Author | Zheng Qiao. After a series of unsuccessful attempts, Ke Holdings finally succeeded in acquiring land in the land auction market. On July 30th, Xi'an Jiajia Zhihe Real Estate Co., Ltd. won two plots of land in the core sector of the second ring road in Xi'an, with a total transaction price of 0.134 billion yuan. The plot numbers are WY10-9-177-1 and WY10-9-177-2. The controlling shareholder of the company is Beihaojia (Xi'an) Real Estate Development Co., Ltd., a residential development service platform established by Ke Holdings in July 2023.

Editor | Wang Xiaojuan

Going around in circles, li ning has once again turned its attention to overseas.

Recently, Li Ning announced that it will establish a joint venture company with its indirect wholly owned subsidiary LN Co, Founder Co, HongShan Venture, and HongShan Motivation. According to the announcement, the total capital of the joint venture company is 0.2 billion Hong Kong dollars, with Li Ning and himself collectively holding 55% of the shares, while Sequoia China holds 45%.

The cooperation between the clothing giant and top investment institutions seems like a win-win situation, and going global is a new story for many companies, but the capital market's reaction is not optimistic. The day after the cooperation news was announced, Li Ning's market value evaporated by more than 2 billion Hong Kong dollars.

Li Ning faces considerable pressure this year. In the first half of 2024, Li Ning's revenue increased without profit growth, with revenue of 14.345 billion yuan, a year-on-year growth of 2.33%; net income was 1.952 billion yuan, a year-on-year decrease of 7.98%. By the third quarter, Li Ning's retail revenue per sales point (excluding Li Ning YOUNG) recorded a mid-single-digit decline across the entire platform year-on-year.

In the past two years, consumers have become increasingly rational, with even luxury goods giants such as LVMH Group and K囤 dropping in performance in the Chinese market.

However, under the influence of major sports events like the Olympics and the Gorpcore trend, many companies in the sports outfits industry have achieved good growth. For example, Anta, Xtep, and 361 Degrees have all maintained double-digit growth in revenue and net income, while Li Ning, which has been declining, stands out even more among its peers.

Li Ning has also had its shining moments. In 2018, "China Li Ning" made a stunning appearance at New York Fashion Week, ushering in a trend of domestic products revitalization.

In 2021, Li Ning's growth reached its peak. Financial data shows that in that year, Li Ning's revenue reached 22.572 billion yuan, a year-on-year increase of 56.13%, with a net income of 4.011 billion yuan, a growth of 136.14%.

That was Li Ning's golden age, a time when they stood out in the industry. At that time, Li Ning also wanted to raise the prices of its products with the popularity of the national trend.

However, soon the era of cost-effectiveness arrived, and faced with Li Ning's high premium prices, consumers began to be less convinced. Moreover, compared to the peak period of product innovation, it has become increasingly rare in recent years to see Li Ning products that stand out.

Li Ning Group's Co-CEO Qian Wei frankly stated: "In the first half of this year, the offline operation environment is under pressure. In general, looking at the overall trend, consumers will become more cautious or careful in their shopping, posing challenges to offline sales growth in the industry. Companies are actively and proactively responding to these changes."

Like many companies planning to expand overseas, shifting focus to overseas markets may be one of Li Ning's strategies in response to market changes.

In China, it is not common for VCs and industrial giants to jointly establish joint ventures. Generally, VCs prefer small equity investments to achieve high returns because their fund size is not sufficient to support large-scale investment in joint ventures, and their main goal is financial returns rather than control.

With the development of capital markets and the increasing demand for going overseas, some VCs have started to attempt cooperation with industry giants, with Sequoia China as a representative.

As early as 2020, Sequoia China announced a strategic partnership with Starbucks China. In July 2023, pharmaceutical giant Pfizer collaborated with Flagship Pioneering Ventures (a subsidiary of Sequoia China).

Many star companies are also included in Sequoia's overseas consumer investment portfolio, including SHEIN, Yaman, Aga, Aventon, Miracle Miles, and more. Sequoia not only participated in multiple rounds of funding for the Chinese fast fashion brand SHEIN, but also helped the company go global through its resource network.

Li Ning's collaboration with Sequoia might be due to recognizing Sequoia China's rich experience in cross-border investments and project operations. Li Ning also mentioned in the announcement that the joint venture company will seek opportunities for future listing.

In fact, Li Ning started planning to go overseas very early on, but the journey has not been smooth.

In the early days, Li Ning sought to enhance its brand image by opening stores overseas, sponsoring sports teams, and other means, but the contribution from international market revenue was inversely proportional to the large investments. In 2003, international market revenue accounted for 2.9% of the business volume, dropping to less than 1% by 2008.

In 2009, Li Ning ambitiously announced the goal of going global and achieving 20% of overseas revenue within ten years. However, after a decade, the percentage of overseas revenue did not achieve the expected growth and instead decreased in the past two years. In 2021, Li Ning's overseas revenue was 0.296 billion, accounting for only 1.3% of the total revenue.

Li Ning attempted to secure a foothold in the international market through acquisitions, acquiring Chinese Hong Kong clothing brand Bossini Int'l, the centennial Italian luxury brand Amedeo Testoni, and the hundred-year-old British footwear brand Clarks, but did not achieve notable performance.

In December last year, Li Ning Group spent 2.208 billion Hong Kong dollars to acquire a company mainly engaged in property investment under Henderson Land, whose main assets are the "Kong Hoi East" commercial building. After the acquisition, part of this building was used as Li Ning Group's Hong Kong headquarters.

Setting up the Hong Kong headquarters marks the start of Li Ning's latest internationalization process speeding up.

Currently, the uncertainty in overseas markets is increasing, and there are significant differences in the operation models between overseas markets and mainland China. Qian Wei has publicly stated: "Doing business overseas is not that simple."

Moreover, as a mature industry, with international brands like Nike, Adidas, Skechers already firmly established globally in the sportswear sector, for Li Ning to get a piece of the pie, quick achievements must be made in new markets and new businesses.

Senior brand management expert and founder of Shanghai Liang Qi Brand Management Co., Ltd., Cheng Weixiong, mentioned that in the outbound business, although the joint venture model has some advancement, the exploration is still in a very early stage. The specific strategies and actions after the establishment of the joint venture company are key to evaluating Li Ning's overseas business.

This time, Li Ning seems to have made a firm decision.