Darren Rovell talks with Dwyane Wade about his decision to leave Nike and join Chinese shoe company Li Ning.
ESPN the Magazine: Dwyane Wade is so Money!
Darren Rovell talks with Dwyane Wade about his decision to leave Nike and join Chinese shoe company Li Ning.
WHEN DWAYNE WADE first met Li Ning, in April 2012, the Chinese executive warned the NBA All-Star that his English wasn't very good. "I said, 'That's perfect, because my Mandarin is not so good,'" Wade recalls. Thus began one of the unlikeliest partnerships in sports-branding history: A 6'4" basketball superstar from the South Side of Chicago and a compact gymnastics legend-turned-sportswear CEO from rural Guangxi in southern China. Together they would try to create a sneaker brand that would give Wade the legacy he had always wanted and lift the Li Ning company from its doldrums back atop the Chinese sportswear world. Nothing about it would be easy -- starting with understanding the words coming out of each other's mouths.
Li Ning announced the endorsement deal in October of that year, when Wade was in Beijing for an exhibition: After three years with Nike's Jordan Brand, the Heat guard would be ditching the Jumpman to form a partnership with ... Lining? Lean In? Oh, LEE-NING. Whatever that was. "A lot of people thought I was maybe a little off my rocker," Wade says with a laugh.
The news wasn't a surprise -- rumors had been flying for weeks -- but it was a milestone: For the first time, a Chinese apparel brand had signed an American hoops A-lister who was still within a standard deviation of his prime. Shaquille O'Neal blazed the trail east by partnering with Li Ning in 2006, followed by Baron Davis in 2008 and rookie Evan Turner in 2010. Kevin Garnett is now with Anta, and Shane Battier and Tony Parker are with Peak. But Wade, then 30, was a different story. He was one of the NBA's top endorsers, and he and the Heat, coming off a 2012 title, had a shot at doubling up in 2013. If Wade won, he'd win wearing Li Nings.
For Li Ning, the deal arrived just in time. The company was coming off the worst year in its two-decade history, with net profit down 65 percent in 2011, amid an industrywide slump when demand failed to meet supply after the 2008 Summer Olympics in Beijing. In July 2012, Li Ning had brought in an American private equity firm, TPG Capital, to stop the hemorrhaging. The company shut down 30 percent of its stores and, after a foray into the U.S. market, shifted its focus back to China. Heads rolled too, primarily that of CEO Zhang Zhi Yong, in whose place Li Ning installed himself, with TPG partner Jin-Goon Kim serving as executive director and vice chairman to oversee the company's transformation.
But the brand still needed a new face. As respected as Li was in China -- his six-medal performance in the 1984 Olympics had earned him the title Prince of Gymnastics -- at 49, his face was becoming a little leathery. Wade was an obvious contender. Between his accolades, playful personality and fondness for nerd-chic glasses and polychromatic suits, he was a brand unto himself. He hadn't been a big seller for Jordan Brand -- even Wade admits "nobody was lining up down the street" to buy those sneakers -- but his name could, in theory, give Li Ning the defibrillation it needed. Basketball was a fast-growing segment of the Chinese apparel market, and in a country where consumers associate foreignness with quality and prestige, Li Ning bet that Wade's backing would prove it could compete with the heavies, Nike and Adidas. "In terms of skills, he's not the best," Li says, "but he's very popular."
Wade got his too. The 10-year deal would earn him tens of millions, plus what his agent called a "significant" equity stake in the company. (Contrary to reports of a $100 million deal, Kim says the total was less than $60 million.) He would also serve as "chief brand officer" of the new Way of Wade line, taking an active role in designing the shoes. "It was the perfect time," Wade says. "I was at that point where I was 29, 30 years old, so I was getting more involved in the business aspects of the game, looking to see what else I could do beyond just endorsing a brand."
Wade knew Chinese shoes didn't have the best reputation among consumers, American or Chinese. "They look at China brands as being, you know, cheap," he says. But that could be fixed, and in the meantime the Li Ning deal would give Wade a prime platform in the world's fastest-growing economy. It was a risk, sure, but if Li Ning recovered, Wade could become one of the wealthiest athletes ever. "I wanted the challenge," Wade says.
