Nike, already the number one sportswear brand in China, aims to double its sales in the country by 2015, and reach a target of $4 billion annually, according to Don Blair, Nike Vice President and CFO. Nike, which has 7,000 stores in the world's most populous country, has already capitalized off of China's growing basketball obsession. Can it make further inroads in a country where brand-pirating is rampant, exercise culture is limited, and the disparity of wealth is so great?
Nike faces some big obstacles: "Gyms have grown in popularity in China in recent years and sports-gear retailers have enjoyed increasing sales," says Laurie Burkitt in The Wall Street Journal. "But market watchers say a significant amount of the population doesn't harbor a Western-style passion for working out." That will make boosting sales a formidable challenge, as will increasingly fierce competition from other foreign brands, like Gap and H&M.
"In China, Nike sets out to alter sports mindset"
But Chinese brands are faltering: Last year, the Chinese brand Li Ning overtook Adidas to grab the second place spot in the Chinese sportswear market (behind Nike), says Patti Waldmeir in the U.K.'s Financial Times. But Li Ning has since struggled, opening the door for Nike to grab more customers. As China grows more wealthy, local brands face a conundrum: Stay true to their "cheap-and-cheerful roots" or try to go upmarket and hope consumers will follow. The latter often doesn't work, as "Chinese customers in general do not want to spend extra for a domestic brand if they can afford a foreign one."
"Li Ning raises concerns for Chinese brands"
Still, Nike's got to be smart: Nike faces the "reverse challenge" of Li Ning, say Anil K. Gupta and Haiyan Wang at Bloomberg BusinessWeek. Nike is "well-positioned at the top end; however, given the multi-segmented nature of China's market, [it] must figure out how to compete effectively against players such as Li Ning… in the mid- and low-tier segments without diluting the brand cachet at the top end." That won't be an easy balance to achieve.
"Lessons from Li Ning's China stumble"