporter of 21st Century Business Herald interviewed Nike, SKECH and other well-known shoe and clothing brands and found that affected by the epidemic, shoe and clothing brands have carried out discount promotion activities through online channels. In addition, Nike, SKECH, Lululemon and other brands have all opened physical stores in China in the past two months. At the same time, shoes and clothing brands have further strengthened the importance of online business. Digital business transformation is the core strategy of these brands in 2020.

Inventory clearing at the end of June

"Nike's promotional discount price is almost lower than the price of many domestic brands of sports shoes and clothing, which also has an impact on us." In late June, the owner of a domestic sports shoes and clothing brand that opened a shop in Jingdong told the 21st Century Economic News reporter that in his view, inventory clearing is the primary work of many domestic and foreign shoes and clothing brands this year, and the price reduction of big brands has made his shop feel sales pressure.

John Donahoe, CEO and President of Nike, mentioned the Chinese market five times when introducing the overall situation of the fiscal year in the fourth quarter of the fiscal year 2020 at the conference call. Financial report data shows that Nike's revenue in fiscal year 2020 is 37.403 billion US dollars, down 4% year on year; In the fourth quarter of fiscal year 2020, the revenue was $6.313 billion. Affected by the epidemic, most of Nike's self operated and dealer stores in North America, EMEA (Europe, the Middle East and Africa) and APLA (Asia Pacific and Latin America) were closed (about 8 weeks in the fourth quarter), with a year-on-year decrease of 38% in revenue.

Even affected by the epidemic, Nike's revenue in the Chinese market in fiscal year 2020 also increased by 11% year-on-year, achieving double-digit growth for six consecutive years. In the just concluded "618" e-commerce promotion festival, the published data showed that Nike's sales had exceeded 100 million in the first four minutes of Tmall's "618 year promotion".

For consumers, foreign shoe and clothing brands including Adidas, Nike, Lululemon and so on have experienced rare promotions in the past two months. Clearing inventory through online channels has become a solution for many shoe and clothing brands to solve their inventory backlog.

According to Nike's reply to the 21st Century Business Herald, as of May 31, Nike's inventory had increased by 31% over the previous year. From the perspective of inventory clearing, the Chinese market will get out of the predicament by the end of June, and is very satisfied with the actions taken by the company.

Nike also mentioned that the company will adjust its plan to re approve global market supply and demand. The specific methods of inventory clearing include adjusting the short-term inventory purchase plan, implementing the "de seasoning" inventory flow scheme, transferring available inventory to the digital platform, and carrying out targeted promotions and price reductions to accelerate the clearing of remaining inventory.

In the interview reply to the reporter of the 21st Century Business Herald, Nike said that this approach has been effective in the Chinese market, and it is expected that the business will return to normal market health indicators by the end of June. In fact, Nike's global inventory level is also improving. It is believed that Nike's inventory will reach an appropriate scale and be in a normal state in the second quarter.

Digital transformation self-help

In the conference call in the fourth quarter of fiscal year 2020, Nike executives mentioned that in addition to "de stocking", it is digital.

Can digital transformation become the lifeline for footwear and clothing brands to cope with the epidemic? At the Nike App launch conference in November 2019, Mike Xiuyuan, Nike's vice president of Greater China and general manager of direct retail, said in an interview with the 21st Century Business Herald reporter in Shanghai that he thought China might become the best case in Nike's entire digital transformation process.

In some very important areas, China has been far ahead of other markets. For example, a large number of consumers in China use mobile phones to shop, and they regard mobile phone purchase as part of their shopping experience. In other markets, only a few people may get shopping experience through mobile phones. Based on the habits of Chinese consumers, Nike is now learning more experience through cooperation with Chinese consumers, including relevant innovation, which can be replicated to other markets five years later.

At the opening of Nike's new store in Guangzhou, Mike Xiuyuan revealed a set of latest data. Nike launched the Chinese version of the Nike App in November 2019 and received 11 million downloads. The success of Nike App in China further proves the growing recognition of Chinese consumers for online retail. With the successful experience of Nike App, Nike will further accelerate the digital transformation of retail, create a safer and more innovative shopping experience for consumers, and promote the prosperity and development of the whole fitness, health and community.

Nike's digital business exploration in the Chinese market is also one of the important reasons for Nike to reduce the impact of the epidemic through its sales in the Chinese market. John Donahoe, CEO and President of Nike, revealed that in March and April this year, the monthly active users of Nike training applications in China increased by more than 350% over the beginning of the year. Direct contact with consumers enabled Nike's business in China to resume growth from March to May.

