Why Are Nike, Skykey And Lululemon Opening Stores In China In The Face Of A Downturn In The Global Consumer Market?

[editor's note]

New consumption power in "post epidemic era"

The epidemic situation in 2020 will have a huge impact on the global consumer market, and retaliatory consumption has not yet come. In 2020, with the normalization of epidemic prevention and control, the consumer market is also undergoing dynamic changes, and the lifestyle, consumption habits and expenditure structure of consumers are also changing. For consumer enterprises, how to break through the "post epidemic era" of China's consumer market? Under the epidemic situation, many consumer enterprises have made more breakthroughs in the field of digital and new retail, and some traditional consumer enterprises with early digital transformation layout were able to flexibly cope with 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 building a select exclusive member's home.

On June 26, Nike released the financial reports of fiscal year 2020 (June 2019 to may 2020) and the fourth quarter of fiscal year 2020 (March 1 to May 31). Under the situation that the global market was hit by the epidemic, the revenue of Greater China market in the fourth quarter increased by 1% year-on-year, which was the only area in the world where Nike achieved sales growth. As a fast recovery of the consumer market in China, Nike has launched an unprecedented discount promotion and inventory clearing activity 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 was the only area in the world where Nike achieved sales growth. IC photo

According to the data of the National Bureau of statistics, the retail sales of clothing, shoes, hats and knitwear from January to may in 2020 decreased by 23.5% compared with the same period last year. Affected by the epidemic, many well-known footwear and clothing brands in the world have burst out of store closures and layoffs. As an industry greatly affected by the epidemic, how to deal with the epidemic crisis?

21st century business reporter interviewed Nike, skykey 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 with the help of online channels. In addition, Nike, skykey, lululemon and others 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 clearance at the end of June

"Nike's promotion of discount prices are almost lower than the prices of many domestic brands of sports shoes and clothing, which also has an impact on us." In late June, the boss of a domestic sports shoes and clothing brand, which opened a shop in Jingdong, told the 21st century economic report that, in his opinion, clearing inventory is the first task of many shoe and clothing brands at home and abroad this year, and the price reduction of big brands makes his shop feel the sales pressure.

John Donahoe, CEO and President of Nike, mentioned the Chinese market five times when he introduced the overall situation of the fiscal year in the fourth quarter conference call of fiscal year 2020. According to the financial report data, Nike's revenue in fiscal year 2020 was 37.403 billion U.S. dollars, a year-on-year decrease of 4%; in the fourth quarter of fiscal year 2020, revenue was $6.313 billion. Affected by the epidemic, most of Nike's own and dealer stores in North America, EMEA (Europe, middle East and Africa) and APLA (Asia Pacific and Latin America) were closed (closed for about 8 weeks in the fourth quarter), and the revenue decreased by 38% year-on-year.

Even affected by the epidemic, Nike's revenue in China increased by 11% in fiscal year 2020, achieving double-digit growth for six consecutive years. In the just concluded "618" e-commerce promotion Festival, the published data show that in the first four minutes of tmall's "promotion in 618", Nike's sales volume has exceeded 100 million.

For consumers, in the last two months, foreign shoe and clothing brands including Adidas, Nike, lululemon and other foreign brands have made rare efforts to promote sales. Clearing inventory through online channels has become a solution for many shoe and clothing brands to solve the overstock.

As of May 31, Nike's inventory has increased by 31% over the previous year, according to the information provided by Nike in response to 21st century economic reporter. From the perspective of inventory clearing, the Chinese market will be out of trouble by the end of June and is very satisfied with the actions taken by the company.

The company will also re approve the company's global market adjustment plan. The specific methods of inventory clearing include adjusting the short-term inventory purchase plan, implementing the "de seasoning" inventory flow scheme, transferring the available inventory to the digital platform, and carrying out targeted sales promotion and price reduction, so as to accelerate the clearance of remaining inventory.

In an interview reply to 21st century economic reporter, Nike said that this method 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, and it is believed that Nike's inventory will reach the appropriate size and be in a normal state in the second quarter.

Digital transformation and self rescue

In the fourth quarter of fiscal 2020 conference call, Nike executives mentioned more than "de Stocking", which is digital.

