As Global Brands Exit, Does The Russian Market Present Overseas Opportunities To Li-Ning?

    Nike and Adidas are among the brands retreating from Russia amid the war, leaving a gap for Li-Ning to fill. What are the risks and rewards?
    Nike and Adidas are among the brands retreating from China’s northern neighbor following its invasion of Ukraine, leaving a gap for Li-Ning to fill. But the sportswear giant faces risks and rewards. Photo: Li-Ning
    Zihao LiuAuthor
      Published   in Profile

    On July 7, real estate consultancy Knight Frank’s Russian arm reported that Chinese sportswear giant Li-Ning opened a store in the Russian city of Krasnodar at the end of April and that the US niche fragrance brand Vilhelm Parfumerie was the only international brand to enter Russia in the first half of 2022.

    This comes amid a mass exodus of global players after western public opinion shifted sharply against Russia due to the latter’s invasion of Ukraine at the end of February. They are either completely withdrawing from the Russian market or rebranding and transferring their ownership to local operators.

    According to the same Knight Frank Russia report, fashion brands like Hamp;M and sportswear giants Nike and Adidas accounted for 19 percent of the over 180 companies that have exited the country to date. Other institutions estimated a far higher number of brand exits from Russia. Yale University, for instance, records that 805 companies have suspended their activities or withdrawn from Russia.

    Regardless of the number disparities, the exodus makes Li-Ning’s expansion in Russia all the more notable. Not only has Chinese media coverage of the brand’s move been positive, there’s more to come: many local outlets are claiming now that Li-Ning plans to open 15-20 retail stores in Moscow and St Petersburg, as well as ink partnerships with local e-tailers and sporting brands. However, it should be noted that Li-Ning reportedly already had this target back in 2018. Li-Ning has yet to officially confirm whether it had realized this objective, nor has it offered other detail concerning its Russian market expansion.

    For Russia, Li-Ning’s growing presence in the country is welcome. Officials there have expressed hopes that domestic and non-western fashion brands will fill the stores in local malls once occupied by departed companies, where vacancies are projected to be as high as 40-50 percent. The sportswear giant’s growth fits the bill while making a point not to isolate Russia from Chinese fashion and culture — a win-win.

    Meanwhile, Russia presents an ideal market for Li-Ning’s global ambitions. Considering the vacuum left by western sportswear and fast fashion brands, Russia's sportswear market is ripe for the picking.

    In recent years, Li-Ning has worked to cement itself as the go-to brand fronting China’s guochao trend both at home and abroad — such as presentations at New York and Paris Fashion Weeks. But progress has been lacking: in 2021, overseas markets only accounted for 1.3 percent of Li-Ning’s total revenue, a 0.2 percent decrease from 2020.

    Li-Ning debuted at Pitti Uomo, a bi-annual men's fashion event in Florence, in June 2022. Photo: Li-Ning
    Li-Ning debuted at Pitti Uomo, a bi-annual men's fashion event in Florence, in June 2022. Photo: Li-Ning

    In Russia, Li-Ning could become a major brand for affordable fast fashion and sportswear since Russia heavily relies on imports for its clothing market. A Chinese article estimates that imports account for about 80 percent of Russia’s 38.2 billion apparel market. China is also Russia’s largest textiles and clothing import partner, providing a favorable condition for Li-Ning’s expansion. In 2019, the World Integrated Trade Solution recorded that Chinese textiles export to Russia reached 3.95 billion, accounting for 34.3 percent of Russia’s total textiles import. The Russian market could also help Li-Ning create a blueprint for future growth in other global markets.

    China’s strategic partnership with Russia could play a major role in Li-Ning’s success. While Beijing has stopped short of providing overt military support to the Kremlin’s war efforts in Ukraine, it has condemned western sanctions against Russia and vows to continue its relationship with Moscow. Li-Ning’s guochao identity aligns it with Chinese patriotism, so it’s no surprise that the brand’s business would follow. In fact, withdrawing from Russia in the wake of western sanctions could’ve threatened the sportswear brand’s reputation at home.

    Li-Ning is best known for incorporating Chinese elements into its designs. Photo: Li-Ning
    Li-Ning is best known for incorporating Chinese elements into its designs. Photo: Li-Ning

    But the brand’s Russian launch isn’t risk-free. Although Li-Ning is unlikely to face western sanctions simply for expanding in the Russian market, the move risks alienating potential customers in markets like the US, where the public is largely pro-Ukraine.

    This could prove problematic for Li-Ning, considering its investments in aforementioned global events and the potential growth it could see in the west. It also remains to be seen whether Russian consumers will welcome Li-Ning. Russia and Ukraine combined made up less than 1 percent of Nike revenue; cultivating brand awareness and loyalty from scratch in a country with its own culture could be an uphill battle. Moreover, Russian designers could create the country’s own iteration of guochao and call for local consumers to support homegrown companies.

    In the short term, embracing the Russian market will likely help Li-Ning boost sales and brand awareness. But in the long term, the picture is more complex. The sportswear brand will need to walk the tightrope between localizing in Russia and cultivating goodwill with potential shoppers elsewhere, and invest in new products tailored to the needs and tastes of Russian consumers.

    Success will require an astute, adaptive strategy that focuses on patient investment over quick wins: the fact that Li-Ning has not yet publicly commented on its future development in Russia speaks volumes.

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