Nike Squeezes Profits In China Ranks First In The World

On the official shopping website of Nike America, Kobe's five generation is one of the best selling basketball shoes at a price of $130. However, the same pair of Kobe five generation men's shoes sell at 1298 yuan in the Nike store in Tibet Road, Shanghai. If the renminbi is used as the unit of valuation, the difference between them is nearly 400 yuan.

The average purchasing power of Americans is much higher than that of China. Why?

An insider familiar with Nike told reporters: "for example, Nike has a pair of $100 sports shoes, the cost of manufacturing enterprises is only about $10, Nike's price to retailers is half off, about 50 dollars, retailers are selling at a price of 100 dollars, the whole process eliminates all kinds of costs, Nike's gross margin is about 40%, quite high."

High prices and high profits

A Nike shoe China

Huang Xiangyan, the newly appointed Nike China spokesman, also blamed the higher tariffs and logistics costs. She said: "Nike sells a lot of products in China, including shoes, clothing, accessories, etc., and some products are higher than those in the United States, and some are not."

Huang Xiangyan said that tariffs in China have a greater impact on product pricing.

Nike pursued light asset strategy. In addition to R & D and sales, it does not produce itself, and its products are produced by foundries all over the world.

In the 2009 fiscal year, the total number of Nike's global foundry enterprises was 618, and as of June 1, 2009, Nike had 136 foundries in China.

Huang Xiangyan said that Nike had no domestic sales rights in China's foundries. The products produced in China must be exported to third places and then returned to China in the form of imports. Tariffs, especially import tariffs, have increased the cost of Nike products.

The head of Nike's above mentioned factory also said that there are three ways to sell the international brand shoes, such as Nike and Adidas, which are sold in China. One is to sell directly after China's production, one is to export from China to overseas, and another to sell in other countries or regions.

No matter which way it is sold in China, it can not avoid higher taxes and fees.

The taxes and fees of different shoes are not the same, and the duty of importing leather raw materials is generally 10%. The total tariff of imported shoes is 15%, plus 17% of value-added tax, the cost of taxes and fees is obviously higher than that of overseas.

In addition to tariffs, Huang Xiangyan said that higher logistics costs were also the reason why some of Nike's products in China were higher than those in other countries. She said: "Beijing, Shanghai and other tier cities are easy to pport, and the logistics cost of products after entering China is relatively low. However, China has a vast territory and the cost of pporting products to the mainland is much higher."

However, insiders pointed out that some of Nike's foundries are located in the bonded area. The products can be exported and imported in the bonded area before they can be completed, and in fact, there is no need to go abroad.

Insiders pointed out that the light asset model adopted by Nike decided that its products had to go through many links in reaching the final consumers, and Nike, foundries, logistics and sales channels all needed to make profits, and the price of products rose naturally.

Moreover, the consumption habits of different countries and regions also affect the pricing of shoe enterprises.

For example, Americans often throw their shoes dirty, and Chinese people often wear out before they lose them. The average annual consumption shoes 6~7 pairs, the 1~2 consumption per capita consumption shoes and the amount of consumption in the United States affect the operation cost and pricing strategy.

Another industry source said that in the United States, Nike belongs to a functional product, mainly to meet the sports needs of consumers, so its pricing is not high; but the Chinese market is different, Chinese consumers regard Nike products as a fashion, Nike is a synonym for high-end and luxury goods, even if the price is high, it is the social foundation of Nike's high pricing strategy in China.