Can digital transformation be the lifesaving straw for footwear and clothing brands to cope with the epidemic situation? During the press conference of Nike, vice president of Nike retail, said that he had become the best case of Nike in the 21st century.

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

The latest Chinese version of Nike app was released in November of 2019. The success of Nike app in China also further proves that Chinese consumers increasingly recognize 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.

The exploration of Nike's digital business 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 of this year, the number of active users in China increased by more than 350% compared with 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 of self-help for many shoe and clothing brands since this year's epidemic. On June 11, lululemon, a Canadian yoga clothing brand, released its first fiscal quarter financial report in fiscal year 2021. Its revenue performance in this quarter was lower than market expectation, and its net profit decreased significantly year on year.

According to Calvin McDonald, lululemon CEO, online sales rose 125% in April and the growth momentum continues. During the epidemic period, users spend more time at home, and the demand for yoga clothes for home sports has also increased, and online sales of lululemon have increased. Another notable figure is that lululemon's e-commerce revenue in China increased by 70% last year.

The epidemic has reduced the number of offline fitness scenes in many places, and increased the number of home-based fitness scenes. Shoes and clothing brands represented by lululemon have also invested in the field of online fitness. On June 30, lululemon announced plans to buy mirror, a fitness technology company, for $500 million.

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

Opening new stores against the trend and establishing offline connection

Under the epidemic situation, shoe and clothing brands are in the process of clearing inventory and increasing the size of digital transformation business. At the same time, some well-known shoe and clothing brands have also opened physical stores in China in the past three months. The representative ones include Nike, skykey and lululemon. Most of these digital stores have the characteristics of high-level digital brand experience, such as large-scale stores.

Take Nike as an example. According to the information provided by Nike to the 21st century economic reporter, Nike Guangzhou, which opened its store on July 9, is a select exclusive member's home built by Nike for local members. It has an in-depth insight into the needs of members and provides highly digitized 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, so as to further help Nike establish an unbreakable relationship with local members.

On May 1, 2020, skykey opened two brand-new image stores in Shanghai Zhengda Plaza, one is children's flagship store, the other is D & apos; lites fashion store. In a written reply to the 21st century economic reporter on July 9, skykey chose to open a new physical store against the background of the epidemic impacting on physical retail. On the one hand, they were optimistic about the prospect of China's market. On the other hand, on May 1, it coincided with the May 5 consumption festival in Shanghai, and physical retail was recovering, so they opened physical stores according to the original plan.

Key stores will continue to be opened in the city in accordance with its strategy.

In an interview with 21st century business reporter at the end of 2019, Mr. Chen Weili, chief executive of China, South Korea and Southeast Asia, said that they planned to open more than 900 stores by 2020. Chen Weili revealed that the store opening mode of skykey is very simple, that is, the first and second tier cities will continue to strengthen the layout, and the third, fourth and fifth tier cities are their new markets. If they open large stores in some small cities, skykey will have strategic cooperation with real estate developers, and getting the best position and opening large stores is Skeeter's opening strategy.

In response to the 21st century economic report, Mr. scacci said that at present, there will be different emphases in the opening of its stores. The strategy in the first and second tier cities is to open different types of stores, and there will be more boutiques to enhance the brand's store image, play the role of brand name card and leader, and meet the needs of all kinds of consumers' accurate life scenes. From the third tier to the fifth tier cities, the mode of super store is still adopted. The spacious stores can fully present the diversified products of skykey to the consumers, and provide the whole family with head to toe wear requirements. During lululemon's fourth quarter fiscal 2020 earnings call, lululemon CEO Calvin McDonald said the company's number of stores in China would double in 2020.

According to the 21st century economic report, lululemon has opened stores in Qingdao, Kunming, Hangzhou and Tianjin in the past three months. The stores in Qingdao, Kunming and Tianjin are all lululemon's first stores in these cities. As of June 28, lululemon opened 32 stores in China.

The similarities between Nike, skykey and other brands in opening new stores in China are not only the completion of offline sales, but also the experience center of a brand in the region and the offline connection and interaction center between online members and brands. According to an official introduction to the new lululemon store in Vientiane City, Tianjin, the store will become the community center of the brand in the region and establish a "hot sweat connection" with community members.