Puma is hurting. German sportswear company has a a $45.8 million loss in the fourth quarter of 2012. Now Puma has announced it will close 90 stores in China as part of its global cost-cutting measures.
Since the Beijing Olympics in 2008, China’s sportswear market has been slowing. “The age of high profit and growth rate in sportswear industry has gone that it’s difficult for sportswear companies to follow the developing model to largely open new stores,” said Zhang Qing, CEO of Key Solution Sporting Consulting.
Both foreign and Chinese-owned brands are getting slammed from this downturn and inventory buildup has become troublesome. The market will only get more competitive with further price discounting from e-commerce and factory-owned stores.
Nike announced that it will open 40-50 factory stores in China this year with heavy discounting — up to 70% off — to clear inventory. So far, Nike has been successful using its factory stores as a channel to rid excess inventory and as brand advertisement, especially in the second- and third-tier cities.
Due to Nike’s deep discounting at its factory stores, they have started to take out domestic players, such as ANTA and Li Ning, in second- and third-tier cities, traditionally a stronghold for domestic brands.
“Other sportswear brand stores or discount outlets have difficulty surviving around Nike’s factory outlets,” said an employee from Chinese sportswear brand ANTA to National Business Daily.
photo credit: retaildesignblog, morningwhistle