China Sportswear Online Trends
September trends - Li Ning pricing
momentum ahead of domestic peers
This is our first edition of China Sportswear Online Trends, in which we monitor sportswear
trends on e-commerce (JD.com), since June 2019. We have collected over 8 mn data points
on a weekly or monthly basis over the last four months across eight sportswear brands ranging
from their online stock keeping units (SKUs), pricing trends to brand perception amongst
Chinese consumers. A caveat to note, JD.com might not be a holistic representation of online
trends, but we believe that it serves as a way to provide some insights on consumer’s trends.
Fashion trend momentum still strong
In looking at online apparel SKUs as a percentage of total SKUs (footwear and apparel), we
note that online apparel SKUs have been trending upwards for domestic brands, which could
likely indicate that fashion trend still remains. Domestic brands apparel contribution increased to
48-56% by end-September while international brands contribution was at 49-54%. Fila online
apparel contribution was the highest at 80%. This suggests that domestic sportswear brands
that are able to incorporate a fashion element into their brands should stand to benefit.
Li Ning pricing ahead of domestic peers
Based on the SKUs online, we calculate an average weekly price for footwear and apparel and
use that as a basis of comparison for pricing trends. However, given there could be seasonality
impact, prices might not represent a like-for-like increase. Movements in prices could be
attributed to a change in product listing mix, addition/subtraction of vendors, or simply due to
new product launch. As such, we focus on the relative price performance between brands.
Since the first week of July, all brands have witnessed uplift in average weekly online apparel
prices in the week of end-Sep. Nike leads the pack, with a 30% increase in average prices vs
Adidas at 11%, and Fila at 14%. Among the domestic brands, Li Ning was ahead at 18%
increase vs Xtep at 7% and Anta at 5%. Li Ning’s apparel price premium have also widened
over the last couple of weeks, now at a 47% price premium to Anta and 68% to Xtep. During
the same period, among domestic brands, Li Ning’s weekly average footwear prices increased
6%, which also outpaced that of Anta and Xtep at -2% and +3%. For leading international
brands Nike growth, +18% outpaced Adidas at 9%.
Brand sentiment improving for most brands
In calculating the score of brand sentiment, we looked at consumers’ reviews on JD.com. and
our proprietary system calculates a monthly average brand sentiment score. The sentiment
score ranges between 0 and 1, in which 0 is the most negative sentiment and 1 is the most
positive. For instance, a 5-star rating comment on JD.com with negative comments will have a
lower sentiment score than a 5-star rating with positive comments. Our sample size data
stretches back as early as Oct18. Since Oct18, all brands have seen improving online apparel
brand sentiment with the sharpest increase being the international brands, particularly Nike.
Nike brand sentiment has improved to 0.72 in Sep19, just slightly below that of Adidas. Fila’s
brand perception also saw a sharp increase over the last two weeks, which we believe indicates
that the new apparels SKUs were well received. Footwear brand sentiment witnessed similar
trends where all brands have seen improving brand perception since Oct18. The sharpest
increase is Fila, which has seen the highest ratings in Sep19 at 0.9.
Li Ning remains our top pick
Positive online pricing trends coupled with our channel checks have led us to believe that
demand momentum for Li Ning (Outperform) will continue. We raise our Li Ning earnings by
4-10% resulting in a target price of HK$26.30 (from HK$23.60). We lift Anta earnings by 4-
8%, resulting in a HK$76.00 target price (from HK$60.00) which reflects healthy growth on
Fila. Upgrade to Outperform We lower Xtep target price to HK$4.90 (HK$5.40) as we tweak
earnings lower but upgrade to Outperform due to the recent pull back in its share price.