Finally catching up?

Li Ning: racing back to profit?

In 2008, Li Ning soared to the top of the Bird’s Nest stadium in Beijing, lighting the Olympic flame. But like many things that go up, Li Ning soon came down: this time in the stock markets, as profits of the former gymnast’s eponymous sportswear brand began to fall not long afterwards.

Now, after three consecutive years of losses, Li Ning’s fortunes may be on the up.

The Hong Kong-listed firm gave shareholders some good news on January 5, announcing via a regulatory filing that the company “is expected to record an approximate break-even” in 2015. This would compare with a Rmb781 million ($118.8 million) loss a year earlier, and an even heftier loss close to Rmb2 billion in 2012.

What caused the turnaround? Li Ning has been striving to cut costs for several years, consolidating distributors and hoping to improve product turnover (see WiC93) as well as enlisting more celebrity endorsements (see WiC252).

Li Ning’s stock seem to be regaining investor attention too. Its share price has climbed more than 14% in the past 12 months. Its market value now stands at about $500 million. (When Li Ning was lighting up the Olympic torch in August 2008 his company was worth $2.5 billion).

But perhaps its biggest coup came last year when it teamed up with Huami – a division of China’s Xiaomi tech company – to launch a “smart shoe”. Since then Li Ning has released a variety of “smart” sports equipment, from shuttlecocks to footballs, though it is undoubtedly the running shoes that gained the most traction. The 21CN Business Herald reports that more than 400,000 pairs have been sold since their release in July.

The smart shoe incorporates a small computer chip in the sole of one of the trainers which then monitors various facets of the wearer’s performance, such as speed, distance and duration. The data is shared with MiFit – Xiaomi’s fitness app – either directly to the user’s phone or via the Mi Band (Xiaomi’s take on the increasingly popular fitness monitoring bracelets).

Li Ning believes the digitalisation of his sportswear is the key to saving the brand: “Customers all have finely detailed requirements regarding exercise equipment, their own physique and site services. Using digitalisation to obtain information about them means we can tirelessly improve our understanding of the change in their requirements, and this way we are able to create and develop targeted products and services.”

Enter Tencent, Li Ning’s new internet partner for another line of footwear. These smart shoes also monitor the wearer’s steps, speed and general usage. But this new line is designed primarily for children (in the 4-12 age range) and their parents, who can use QQ (one of Tencent’s popular messaging apps) to locate the shoes – and hopefully their children wearing them .

The computer chip in Li Ning’s sneaker has a Bluetooth function, 21CN reports. If a child goes missing, their parents or guardian can report the case through QQ. This will then alert other QQ users (using the app on their smartphone) as well as automatically register if a QQ user with Bluetooth comes within proximity of the shoes. QQ can then use this data to triangulate the position of the child.

This method may seem somewhat more convoluted than a standard GPS tracking system. But National Business Daily reports it was chosen because the costs are lower, it is almost “without radiation” and the battery charge of the Bluetooth device lasts for six months.

Child abduction is a major concern in China. The BBC reported in 2015 the average number of stolen children was roughly 20,000. Naturally a product that can tap into the parental angst such a statistic generates has potential to do well. But while Li Ning’s new shoes might help see a child’s safe return, will it do the same for his wayward company…

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