**: Ebang Power Network.
The brand is open and bows
Adidas CEO Björn Gulden did not expect that it would not be so easy to regain the Chinese consumer market. The soil that once made Adi so sought after is changing.
Last September, when Gulden visited China for the first time, he wore a blue coat with the word "China" printed on his chest. This is a model that Adidas introduced during the 2008 Beijing Olympics and a way for him to get close to the Chinese market. During his visit to China, Gulden said that Adidas will make greater efforts to get closer to the Chinese local market in the future, and currently has a team of 35 designers and nearly 100 creatives to serve the Chinese market.
Faced with the continued sluggish consumption expectations in China, the long-established sales giant decided to adapt measures to local conditions. At the earnings report meeting in November last year, Goulden revealed that in order to strive for a larger market share, Adi intends to launch cheaper shoes in China, and if you want to really increase sales, you must keep the ** down and come up with really good shoes at a price of less than $100. 」
International brands that occupy a favorable ecological niche take the initiative to bend down to domestic consumers, while domestic brands can only suffer from the enemy. The first to bear the brunt is Li Ning. In the past, most of Li-Ning's running shoes cost $30 to $60, less than half that of Adinaike, but higher than other Chinese sports brands.
But after large-scale consumption reached its peak, Li Ning has been weak for two consecutive years. Relying on the popularity of the national tide, Li Ning was popular at home and abroad in 2018, and in 2021, it ushered in the second spring of performance due to the Xinjiang cotton incident. However, since the third quarter of 2021, Li Ning's performance growth has begun to encounter challenges.
According to Li Ning's financial report for the third quarter of 2023, its sales, offline channels, and online business have all experienced a slowdown and decline in growth. As soon as the Q3 financial report came out, Li Ning's share price ** evaporated the market value of HK $150 billion overnight.
In the first meeting after the Q3 financial report, Li Ning said that it will significantly reduce its performance target in 2023 due to goods fleeing and inventory problems. According to the financial report, nearly half of Li Ning's revenue** is achieved by relying on dealers, taking the proportion of channel revenue in 2022 as an example, direct sales, dealers, and e-commerce channels account for % respectively.
In fact, throughout 2023, Li Ning struggled with the cycle of destocking. According to the analysis of people close to Li Ning, Li Ning's online and offline, dealers and direct stores discount inventory together make dealers with greater inventory pressure bound to return cash as the guide and choose to sell on as many online e-commerce platforms as possible, even if it is an unauthorized channel, which once caused price chaos.
Compared with other brands, the inventory turnover time of 3 months at every turn, it is not easy for Li Ning to control the inventory turnover days within 2 months in the first half of last year, but it is still difficult to escape the inventory problem.
Anta, which is a difficult brother with Li Ning, will also grow from 26 in the same period last year in the first half of 20233% slipped to 61%。As Anta's cash cow, FILA, which focuses on mid-to-high-end products, fell to single digits in Q1 last year, and even if the growth rate in Q3 rebounded to the range of 10%-20%, it was still a big drop from the 25% growth rate in 2021.
In the face of a more brutal situation in 2024, almost all brands have clearly realized that there is no shame in lowering oneself, and only by bending down and bowing one's head can one survive. They are more concerned about recovering users and market share that may have been lost than those brands that have been diluted.
Previously, insiders of well-known beauty brands told us that the group immediately adjusted its expectations for 2024 after last year's Double 11.
If the protagonists of the low price war in 2023 are still e-commerce platforms and offline retailers, the keywords are traffic subsidies, white labels, industrial belts and vertical ** chains; This year, it will be the brands that will suffer even more. In other words, it's the turn of brands to do their own thing. Otherwise, the living space may be even more cramped.
We believe that Adidas's downward stamping and re-anchoring the mainstream ** band are just a microcosm of the collective change of the brand this year.
Is price reduction the only option?
If you look at the timeline, this wave of "chopping and cutting" initiated by the brand began in the fourth quarter of last year. It's hard to say whether the Double 11 promotion, which is a consumer vane, has aggravated the anxiety of brands.
