Nike sets store by mainland growth

Sports giant goes to market with Beijing flagship Nike's 'Just Do It' slogan may have inspired millions worldwide to be spontaneous in their lives but the campaign underscored the fact the Fortune 500 sports giant leaves little to chance. Sleek marketing has always been a strategy for the multibillion-dollar company, but it has not always been a dream run - it has been hit with allegations of exploiting cheap labour in the developing world, claims which it assures have been settled. For the year to May 31, the United States producer of Air Jordan shoes and whose subsidiaries include Cole Haan and Converse, earned US$1.49 billion, on US$16.33 billion in sales. In February, Nike executives told investors they had re-organised their marketing into six consumer-focused categories - basketball, soccer, running, men's training, women's fitness and sports culture - arguing that the way forward was to engage 'deeper and more emotionally' with consumers. While Nike aims to surpass Adidas as the top soccer-equipment maker by the next World Cup in 2010, Adidas - a Beijing Olympic sponsor - says it plans to dethrone Nike by 2008 as the top athletic brand in the mainland. A little less than a year before the games open, Nike's marketing efforts began last week with the opening of its first mainland flagship store in Beijing. Charlie Denson, president of Nike Brand, provides some insights into the company's business beliefs and aspirations from a global perspective and in the mainland, its soon-to-be second largest market after the United States. You have been with Nike since 1979, during which time the company has grown. How has the experience been? It's been a great ride. When I started with the company, I thought: okay, I grew up in sports, participated in sports, so going to work for a sports company right out of college basically was a great idea and a great opportunity. I thought I'd do this for a couple of years and then I'd go and get a real job. It's turned out to be a pretty good career. How has the concept of branding changed? It has changed dramatically over the years. At a certain time it was about selling something to somebody. Today, branding is much more than that. It's more than a transaction; it's a relationship. One of the things that has allowed Nike to be so successful is that we've always looked at our relationship with the consumer, and our relationship with the athlete as one and the same. What is the current marketplace like? The market worldwide is a very diverse place. Certainly, in the United States it has a lot of similar characteristics to maybe, Europe, in a sense that it is more western or a bit more mature. Then you have emerging markets such as China, Russia, Brazil and India - they have very different characteristics. The great thing about our brand and our business is that we operate in the world of sport, and the world of sport is relatively universal. How does Nike view the mainland market? It's probably our single biggest growth opportunity right now when you look at how fast it is developing, how fast the business is growing and the emerging middle class - all of these things contribute to success both from a brand and a business standpoint. I've never been anywhere in the world that moves as fast as the China marketplace, and the consumer here has just a voracious appetite for new and innovative things. Many people compare China to India. What do you think? I think China and India are hardly comparable today. India is an emerging market and economy. China represents a much bigger opportunity, certainly, short term. I think long term, for the next 10 to 20 years, they are both great growth opportunities. But right now, China is much bigger. It's a much more tangible opportunity. The reason is the consumer. The consumer here embraces sport with an appetite. Does Nike have a definition of the Chinese consumer? We try not to define the consumer. Our job is to continue to introduce new, compelling and innovative products to the consumer, not necessarily to define it. If you think about the consumer today versus the consumer 10 years ago, trying to define the consumer can be a little dangerous in a sense that the consumer will define themselves. If you try to restrict them, you run the risk of driving them away as opposed to embracing them. Your rivals have claimed to outdo you in terms of branding and in establishing themselves in China. Do you agree and what is competition like in the mainland? It's a very competitive market and the fastest-growing economy in the world. It's great to be in the No1 position because then everybody always has to chase you. I always take it as a compliment that everybody thinks that they're going to outdo us, they don't talk about outdoing anybody else. Nike's strategy is about connecting to the consumer and every market is different with its own culture and practices. How is the company going to make that connection in the mainland? Great athletes are perceived as great athletes everywhere, whether it's Liu Xiang - who's the world record-holder and obviously one of the Chinese sports icons - or LeBron James or Michael Jordan or Tiger Woods. The great part is our ability to bring the world's greatest athletes and