July 7, the Russian arm of real estate consultancy Knight Frank reported that Chinese sportswear giant Li-Ning open a store in the Russian city of Krasnodar at the end of April and that the American niche perfume brand Vilhelm Parfumerie was the only international brand to enter Russia in the first half of 2022.
It comes amid a mass exodus of global players after Western public opinion turned sharply against Russia due to the latter’s invasion of Ukraine in late February. Either they withdraw completely from the Russian market, or they change brands and transfer their ownership to local operators.
According to the same Knight Frank Russia report, fashion brands like H&M and sportswear giants Nike and Adidas accounted for 19% of the more than 180 companies that got out the country to date. Other institutions have estimated a much higher number of brand releases from Russia. Yale University, for example, reports that 805 companies suspended their activities or withdrew from Russia.
Regardless of the disparities in numbers, the exodus makes Li-Ning’s expansion into Russia all the more notable. Not only has the Chinese media coverage of the brand’s move been positive, there’s more to come: many local outlets have reported that Li-Ning plans to open 15-20 retail stores in Moscow and St. Petersburg, as well as ink partnerships with local online retailers and sports brands. However, Li-Ning has yet to officially confirm its future plans for the market.
For Russia, Li-Ning’s growing presence in the country is welcome. Officials there expressed hope that domestic and non-Western fashion brands will fill stores in local malls once occupied by defunct companies, where vacancies are unfilled. projected be as high as 40-50 percent. The sportswear giant’s growth fits the bill while being careful not to isolate Russia from Chinese fashion and culture – a win-win.
Meanwhile, Russia presents an ideal market for Li-Ning’s global ambitions. Given the void left by Western sportswear and fast fashion brands, the Russian sportswear market is ripe for the picking.
In recent years, Li-Ning has been striving to establish itself as the go-to brand The guochao trend in China both at home and abroad – such as presentations at New York and Paris Fashion Weeks. But progress has been lacking: in 2021, foreign markets accounted for only 1.3 % of Li-Ning’s total revenue, down 0.2% from 2020.
In Russia, Li-Ning could become a major fast fashion and affordable sportswear brand, as Russia relies heavily on imports for its apparel market. A Chinese article estimates that imports account for around 80% of Russia’s $38.2 billion apparel market. China is also Russia’s largest textile and apparel import partner, providing a favorable condition for Li-Ning’s expansion. In 2019, the global integrated business solution checked in Chinese textile exports to Russia reached $3.95 billion, or 34.3% of Russia’s total textile imports. The Russian market could also help Li-Ning create a model 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 providing overt military support for 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 follows suit. In fact, withdrawing from Russia in the wake of Western sanctions could have threatened the sportswear brand’s reputation in the country.
But the Russian launch of the brand is not without risk. While Li-Ning is unlikely to face Western sanctions simply for expanding into the Russian market, the move risks alienating potential customers in markets like the United States, where the public is largely pro-Ukrainian.
This could prove problematic for Li-Ning, given her investments in the aforementioned world events and the potential growth she could see in the west. It also remains to be seen whether Russian consumers will welcome Li-Ning. Russia and Ukraine combined accounted for less than 1% of Nike’s revenue; Cultivating brand awareness and loyalty from scratch in a country with its own culture could be an uphill battle. Additionally, Russian designers could create the country’s own version of the guochao and appeal to local consumers to support local businesses.
In the short term, embracing the Russian market will likely help Li-Ning increase sales and brand awareness. But in the long term, the picture is more complex. The sportswear brand should walking a tightrope between locating in Russia and cultivating goodwill with potential buyers elsewhereand invest in new products tailored to the needs and tastes of Russian consumers.
Success will require a shrewd and adaptive strategy that emphasizes patient investment rather than quick wins: the fact that Li-Ning has yet to publicly comment on his future development in Russia speaks volumes.