The first to seek change is the high-end snack brand BESTORE. In November 2023, BESTORE announced the implementation of the largest price reduction for the first time in 17 years, with an average price reduction of 22% and a maximum price reduction of 45% for 300 products, mainly focusing on snacks with cost optimization but no impact on quality and high repurchase rate.
Although BESTORE claims that the driving force for price reduction mainly comes from the efficiency improvement of the ** chain, its financial report shows that in the first three quarters of 2023, the company's revenue fell by 14% year-on-year33%。It can be seen that the price reduction is really a helpless move.
The snack assassins that consumers couldn't climb in the past are finally no longer arrogant. Not only good stores, but also brands such as Three Squirrels, Baicaowei, and Laiyifen followed, and the person in charge of Laiyifen said that the company has launched a weekly popular activity, and the popular products can allow consumers to save 30%-60%.
From 2017 to 2022, the net profit of listed companies in the snack food industry such as BESTORE, Three Squirrels, and Laiyifen generally fluctuated. In 2022, the average net profit of these listed companies has declined, indicating that the profit scale of the snack food industry is shrinking, and this downturn may become the norm for quite some time - agency data shows that the peak search volume of Double 11 in 2023 will be 60% lower than the same period last year, and at the same time, the transaction volume of many e-commerce companies has begun to become invisible.
Of course, there is often hope in a crisis. In fact, many consumer brands around the world have risen through self-depreciation during the Great Depression and economic crisis.
Pepsi, which was born in 1898, was born 12 years later than Coca-Cola. In 1930, when the United States entered an economic crisis, PepsiCo began to promote its products with a low-price strategy. By doubling the size of the bottle and increasing the quantity without increasing the price, the marketing slogan of "five cents can buy two goods" was played, and it successfully stood out at the moment when the advertising budget was insufficient.
This strategy remained in place until the end of the Second World War. Although Pepsi was once seen as a low-class drink and a black drink, between 1936 and 1938, Pepsi's profits doubled and it became the second largest cola brand in the United States.
There are also brands that see offensive opportunities against the trend from the cycle, and then achieve cross-category operation. For example, McDonald's has entered the coffee market from fast food. During the 2008 global financial crisis, McDonald's posted a provocative slogan on the door of Starbucks' Seattle headquarters - $4 is stupid,* followed by a line of small print "Let's start** instant coffee."
This resonated with customers who were suffering from the economic crisis at the time, and after that, McDonald's set up coffee bars in nearly 14,000 restaurants in the United States, and the new brand McCoffee, which focused on low prices, grew with McDonald's global expansion and became a competitor to be reckoned with Starbucks.
Of course, low prices and downward slots are not the only means for brands to cope with the cycle. During the Great Depression in Japan, after seeing that his peers might not be able to sell their clothes even if they cut prices and sell them, Uniqlo founder Yanai Masashi realized that in the economic downturn, consumers do not shop because things are expensive, but because they lose their reason and confidence to shop.
Yanai Masa's idea is to provide customers with new reasons to buy and stimulate their desire to spend. For example, the 1998 polar fleece jacket, which is known for its high warmth and extremely low price, became an instant hit when it hit the market, making Uniqlo the biggest leap forward since its inception and becoming the largest clothing retailer in Japan.
Regarding Uniqlo's success, there are many dimensions of interpretation from the outside world, such as the parity strategy that conforms to the downward cycle, the positioning of the mass basic model, etc., but one thing cannot be ignored, that is, the ability to innovate a single product, whether it is polar down, heat tech, or light down, most of Uniqlo's popular items have both material innovation and cost performance, which can stimulate new consumer desires and naturally resist the cycle.
Of course, Uniqlo's ability to innovate has been lackluster in recent years.
In the downward cycle, how can brands cross themselves?
For domestic consumer brands, 2024 also has the opportunity for such in-depth reflection and change.
First of all, in the downward cycle, discounting will become the norm, which is an opportunity for brands to reorganize their relationship with channels. According to the China Association of Department Store Commerce**, compared with other formats, the discount market will continue to develop rapidly in 2024, seizing more market share that originally belonged to hypermarkets, supermarkets and department stores.
