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On July 13, 2001, Beijing won the bid to host the 2008 Summer Olympics. It was a day of triumph for China. It also represented a tremendous opportunity for Nike, which has a track record of delivering stunning investment return performance during the Olympics years. Before 2007, however, Nike had no premium owned retail space on the high street in China. Rather, it relied on a network of distributors (department stores and partner stores) to distribute its products in the country. The company felt that this retail network would simply be insufficient to maximize the brand-building opportunity presented by the Beijing Olympics. Not only would the company be unable to rely on these distributors to provide ample space for Nike products, but Nike lacked control of the brand presentation in third party stores. The company concluded that the Beijing Olympics warranted the creation of a new flagship store in China, not only to maximize sales through the store itself (and, via the brand heat created, through its distribution partners) but, also, through increased brand visibility to deepen the brand’s relationship with the younger generation. A further advantage is that the new store would steal the thunder of its competitors’ stores and cool their own brand heat.

From among the top tier cities in China, the company selected Beijing to build the new store. Not only would Beijing be the host city for China’s first Olympic Games, it is also the capital of China and has a long and well-established history and culture. It is the

leading city in the country. Its nominal GDP has experienced tremendous growth over the years. In 2007, a year before the Olympics, Beijing GDP was USD$138 billion (935 RMB billion) – a remarkable 229% increase from USD$42 billion (285 RMB billion) in 2001. Further, it is anticipated that Beijing will continue to experience accelerated urbanization and globalization.

The primary focus of opening a flagship store in BJ is to secure solid brand presentation at the premier location in China, ahead of the Olympic Games. This flagship store was planned to be the best of Nike in China and to be the archetype for the other retailers that sell Nike products. It is therefore much more than a store; it is a venue intended to elevate the Nike brand image in this fast growing market. “It’s extremely exciting to open a flagship Nike retail presence in one of the world’s great cities. China is one of Nike’s biggest growth opportunities, and one of the most dynamic retail markets in the world. Our Beijing flagship store creates a strong brand statement with a

compelling world-class shopping experience. “244

The strategic move to build a flagship store in Beijing was shared and followed by competitors. A year after the opening of NTB, Adidas opened its flagship store, the “Adidas brand center”, in Sanlitun, the capital's main entertainment district245. Their 34,100 square foot store is about 1½ times the size of Adidas's previous largest outlet on

244

Charlie Denson, Brand President, Nike, Inc, at Beijing store opening, August 7, 2007. Source: Company site.

245 _{The fact that Adidas opened its megastore in Beijing’s entertainment district may signify the company’s}

the Champs-Elysées in Paris. The company invested heavily in China in the near term to promote Adidas's role as the official sportswear provider for the Beijing Games. In the longer term, Adidas is planning to grow its business in China significantly246.

In order to find the best location for NTB, Nike conducted an in-depth analysis that compared different prominent retail districts - Wanfujing Aveneue, Xidan,

Jingoumen, Donzhimen, and ChaoYang - within the Chinese capital. The districts were categorized by the demographic characteristics deemed significant by Nike for store location (membership in the 16-24 age group, student or non-student population, and amount of tourist and local foot traffic)247. A matrix, Table 21, was created in 20** that matched the demographics of each district, weighted by expected revenue248, that the company estimated would be generate sales. The results show that Wangfujing Avenue ranked the highest in student and tourist populations and was in a virtual tie with Xidan for youth as a percentage of the population. Wanfujing Avenue had the highest estimated retail revenue potential among the five districts and, in addition, it was the most popular of the districts among the local population.

246 _{Christophe Bezu, GM Adidas Asia, “China is already Adidas’s second-largest market by the end of this}

year, overtaking Japan and coming after the U.S. China is already Adidas's most profitable market, having passed Japan and some other European markets at the end of 2007.” Chief Executive Herbert Hainer has said that Adidas's China sales will surpass $1.58 billion by 2010.

247 _{Data derived from census and from several governmental agencies. Details are available only for}

academic study.

248

Dollar amount of estimated revenue data is confidential, and therefore only percentage breakdowns may be used in this study.

Table 21: Beijing Major Retail District Demographic Comparison

Matrix Wangfujing Xidan Jingoumen Dongzhimen ChaoYang Total

Youth 34.0% 34.7% 12.3% 11.2% 7.9% 100.0%

Students 41.2% 27.9% 9.9% 17.4% 3.6% 100.0%

Tourist 56.9% 26.9% 0.0% 10.1% 6.1% 100.0%

Wanfujing Avenue has become one of the world’s most famous shopping areas in recent decades, and is sometimes called Beijing’s “Golden Mile.” It is the most well known and popular shopping district in China. Seven hundred thousand pedestrians walk along the Avenue each day, comprising a highly desirable demographic mix. Many major consumer brands seek locations on Wanfujing Avenue for their flagship stores. The Avenue has two major plazas: the Oriental Plaza and the Sun Dong An Plaza. The Oriental Plaza has very high-end retail shops that maximize the overall spending habits and profile of the consumers attracted to that area. Sun Dong An Plaza249, however, presents the ultimate address for a flagship store. It features excellent access to a main subway line and other transportation resources. Because of this accessibility, Sun Dong An Plaza has higher foot traffic. Research estimates that Sun Dong An Plaza will have over a million visitors a day after the opening of the new subway extension.

249

Occupying an area of 120,000 sq. meters spread over seven levels, the Plaza’s balanced mix of retailers will attract a large and diverse range of consumers. The retail mix includes two department stores of around 30,000 and 10,000 sq. meters, an eight-screen Cineplex, food court, F&B outlets and an entertainment center, etc. In addition, parking for 500 cars and 3,500 bicycles, cargo loading and unloading and E&M