After the Xinjiang cotton incident, Nike experienced retribution: its sales on the Tmall platform were cut in half in April, plummeting 59% in a single month; affected by the epidemic in India, Nike’s main foundry in India was partially suspended, affecting Over 20% production capacity!
1. Nike’s “Thunder”: The main foundry has partially suspended operations, affecting more than 20% Production capacity!
On May 12, Fengtai, Nike’s main shoe manufacturer, announced that starting from that day, in order to protect the health of employees and strengthen epidemic prevention, its three factories in India will officially initiate voluntary shutdowns. Fengtai pointed out that its three factory production lines in India account for more than 20% of the total production capacity, and the company also plans to expand the production capacity of overseas factories including India by 7-10% this year. Fengtai Shoes is a Taiwanese company, one of the world’s leading shoe manufacturers, and the base for the production of Nike’s high-end shoe products.
The shutdown of the foundry is another example of the negative effects of Nike’s “industrial transfer”. According to industry statistics, Nike has factories in 43 countries around the world, of which China has 112 contract production units, accounting for 18% of the world. The estimated number of employees is 156,411, accounting for 13% of the world.
But in recent years, Nike has begun to transfer its production lines to Southeast Asia and South Asia. In 2010, its output in Vietnam exceeded that of China, and the shoes produced in Vietnam accounted for more than half of Nike’s global output. But “industrial transfer” did not bring good news to Nike.
The most important factor is that the quality of the labor force in Southeast Asian and South Asian countries is generally low, which cannot be compared with China’s 165 million skilled workers. For this reason, In recent years, the quality of Nike products has declined significantly – problems such as reduced service life, rubber peeling, sole breakage, surface peeling, fading and pilling have frequently occurred.
Product quality is a magic weapon for the survival of any company, let alone a high-profile industry giant. Sina Finance announced in 2019 that in November of that year, Nike received 240 valid complaints only on the Black Cat complaint platform, an increase of 133% from October, and entered the top ten of the monthly black list.
2. Make hundreds of billions of dollars in China! Despite Nike’s fourth crisis, it still hurt its money-making “engine”
For Nike, not only the production side, the Chinese market is also its most important sales position. Since entering the Chinese market in 1982, thanks to years of accumulation in technology and branding, Nike’s total profits in China have exceeded 100 billion yuan, and the latter has become the most important “engine” for Nike’s performance.
In the third quarter of fiscal year 2021, Nike’s revenue was US$10.36 billion less than expected, of which revenue in North America fell 10% to US$3.56 billion, while large Revenue in China rose to US$2.28 billion (approximately 14.7 billion yuan), a year-on-year increase of 51%; it is no exaggeration to say that the Chinese market has become the biggest support for Nike’s performance reversal.
In particular, Nike has been working hard to integrate into the Chinese market in recent years-Nike, which was originally “high-priced”, appears to be much more accessible to the people in 2020. For example, since March last year, Nike has launched frequent promotions and entered a big sale stage. Especially during the 618 promotion, the discount on the official website was as low as 50% off.
The discount effect is also immediate. On the day of 618, the brand’s sales on the Tmall platform exceeded 100 million in less than 3 minutes; industry organizations confirmed that Nike’s discount was even greater than that of “domestic brands” such as Li Ning and Anta. A large number of products even drop into the price range of domestic brands.
In addition, Nike has a sneaker business model of co-branding with international basketball superstars, and the brand is also the main sponsor of many domestic athletes and various sports organizations. , these have established its position in the Chinese sports shoe industry market.
But what cannot be ignored is that in addition to this year’s “Xinjiang cotton incident”, Nike has also experienced three credibility crises in China before: an advertisement suspected of insulting Chinese people in 2004, involvement in a football corruption case in 2012, In 2006, he was named at the CCTV March 15th Gala due to quality issues. Now that sales in China have plummeted, the final analysis is as the CCTV article said: How far can a company that does not distinguish right from wrong go? Once it touches China’s bottom line, it will no longer be called Nike, but it will be conquered! </p