When the first Way of Wade sneaker debuted in October 2012, reaction was mixed: There was skepticism about Chinese production quality, along with hope that the WoW, as it was known, could blossom into something unique. The website Kicks on Court gave the shoe a strong review, singling out its high-quality leather and throwback look. Others weren't so taken: "The only 'wow' involved with these is that Wade would jump from Jordan Brand to create something that looks like this," wrote a BleacherReport columnist. Undeterred, Wade dutifully promoted the sneaker, posting first-person-POV shots of his new shoes on his Twitter and Instagram feeds and even suggesting a new nickname for himself: "WoW." (LeBron James told reporters the moniker was "corny"; "We like it!" responded the official Twitter feed of World of Warcraft.)
But even as the Heat would go on to beat the Spurs in an epic championship series last season, the business outlook for Li Ning remained grim. In January 2013, the company announced it would need to raise another round of funds for restructuring, which sent the stock price plunging 15 percent. In March, Li Ning announced a $319 million annual loss in 2012, its first drop since it went public in 2004. The bosses at Li Ning knew the "transition" would be hard, but this would be a longer slog than they'd expected. They had gotten Wade. All they needed now were customers.
LI FOUNDED Li Ning in 1990 in part so Chinese athletes wouldn't have to wear foreign brands anymore. It worked, at first. The company quickly became the top sportswear brand in China. When government work units held athletic matches, they bought Li Ning outfits for everyone. There wasn't much alternative anyway. Nike had entered China in the early 1980s, but few Chinese consumers could afford a pair, if they'd even heard of the brand. A Nike factory owner in Fujian province set off to create Peak in 1989. Anta followed in 1994, providing an affordable alternative to the international brands.
Li Ning had a different model. The brand was consciously Chinese, as opposed to Peak, for example, whose English name signaled its international pretensions. Between 1992 and 2004, Li Ning sponsored every Chinese team at the Summer Olympics. And whereas Peak and Anta initially focused on sneakers -- then called "traveling shoes" because they were first spotted in China on the feet of tourists -- Li Ning's introductory product was a podium jacket. Over time, the brands became even more distinct: Peak and Anta targeted second- and third-tier cities, where incomes are lower and tastes less international, while Li Ning fancied itself a midmarket alternative to luxury Nikes or down-market Chinese options.
But the swoosh was gaining fast. Originally introduced by missionaries in the 1890s, basketball had long been popular in China. (Chairman Mao banned most foreign cultural imports but made an exception for hoops.) Fandom exploded in the 1980s with the advent of NBA broadcasts on China Central TV and the rise of Michael Jordan. Nike plastered its logo all over broadcasts of the newly established China Basketball Association in 1995 and began sponsoring grassroots activities like three-on-three tournaments and a high school league. Meanwhile, China's post-1979 open market reforms drove incomes higher and spread middle-class notions of individualism and status -- Nike's bread and butter. Sales grew an average of 60 percent a year in the 1990s.
If Jordan set up the alley-oop for basketball in China, it was Yao Ming who provided the oop. Even before the Rockets made him the No. 1 pick of the 2002 NBA draft, Nike swooped in with a contract. Nike soon surpassed Li Ning to become China's top sportswear brand, eventually inspiring the ultimate corporate compliment: a Chinese brand ripping off Jordan's name.
Li Ning scored a publicity windfall when its founder flew through the air, Crouching Tiger-style, to light the torch at the 2008 Beijing Olympics. But although the entire Chinese sportswear industry was expanding furiously, opening an average of 11 stores a day between 2008 and 2011, demand never caught up. Li Ning was hit especially hard by the slump. The company trumpeted the opening of its flagship store in Portland, Ore. -- aka Nike's backyard -- in 2010, but it was quietly shuttered within two years. In 2011, Li Ning's market share fell below Anta's for the first time. Forget being the top brand in China -- it wasn't even the top Chinese brand.