In the face of the sharp decline in sales of traditional channels and the fierce fighting, existing brands have put down their bodies, taken the initiative to optimize their structure, and even began to bypass the first merchants and negotiate directly with retailers to meet the needs of the channel.
The trend of discounting has broken the traditional retail supply relationship - retailers are no longer just channel providers, and brands are not simply suppliers, but both parties jointly customize products that are more in line with the market. In the process, retailers' data insights also bring new product ideas and sales increments to brands that are adapted to the downward cycle.
For example, Hema and Yili have recently reached a customized cooperation intention, and the two sides will jointly develop high-quality and inexpensive refrigerated milk, room temperature milk, and flavored yogurt.
Zhang Ning, co-founder of Good Sale, also mentioned in an interview with "Nonoise" that at the beginning of Good Sale, many brands did not want their products to appear on the shelves of discount stores for price control or brand image considerations, so most of their products were supplied by dealersIn 2023, many brands will take the initiative to talk about cooperation, and by the middle of the year, there will be more than 200 direct signed brands on sale, and now there is a new trend, many big brands will provide inventory and tail goods.
Second, the Tropic of Cancer is becoming a new consumer trend, and it is necessary for brands to re-examine physical retail.
After the release of the semi-annual report last year, Zhao Dongsheng, vice president and CFO of Li Ning Group, said that consumers' consumption habits have migrated, and the popularity of online shopping has declined. In the first half of 2023, Li Ning's offline retail store revenue increased by 22% year-on-year3%, which is much higher than its online growth rate. Not only that, in the first half of last year, the proportion of turnover of large stores with an area of more than 300 square meters increased by nearly 10%.
BESTORE, which was the first to announce price cuts, saw its offline sales increase by 8% year-on-year, despite a nearly 20% decline in online business sales in the third quarter of 202397%。
According to the Consumer Goods and Retail Outlook 2024 released by the Economist Intelligence Unit, global retail sales will grow by 6% in 20247%, brick-and-mortar store sales will account for more than 85% of total sales, and 2024 is also expected to be the strongest year for offline retail growth since 2021.
The above-mentioned beauty brand insider also said that the e-commerce business has been difficult in the past two years, so his group is accelerating the transfer from online to offline.
After three years of the pandemic, offline consumption has placed more emphasis on experience and connection than ever before, including the connection between people, people and space, and the life concept represented by the brand.
As for how to do the first line test, retailers can probably provide a lot of thinking for brand owners. Take the time to visit Sam's Club, Costco, Good Sale, Hi Sale, and maybe many questions will be answered in the crowded **.
The third point is to shift to new, more efficient channels and seize new opportunities that come with channels such as just-in-time retail. In 2023, Meituan, Ele.me, JD.com, etc., are all working on instant retail, providing assistance for brands with a more certain attitude.
Last year's Singles' Day, the number of products participating in Meituan's flash sale increased by 123% year-on-year, and the turnover of JD.com Hourda increased by 45% year-on-year. Ele.me also announced the launch of the Double Hundred Plan, working with 100 retail brands to achieve 100% growth in two years.
If the focus of Meituan's instant retail is self-operated + large chain supermarkets convenience stores + small and medium-sized merchants, and JD.com's focus is JD Daojia, retail brands will be a starting point for Ele.me to seek differentiated competition. We learned from insiders that Shi Quan, vice president of Ele.me and head of the retail brand center, was previously the person in charge of the Tmall supermarket flash store, and his arrival also connected the deeper brand resources to Ele.me. According to previous reports, in the in-depth cooperation with Ele.me, some brands have achieved a monthly transaction volume of more than 100 million.
There is reason to believe that a new situation of brand and channel integration and symbiosis and mutual achievement is taking shape.
Jack Ma said that all great companies are born in winter. This sentence probably applies to brands in 2024 as well.
Note: Wen Modi, article**: noise reduction, this article is the author's independent point of view, and does not represent the position of Ebang Power.