what they bring to our brand here. People like Liu Xiang represent someone that we have worked in China with for many, many years. He's not just somebody that we've just stumbled across as he's emerged as a world-record talent. He's somebody that we've had a relationship with for quite some time. How do you pick your local talent for sponsorship? It's a combination of many things. We have a lot of people that we work with. We have a lot of relationships and associations with coaches around the world, great athletes, great teams, federations and organisations and then we do our homework. Again, when you look at the world of sports, part of it is, the athletes come to us, because we can provide them with maybe a better solution from a performance standpoint, with respect to their footwear, or apparel or equipment. How will the Olympic Games play out in your new strategy in China? For the China marketplace, the Olympics represents probably the single biggest sporting event maybe in history, because it will transcend sport. That said, the Olympics for us is just another checkpoint, it's another point in time that we can measure our success and leverage what we do on the world stage, but it is by no means our destination. Is this the context in which you'd view it - not being an official Olympic sponsor? We've never really engaged a lot at that level around the official sponsor ... that's really for the world of advertisers. We don't see ourselves as an advertiser at the Olympics. We are part of the athletes' experience and we are part of their performance. That's where our focus is and that's where we'd continue to engage and spend our time. Delivering some of the greatest performance products for our Nike athletes at the Olympics is a great challenge for us. You've defined six categories in your business strategy. Which is the biggest growth group in the mainland? Basketball represents our single biggest opportunity and is probably our biggest priority here. It has the highest level of participation ... we have the biggest market share around the world and we will certainly look to duplicate that type of performance in the Chinese marketplace. When you think about basketball, it is perceived as a US sport because of the NBA and all that, but I think today, the influx of the international game into basketball is really changing that, and China is playing a very significant role. With Yi [Jianlian] coming up now and going into the NBA, it's another opportunity for us to continue to broaden our scope and our footprint in both the game and the business of basketball. Football, or soccer, would certainly also represent another great opportunity here in China on a longer-term basis. I think basketball may be a little bit ahead of football developmentally. Certainly, China has world-class basketball player status, [but] has yet to really produce a world-class football player. It will come. In China, there is the problem of counterfeiting. What is your view on this and how do you see the company handling this issue? Counterfeiting for us is an increasing problem because of our success, so in some ways it's the sincerest form of flattery, but it does represent a significant issue for us. We will continue to protect our brand, not only in China but around the world. How severe is the counterfeiting problem? It's significant but I wouldn't categorise it as severe. You've targeted sales to reach US$23 billion in 2011. How much of that will come from China? We've stated that China will be over a US$1 billion business for us within the next couple of years. It will be our No2 marketplace within the next two years. Can we talk a bit about being green and corporate social responsibility? How do you, as a global brand, ensure that standards are met from point A to the finished product? Whether it's the sustainability of the products that we're developing or some of the manufacturing practices that are followed, it's something that we embraced as a company more than 10 years ago. We have learned some pretty tough lessons early in this process, and really embraced it and integrated it into our business practices as well as our consumer insights. Can you elaborate? There are certain things that we do and will continue to do as far as eliminating waste in the manufacturing process. Certainly, in the use of some materials and chemicals that were traditionally used in shoemaking or development of apparel products, we'll continue to explore new and innovative ways. How has globalisation played out for a global brand like Nike? I go back to what the brand stands for - the world of sports. The world is getting to be a smaller place. Our consumer is digitally connected and the speed from which they transmit and embrace information is staggering. It's a fascinating phenomenon which really plays to some of the strengths that Nike as a brand has developed and created over the years around storytelling. In that regard, globalisation is an advantage for us because we can communicate worldwide so much quicker and so much more efficiently than some of the traditional ways of marketing. Any specific plans for the next 12 months, as far as marketing of the Olympics goes? We have a few plans. Everything kicks off with the opening of the store.