Li Ning Co Ltd, China's leading sportswear brand, has raised the stakes yet again in its battle with global leaders Nike Inc and Adidas AG.

The Beijing-based company announced last week it had signed up National Basketball Association star Evan Turner, set to play for the Philadelphia 76ers next season, in a multi-million dollar endorsement deal.

The coup adds to Li Ning's galaxy of stars, which already includes Boston Celtics' player Shaq O'Neill.

It also brings a further edge to the battle in what is emerging as one of China's fastest growing retail markets.

The country's sports apparel market is set to nearly double from its 2009 value of 59.2 billion yuan to 114.8 billion yuan in just three years, according to the Shanghai-based China Market Research Group (CMRG).

Hong Kong-listed Li Ning, founded in 1990 by the now 46-year-old former Chinese Olympic gymnast it is named after, seems keen to knock Nike from its pole position in China.

Brian Cupps, Li-Ning's brand initiative director for basketball, said the Turner deal was significant.

"This is truly a game-changing moment for the Li-Ning brand. Adding a supreme young talent like Evan Turner sends a message to the global basketball community that Li Ning basketball is committed to being a player on the global stage," he said.

Ben Cavender, associate principal at the China Market Research Group, said the endorsement deals were more about improving Li Ning's position in China than driving sales in North America.

It is Chinese people who are more likely to be more impressed by sportswear approved by these big stars, he added.

"I think a lot of Li Ning's efforts overseas help them more in China than in the United States, for example. I think they are interested in selling internationally but it is more of a long-term objective," he said.

"What they don't admit to and what they are being slightly cagey about is that their strategy is to firm their position in China as a domestic brand. They can appeal to a certain Chinese nationalism by playing on being able to compete head-to-head with the major international brands because they have these big-time athletes."

Visitors to Li Ning's campus headquarters just outside Beijing are struck by its similarity to Nike's main base in Beaverton, Oregon. It has the same running track on the outside and other similar sports facilities.

Li Ning also has its US headquarters in Oregon, just a few kilometers up the road from its rival's, in Portland. The two are certainly determined to watch each other closely.

In 2009, Nike was still hanging on to its leading position in the sportswear market in China with a 16.7 percent share, ahead of Li Ning with 14.2 percent, the German giant Adidas with 13.9 per cent and the other leading Chinese brand Anta with 9.9 percent, according to CMRG figures.

Yet, Chinese brands sometimes have an uphill battle with international brands in China with many consumers believing the latter to be naturally superior.

Howard Abe, who leads the consumer industry and retail practice of management consultants AT Kearney in Shanghai, which has worked closely with Li Ning, said this certainly used to be the case.

"We know that the international brands when they first came to the market were the most popular brands to start with. The early studies we did showed that Chinese consumers were most familiar with brands like KFC and Nike," he said.

He added, however, there was a major opportunity for Li-Ning and other Chinese brands because branding of any sort was relatively new in China.

"It is really only in the last four or five years that the concept of branding really started in China and only in the last two or three years has it been a real focus."

He said in sportswear the turning point was the Beijing Olympics when, perhaps somewhat poignantly, Li Ning, probably China's greatest Olympian with three golds in the 1984 Los Angeles Games, lit the Olympic flame.

"Before then to a large extent customer preferences were based on price and also the convenience of the store location. The Olympics brought a new awareness about sport and people see buying sportswear more as a destination shopping purchase," he said.

Chinese consumers can do their destination shopping at own-branded stores operated by Nike, Li Ning and other major players in the malls and in the main retail streets.

Such stores are almost unique to China because in many other international markets sports shops do not tend to be brand specific.

Cavender at CMRG said it is a way of combating the problem of counterfeiting, which affects sportswear as much as it does other markets in China.

"Fake goods are an issue. Nike, Li Ning and Adidas have opened these big retail outlets so consumers have somewhere to go where they can trust they are buying the real product," he said.

One of the problems for Chinese brands is in being able to position themselves in the top bracket of the market despite investing heavily in research and development.

"A Nike shoe can still be twice as expensive as a Chinese competitor and even Li Ning, which does have many quality products, can be 20 percent less expensive," added Cavender.

Mike Bastin, who is an expert in sports marketing and is visiting professor at the China Agriculture University, said some of the Chinese brands need to look at their branding strategy.

"China continues to suffer from a country image problem. They need to move from corporate to product branding and choose names for their products which do not sound Chinese. Such a change in strategy would enable them to move more upmarket," he said.

The tastes of the Chinese consumer present a challenge not just to Chinese brands but to the major Western ones as well.

Nike might release three different styles of a shoe in a season in the United States but in China it comes under pressure to offer five or even six a year.

"Chinese consumers want more innovation in styles than you would expect in the United States. Everyone is being forced to innovate and differentiate themselves. It is a very exciting market," added Cavender.

Tim Maitland, the Hong Kong-based director of sports marketing for international public relations firm Hill & Knowlton, which has worked with Li Ning, said Chinese sports brands were pursuing the right strategy by linking themselves with major stars such as Evan Turner.

"Getting the right kind of associations with the right kind of sports stars, artists and musicians is the right way to go. If they get their marketing right, they should be able to reach those high-value positions in the market," he said.

Maitland sees no reason why Chinese sports brands will not one day dominate world markets.

"Will they succeed? Yes, of course. Why wouldn't they? The question at the moment is whether they really need to. The domestic market still has so much promise," he added.

(China Daily August 30, 2010)