LI NING CHANGED its slogan to "Make the Change" in 2010, but it wasn't until 2012 that the company began taking its own advice. Li put Kim, the motormouthed executive director, in charge of taking the business off life support. He'd handled turnarounds before, including Daphne shoes and China Grand Auto. But when he first took over Li Ning's operations, he found the company in far worse shape than he'd expected. Old inventory was still sitting on shelves, so stores wouldn't place new orders. Even figuring out the size of the problem was a challenge. "How are they gonna know the financials of these mom-and-pop stores?" he says. "Even if you ask, they wouldn't tell you." Li Ning eventually shut down more than 3,500 of its 8,324 stores.
Meanwhile, the company has opened 1,400 new stores with healthier fundamentals: better locations, lower rent, more competent management. Li Ning owns the new stores directly, or requires franchisees to follow strict guidelines, just as Apple does, giving executives more control over inventory and customer experience. It also reduces the chances of retailers stealing intellectual property. In China, as in other emerging markets, "you've got a lot of small, unethical, don't-play-by-the-rules sort of people," Kim says.
Wade says he knew what he was getting into, business-wise, when he signed with Li Ning: "In a sense, they're starting over and trying to right the ship." He also says he knew he'd have less of a presence in the U.S. market: "I understood that it was a China brand, and I also understood that Li Ning wasn't the No. 1 brand in China. So the first thing we have to do is get our house in order."
Comebacks never happen overnight, but Li Ning's has started to feel like the Long March. "It was supposed to be a six-month journey," Kim says of the "transition" that is now pushing two years. At a news conference in Hong Kong in March, Li said it would take another year or two to get his company back on its feet. "It's very hard to stand in front of all the analysts and media and say, 'I gotta tell ya, we're going to focus on the right things, and short-term profit is not our No. 1 priority,'" Kim says. "It's about long-term value creation." Anta, meanwhile, recently posted its third consecutive quarter of order growth.
Of course, the business can't recover without a solid product. Li Ning has long been known for its perfectly decent quality -- not on par with international brands but better than the Chinese competition. "One of the reasons Li Ning and Chinese brands have not done very well as creative brands is the lack of creative development history," Kim says. To that end, Li Ning has debuted a number of patented technologies. That might not scare Nike and Adidas, which have in the past partnered with NASA and BASF, respectively. But they do separate the company from its Chinese competitors, Kim says: "They don't have innovative and creative DNA in their heritage." He used the word "innovate" and its variations 37 more times over the course of two hours.
But the brand is facing a more fundamental problem: It's just not cool. On a recent Saturday afternoon in central Beijing, the Dongdan basketball courts are packed. Of the 200-plus players, all men roughly between the ages of 15 and 40, I count only seven wearing Li Nings. Even Xu Yao, a 24-year-old wearing a Wade jersey, has opted for Jordans. "When I was little, we all wore Li Nings," he says. "Now the NBA stars wear Nike and Adidas, so we wear these." Across the way, giant ads for Nike's new Kobe 9 Elite loom over the courts. Xu Qiang, a columnist who writes about the shoe industry for the Chinese newspaper Entrepreneurs' Daily, says he associates the Li Ning brand with laotu, or "bumpkins."
For Anta and Peak, uncoolness isn't a problem: Their selling point has always been affordability. But Li Ning pitches itself as something more than just a cheap alternative. Its shoes have a higher price point than Anta and Peak and boast more sophisticated technology. Yet they still lack the prestige of their foreign competitors. Kim spins this middle ground as a plus: Li Ning targets the consumers who want higher-quality sneakers than those that sell for $30 but who can't shell out $120 for a pair of Nikes. That middle range of $50 to $70 is what Kim calls Li Ning's sweet spot.
Others argue the spot is not so sweet. According to Ben Cavender of China Market Research Group, Li Ning is caught in a trap: Kids who can afford Li Nings will buy Nikes. Those who can't will buy Antas or Peaks, but they dream of buying Nikes. Guo Yu, the manager of the storied Yaxin sneaker store in Beijing, says most Chinese sneaker collectors, rather than getting to know the story behind each design, just buy the most expensive shoes they can find. Nike and Adidas both have about a 13 percent share of the Chinese sportswear market, followed by Anta at 5.7 percent and Li Ning at 4.1 percent.
