As originally published on brandchannel.com. Article made top 5 most viewed.

In China, the sporting apparel market is a bit of an anomaly. For one thing, fitness and physical activity in China is a lot less common than in other global markets like the US, Europe and South America. And when Chinese consumers do hit the gym or track, it’s usually in their street clothes.

That presents a unique challenge for both foreign and domestic brands like China’s Li-Ning, the oldest and second-largest Chinese sporting goods brand. Facing the relentless competition of Nike, adidas and Under Armour on both its home turf and abroad, Li-Ning has had to adjust its product and growth strategies to focus less on hard-core athletic gear as a free-expression trend continues to grow among China’s fashion-savvy youth.

Established in 1989, Li-Ning, which sells basketball, running and women’s fitness apparel, dominated the Chinese market until the late 90s, when Nike and Adidas gained force in China. But, the company has hit hard times in the last few years. In 2012, Li-Ning sales declined 25 percent, allowing ANTA, a local competitor, to become the largest sports retailer. Despite closing 410 stores in 2013, Li-Ning still has the largest distribution network, with 6,024 stores throughout China. The brand gained back some strength in 2013, with inventory reaching relatively normal levels and same-store sales at directly-owned stores increasing 9 percent in the first half of 2013.

Much of the loss over the last several years was actually a result of the sports boom following the 2008 Beijing Olympics, after which, on average, 11 sports apparel stores opened per day in the country. Li-Ning and other local brands were forced to dump products on the market at severe discounts, stripping the brands of their value as compared to Nike and adidas, which are more highly-regarded among Chinese consumers.

But Li-Ning, which also markets products under three sub-brands—Double Happiness, AIGLE, and Lotto—has since focused on rebuilding its brand value and differentiating itself from foreign competitors. The brand re-embraced its lower-priced roots in order to expand to China’s second and third-tier cities, adopting the slogan “Anything is Possible.” But Li-Ning is not alone, as adidas opened up some 500 new stores in China’s higher and lower-tier cities in 2013, flaunting its Neo and Originals labels to appeal to trendy Chinese youth.

One aspect where Li-Ning has been comparatively successful is with sponsorship deals, mainly with NBA star Dwyane Wade. The brand, which signed Wade in 2012, has built up its brand awareness abroad and its street cred among basketball-obsessed Chinese with the deal, which has seen Wade release personalized basketball shoe and gear designs for the brand. It has also focused much of its growth on e-commerce—a rapidly growing channel in China.

Li-Ning, which is already the third largest sports apparel company in the world, has also expanded to the US. In 2012, the company rolled out its US branded website, which has seen a 600 percent increase in web traffic since its soft launch in late 2011. The company differentiates itself by emphasizing its Eastern philosophy around movement.

But relative success in the US won’t keep Li-Ning afloat in the global market that is still being driven by its home country. adidas, Nike and Under Armour continue to invest in China, debuting unique merchandise and retailing concepts, like adidas’ new HomeCourt store design and Under Armour’s “Retail Theater” experience in Shanghai, which also aims to speak to the specific athletic needs of Chinese consumers.

Will Li-Ning be able to break free from the stigma of Chinese brands in China? Only time (and the addition of another major brand ambassador) will tell.

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