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Shoe surprise with an unexpected discount

By Fang Yunyu  (Global Times)

08:49, March 15, 2013

New Nike and adidas sneakers that have just arrived in Beijing are being sold at an unexpected discount, with up to 50 percent off at the New World Department Store on Dawang Lu last weekend.

Dozens of consumers were trying and buying the new sneakers at the store, with prices of around 300 yuan ($48), which is usually what domestic brands cost.

A mid-range pair of Nike shoes normally sells for around 600 yuan ($96.36) in China, while a mid-range pair of Li Ning shoes costs 400 yuan.

The shop assistants were greatly outnumbered by the customers, who had to wait for a long while before being served.

One consumer told the Global Times that although she had to wait, she was still very happy to be able to buy a new pair of adidas sneakers at a "very fair" price of only 290 yuan.

Such discounts are set to become more common across China.

Too much stock

On March 4, the Shanghai-based National Business Daily reported that US sportswear maker Nike will open 40 to 50 factory outlets (discount stores) in China this year to sell its shoes and clothes at huge discounts, as a way to address its high inventories.

Nike stores will open not only in big cities but also in smaller ones, offering discounts up to 70 percent, the newspaper said, citing a source close to the company. Nike refused to comment when contacted by the Global Times Tuesday.

"After recent years of fast expansion, overseas sportswear brands, like their domestic peers, have encountered the problem of high inventories," Zhang Qing, founder and CEO of Beijing Key Solution Sports Consulting Co, told the Global Times Sunday.

Fierce competition from fashionable clothing brands like Zara and Hennes & Mauritz AB (H&M) is another factor making the circumstances tougher for sportswear firms, Zhang noted.

H&M disclosed earlier this year that its 2012 China sales surged 50 percent year-on-year to 5.4 billion Swedish kronor ($843 million), much faster than its 9 percent global sales growth rate. The Swedish clothing company also said it added 52 new stores in China last year, pushing the total to 134.

In comparison, Nike said in its latest financial report that its total revenue for the September-November 2012 period reached $6 billion, an increase of 10 percent over a year earlier. However, Nike's sales in China during the period dropped by 12 percent year-on-year to $577 million. It was the only market around the world to generate negative growth for the company.

Nike does not yet post full details of its China inventory figures, but it said they were up by 9 percent year-on-year in the same period.

"Our main area of focus for inventory management continues to be China, where we're working to manage down inventory at retail," Don Blair, Nike's chief financial officer, said during a conference call on December 22, 2012.

Changing strategies

Wei Guangju, a senior consultant at Adfaith Management Consulting, told the Global Times Monday that after the 2008 Beijing Olympic Games, many sportswear companies viewed China as a fast growing market and were active in entering it.

"The overheated market led to high inventories, which is why they are all changing strategies," said Wei.

Adidas was the first sportswear giant to encounter inventory problems in China.

In 2009, the German company saw its sales in China fall by 16 percent year-on-year, the biggest decline globally.

"But since then, adidas has diversified its product line, producing more fashionable products, and controlling its inventories strictly," said Zhang, noting that these measures have kept adidas running well in China.

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