Li Ning Nike Qi said that the cost increase will increase prices

Nandu Manga: Chen Ting, for consumers, clothing prices seem to have become a "compulsory course" that starts every spring, but this year's "ups" is actually a bit high. Recently, Li Ning, a well-known sports brand in China, released its 2010 financial report, which emphasized that due to unsustainable cost burdens, it will substantially increase product prices by a rate of “double digits”. At the same time, Nike’s third-quarter report released by Nike, the world’s largest sports goods company, showed that performance was not up to the mark. Its executives said it would increase the prices of most commodities in an effort to offset the impact of rising cost pressures.

In the face of rising prices, it is necessary to spend more than just consumers. Domestic brands represented by Li Ning also need more investment, making the brand itself have a chip of rising prices.

Cost increase in the apparel industry is an indisputable fact for apparel companies. Since October last year, the prices of various raw materials for shoemaking have continued to climb. Severe weather has seriously affected the supply of natural rubber. In the country, the production of two rubber producing areas is not good, Yunnan is experiencing a severe drought, and Hainan is hit by torrential rains. In foreign countries, Southeast Asian countries such as Malaysia, Indonesia and Thailand, which account for nearly three-quarters of the world's rubber exports, suffered from rubber production this year. Extreme heavy rain was contained.

This directly led to the price of natural rubber rose sharply from 35,000 yuan/ton from a year ago to 40,000 yuan/ton.

In addition, along with the turbulent situation in the Middle East, which is the main export area of ​​crude oil, oil prices have only seen growth this year. The rubber used for the production of shoe materials is generally synthetic rubber, which is processed and refined from crude oil. Therefore, as the price of crude oil exceeds 80 US dollars per barrel and continues to climb, it also increases the cost of shoe materials.

The price of cotton, one of the main raw materials for the apparel industry, has also been expanding. After the Spring Festival, the domestic spot price of 328 cotton stocks actually reached 30,000 yuan/ton, a year-on-year increase of over 10%. Not only that, footwear ingredients such as shoe stickers have also risen by as much as 0.5 times. Coupled with the appreciation of the ***, the Pearl River Delta labor shortage and other environmental background, the increase or not rise? It seems that this is not a question that needs to hesitate.

Li Ning has successively announced price increases. Following the price increase proposed at multiple orders last year, Li Ning Company (02331.HK) raised the price increase again in 2010's financial briefing. At the meeting, Zhang Zhiyong, chief executive of Li Ning, said that at present, raw material prices have risen sharply, and the company’s cost is expected to rise by an average of 20% this year. The resulting chain reaction is “this year’s product prices will have double-digit increases”.

Despite the apparent increase in product prices, Zhang Zhiyong said that the company will introduce new sales discount policies to control the pressure of rising costs. It is expected that Li Ning’s gross profit margin may decline slightly this year in the context of product price hikes.

In addition, companies that used to claim price increases in the past were mainly domestic brands, and today international big names have also joined the ranks.

Nike’s latest quarterly earnings report showed that sales for the quarter were $5 billion, a year-on-year increase of 7%, but less than Wall Street analysts’ average of $5.18 billion. Net profit was $523 million, and earnings per share was $1.08, which also failed to meet expectations. Affected by this, Nike's stock price fell more than 5% on the day of financial statements.

Regarding performance, Nike Group executives mentioned at the briefing session that the macroeconomic situation is not good, currency, tax rate, and labor costs are fluctuating around, and the company is making every effort to resist the adverse effects of these factors. At the same time, senior executives of the Nike Group made it clear that to ease the rising cost pressures, only by raising prices. However, according to Nike's remarks, the real price increase plan will not be launched until 2012.

The balance of brand and price is also said to be affected by rising cost pressures. Similarly, in the brewing price increase, Li Ning and Nike have different situations.

“The high point of inflation in China will appear in the first half of this year and it is generally expected, but it does not mean that consumers can fully understand the price rises raised by companies due to rising costs.” Song Yang, an apparel industry analyst, said that no matter which industry If companies want to raise prices for their products, they must add value to their products.

"Or put your brand more beautifully packaged, or make consumers feel that although the price is high but things are worth. Otherwise, how to be accepted by the market?" Song Yang cited as an example, the same price increase of 50 yuan, a pair of Nike shoes and a pair of Li Ning Shoes are completely different. According to this calculation, Nike's price increase will certainly be smaller than that of Li Ning. In addition, the consumer groups of foreign brands have higher incomes and are less sensitive to prices. The side effects of price increases are much smaller than those of local brands.

Since last year, Nike has said that it will promote China's second and third-tier markets. When Southern Reporters asked if the planned price increase would affect the strategy, Nike China responded that "the brand's sinking does not mean that prices have fallen. This is a consistent strategy for Nike's product price."

As for Li Ning and Song Yang, the evaluation is that the advertisements of Lin Zhiling’s endorsements are almost all over the station billboards in Guangzhou, but the content is really puzzling. What does this have to do with the company's new brand positioning after 90? In fact, this nearly chaotic brand positioning has already “cut” Li Ning. “In addition to digesting the unfavorable factors brought about by rising costs, Li Ning’s price increase also needs to support the expenditure of brand promotion in order to ease the negative sentiment when consumers face price increases.” Song Yang believes that this is also a domestic sports brand. Common problems.

Written: Southern Reporter Fang Nan Intern Song Yiyi