Nike's China sales deflate over missing air cushions
Staff Reporter 2012-11-06 10:19
Nike shoes in a launch event in New York. (Photo/Xinhua)
Nike, a world leader in athletic footwear, apparel, equipment and accessories, has come under fire in China because of a missing air cushion in its "Chinese" version of a basketball that normally comes with double air pockets. The shoe is priced 500 yuan (US$80) higher than its international price, the Chinese-language Time Weekly reported.
In response to this, the Beijing Municipal Industrial and Commercial Bureau imposed a hefty fine of 4.87 million yuan (US$780,090) on Nike on Oct. 24.
Nike explained that the mistake had been made due to the misuse of publicity materials.
An investment bank said that Nike had reiterated several times the importance it attached to the Chinese market, because the market contributed about 30% of its operating profits.
After the company's "double standards" came to light, Nike was expected to face declining gross profit margins, higher inventories and decreasing orders, in addition to experiencing other negative fallouts of the incident.
Nike had launched the sports shoe, called the Nike Air Max 90, in July 2011 in the Chinese market. The main selling points of the shoes were its dual heel and toe cushions.
Two months after the product hit the market, sports shoes website Sneaker found during a shoe dismantling process that this particular brand had no toe cushioning.
In addition, a consumer rights advocate Wang Hai said that there was a huge gap between the prices of the same model of shoes sold at home and abroad. A pair of the shoes priced at US$125 (780 yuan) on Nike's official website in the US was being sold for 1,299 yuan (US$208) in China.
Nike did not respond to the question but only deleted the statement about air cushions from its official website on Sept. 9. until Oct. 24 this year. After the Beijing Municipal Industrial and Commercial Bureau imposed a 4.87 million yuan (US$780,280) fine on Nike, the company explained that was because of the misuse of publicity materials.
According to related regulations, operators would be suspected of committing fraud if they provided consumers with false description of goods, commodity standards or fake physical samples of goods.
Nike has come under the media spotlight several times due to quality problems encountered in its products in the Chinese market, causing its market sales to dwindle.
The report said that Nike's sales in China in the fourth quarter of the 2012 fiscal year have slid. The total revenue from sales of its products, including footwear, apparel and accessories in the greater China area were pegged at US$667 million, down 3.89% from the previous quarter.
The growth in Nike's global orders in the same quarter declined to 12% from 18% in the previous quarter and the growth of its orders from China dropped sharply to 2% from 20%.
