【Special Focus】The Analysis of Chinese Sport Brands’ High Inventory

　　Blind Expansion Gave Rise to Trouble

　　As to high inventory, Mr. Ma Gang, an independent commentator, said, “The causes are product homogeneity, close price, the limit of sale channels, inflation and the sliding purchasing-power.”

　　However, more insiders thought that high inventory was caused the expansion speed which was faster than market growth. Some retailer told reporters that with the development of sporting goods industry, many enterprises entered the industry. To get more market share, they opened a lot of stores and ignored what they and the market could bear.

　　The retailer said, “For example, the market growth rate is 20%, and those enterprises produce 60% more products than what the market can bear, so high inventory is inevitable. There are enough sporting goods stores in one block, but more enterprises still open stores in this block. Therefore, the profits slide.”

　　According to the statistics from Dongxing Securities, in 2007-2009, Chinese sport enterprises listed in stock market opened nearly 20,000 stores, triple of those in 2006. In 2010, top four Chinese sport brands all opened more than 7,000 stores. The blind expansion gave rise to high inventory.

　　Extensive Management Led to High Inventory

　　Chinese enterprises’ extensive management led to high inventory in some way because production did not meet market demands.

　　Most enterprises’ production plans were made according to order-placing meetings. Each season, order-placing meeting was held by enterprises and then production plans were made according to the orders. Their information came from distributors instead of consumers. This usually made sales lower than expected and led to high inventory.

　　Besides, enterprises usually exaggerated market demands when they made inventory plans. Some insider said, “For example, if consumers want 100 clothes, retailers will prepare 150, and agents will want 200. At last, manufacturers produce 250. Every time one clothe is sold, 2.5 clothes enter inventory turnover. In this way high inventory comes into being.”

　　Mr. Dong Xinda, Vice-manager General of Paixie.net, said, “Inventory pressure has transmission effect in the industry. When Chinese first-tier brands run down stocks, their contract manufacturers receive less orders and Chinese second-tier and third-tier brands sell less because of Chinese first-tier brands’ sale promotion.”

　　Lacked Brand Characteristics Compared with International Brands

　　Besides the tough economic situation and blind expansion, Chinese brands lacked brand characteristics compared with international brands, which influenced their sales.

　　Since 2010, Chinese brands had raised their price and Nike and Adidas started to enter Chinese second-tier and third-tier cities in order to strengthen their leads in Chinese market. In 2011, Nike released some shoes priced at about 300 RMB Yuan. Adidas also launched some products which were suitable for consumers in Chinese second-tier and third-tier cities.

　　Mr. Xie Zhiqiang, a researcher in the field of pricing and purchasing-power, said, “Undoubtedly, facing 300 RMB Yuan Anta Shoe and 300 RMB Yuan Nike Shoe at discount, consumers usually choose international brands.”

　　Building brand characteristics was one of the Adidas’ ways to run down stocks. Adidas provided something special that other brands can not. Adidas improved its brand image and consumer experiences. “Adidas not only sells products to distributors, but also help distributors to sell products to consumers.”