Digital transformation is a means for many footwear and clothing brands to save themselves from the epidemic this year. On June 11, Canadian yoga clothing brand lululemon released its first fiscal quarter financial report of fiscal year 2021. Its revenue performance in this quarter was lower than the market expectation, and its net profit declined significantly year on year.

Calvin McDonald, CEO of lululemon, said that online sales increased by 125% in April, and the growth momentum continues. During the epidemic, users spent more time at home, and the demand for yoga clothes for home sports also increased significantly, and online sales of lululemon increased. In addition, it is worth noting that the e-commerce revenue of lululemon in the Chinese market increased by 70% last year.

The epidemic has reduced offline fitness scenes and increased home fitness scenes in many places. Shoes and clothing brands represented by lululemon have also increased their investment in online fitness. On June 30, lululemon announced that it planned to acquire Mirror, a fitness technology company, at a price of 500 million dollars.

Calvin McDonald, CEO of lululemon, said: "The acquisition of Mirror is an exciting opportunity. It can grow on our vision and enhance our digital and interactive capabilities. We look forward to learning from and working with Brynn Putnam and his Mirror team to accelerate the development of personalized home fitness."

Open new stores against the trend and establish offline connection

Under the epidemic situation, some well-known footwear brands have also opened physical stores in China in the past three months in spite of the trend, while clearing inventory and adding digital transformation business. The representative ones include Nike, SKECH and lululemon. Most of these new stores opened against the trend have the characteristics of large area and close connection with brand digital business, more like brand experience stores with high digital level.

Taking Nike as an example, according to the information provided by Nike to the 21st Century Business Herald, Nike Guangzhou, which opened its store on July 9, is a home of selected exclusive members built by Nike for local members, providing in-depth insight into the needs of members and providing highly digital retail services. Nike Guangzhou will launch a variety of member benefits related to local cities, including preferential purchase of city specific popular products and sports activities for members, to further help Nike establish an unbreakable relationship with local members.

On May 1, 2020, SKECH opened two brand new image stores in Shanghai Zhengda Plaza, one is the flagship store for children, and the other is D' Lites Fashion Store. On July 9, SKECH's written reply to the 21st Century Business Herald mentioned that SKECH chose to open new physical stores against the background of the epidemic affecting physical retail. On the one hand, they were optimistic about the prospects of the Chinese market. On the other hand, May 1 coincided with the May 5 Consumer Day in Shanghai, and physical retail was recovering, so they opened physical stores according to the original plan.

SKECH also revealed that the opening of SKECH stores will continue this year, and they will plan according to the brand development strategy. In this special period, they will still open key stores in key cities to meet the needs of consumers.

Chen Weili, CEO of SKECH China, South Korea and Southeast Asia, said in an interview with 21st Century Business Herald at the end of 2019 that they planned to open more than 900 stores in 2020. Chen Weili revealed that SKECH's store opening mode is very simple, that is, the first and second tier cities will continue to strengthen the layout. The third, fourth and fifth tier cities are their new markets. In some small cities, SKECH will open large stores. SKECH will have strategic cooperation with real estate developers. Getting the best location and opening large stores is SKECH's store opening strategy.

In response to the 21st Century Business Herald, SKECH said that now SKECH will have different priorities in opening stores. In the first and second tier cities, the strategy is to open different types of stores, and there will be more boutiques to enhance the brand's store image, act as a brand name card and the role of leader, and meet the needs of various consumers for accurate life scenes. Third tier to fifth tier cities are still in the mode of superstore super stores. Spacious stores can fully present SKECH's diversified products to consumers and provide the whole family with the clothing needs from head to foot. At Lululemon's financial report conference call for the fourth fiscal quarter of fiscal year 2020, Calvin McDonald, CEO of Lululemon, said that the number of stores in China would double by 2020.

According to the 21st Century Business Herald, Lululemon has opened stores in Qingdao, Kunming, Hangzhou and Tianjin in the past three months, of which the stores in Qingdao, Kunming and Tianjin are Lululemon's first stores in these cities. By June 28, Lululemon had opened 32 stores in China.

The similarities between Nike, SKECH and other brands in opening new stores in China, in addition to completing offline sales, are also a regional experience center for brands, as well as an offline connection and interaction center for online members and brands. In the official introduction of the new Lululemon store in Tianjin Vientiane City, it was written that the store would become the brand's community center in the region and establish "hot sweat connection" with community members.