US sportswear maker Nike Inc plans to open 40 to 50 factory outlets to sell the brand's shoes and clothes at huge discounts in China in 2013 as a bid to cope with its high inventory, the National Business Daily reported Monday.
Analysts say this will mean hard times for domestic sportswear brands which are also attempting to clear stock.
The Nike shops will open not only in big cities but also in smaller ones, offering discounts ranging from 60 to 70 percent, the National Business Daily reported, citing a source close to the firm.
The move is not good news for Nike's major Chinese rivals such as Li Ning Co, which are making huge efforts to reduce the high inventories they amassed during previous rapid expansion, Zhang Qing, CEO of Beijing Key-solution Sports Consulting Co, told the Global Times Monday.
A mid-range pair of Nike shoes normally sells at around 600 yuan ($96.36) in China, while a mid-range pair of Li Ning shoes costs 400 yuan, said Zhang.
Nike did not respond to e-mail inquiries sent by the Global Times Monday.
But with such high discounts, Nike will attract a greater number of frugal domestic consumers, who believe that foreign brands are better in quality than domestic ones, said Zhang.
The Hong Kong-listed Li Ning announced December 17 that it would invest up to 1.8 billion yuan in helping its distributors clear stock. Another Hong Kong-listed Chinese sportswear maker, Xtep International Holdings, disclosed that its distributors had reduced orders for the first half of 2013 in order to control their inventories.
Overseas sportswear brands like Nike are also confronting high inventories in China, largely because the players in the sector overestimated the potential of the sportswear market following a decade of high growth, Zhang said.
China had been the fastest growing market around the world for Nike, but became the slowest during the six months ended November 30, 2012, when the firm saw an 11 percent year-on-year drop in revenues.