Wade says he anticipated the problem. "One of the decisions I had to make was about the cool factor," he says. But, he adds, he knew he could bring the freshness himself. "I have a great following in China. Chinese fans know just as much if not more about me as some American fans, so they decide if it's cool or not."
As every marketing major knows, branding is about storytelling. MJ wanted to wear Air Jordans so badly that he was willing to be fined by the NBA for breaking the league's onetime draconian rules governing the permissible color of sneakers (in fact, Nike picked up the tab). In the '80s, hip-hop artists like Run-DMC lent Adidas a kind of street cred that commercials could never buy. Over time, these brands have become suffused with so much meaning that it's easy to forget they're selling pieces of cloth and rubber for your feet.
Li Ning, by contrast, has been casting around for an identity for years. In 2009, wanting to focus on its strengths, the company pivoted toward badminton and away from basketball, a huge growth sector in China (though the company did erect a 50-foot statue of Shaq in Beijing's Chaoyang Park). It has since turned back hard, signing not just Wade but also a 2 billion yuan (upward of $300 million) sponsorship deal with the CBA -- the biggest Chinese sports apparel endorsement of all time. In 2010, the company changed its swoosh-like logo, scrapped the slogan "Anything Is Possible" for "Make the Change" and ran ads with a Nike-like message of overcoming obstacles.
Now the Li Ning brand is all about Wade. "I wanted to tell the story of why I left the Jordan Brand," he says. "Everyone thought: It had to be the check that he signed." But really, he says, it was about leaving his own legacy, hence the slogan "Make Your Own Way." "It's largely about, 'Listen, guys, I'm gonna show you that it's okay to change, that it's okay to wear something different from what your friends are wearing because of the name of the sneaker." The same narrative applies to Li Ning's business strategy, he says: "They're not Nike, they're not Adidas, they're not Jordan. Li Ning has to do it the way Li Ning sees fit. Right now, people might not understand why are they doing this, or the bottom line doesn't look that great, but they have a future plan. And they have to do it their own way."
Even the shoes reflect that theme. One of the reasons Wade joined Li Ning, he says, is that the company offered him the chance to design his own sneaker. (At Jordan Brand, athletes generally suggest ideas for how their shoes will look but don't have final say.) Wade wanted a design that would "look good on the court and look good off the court." The original Way of Wades are simple but distinctive, with sharp angles that mimic the "W" of his name and premium leather that, in these days of Flywire and NanoWeb and Phantom Liner, counts as a throwback. "I didn't go to school for design, but I know what I like," he says. "I have a good eye and a creative mind."
When something catches his fancy on the street or in a store, he'll text a picture to Eric Miller, the lead designer for the Way of Wades. Miller has come up with some striking colorways, including the "Birthday" design, based on camouflage boats from World War I, and the "Year of the Horse" to coincide with Chinese New Year. Less clear was the thinking behind the "Lei Feng," named after the semifictional, ultraconformist hero of Chinese Communist Party propaganda who made his own way to an early death when a telephone pole fell on his head.
The emphasis on Wade's role in the design process is a narrative threefer for the Way of Wade brand: It distinguishes this shoe from those he wore under previous endorsers, highlights his design chops and business acumen, and drives home the brand's enterprising, do-it-yourself message. "If [Miller] just created a sneaker and put my name on it, then it's not real, it's not authentic," Wade says.
At the company's flagship store in downtown Beijing, a video loop on the wall tells the tale of how Li Ning and Wade forged their East-meets-West, visionary-meets-visionary trans-Pacific bromance. Soaring music plays as Chinese characters flash up on-screen: "Sports entrusted them with the same humble and tolerant demeanor, the bravery to surpass themselves, the willingness to contribute to society. They now walk hand in hand to promote basketball's development in China." Finally, the Li Ning and Wade logos flash on-screen side by side.
The message of mold-breaking, East-West cooperation might click with young people in China eventually. But shifting perceptions takes time, especially as Chinese consumers become savvier about how they're being marketed to. During my visit to Li Ning's store in Beijing, I ask a clerk what kind of shoe he usually wears. He says he prefers the comfort and design of Nikes. I ask him what he thinks I should wear. "Li Ning," he says. I ask why. "Because I'm selling Li Nings."