Turmoil at Nike: Sales in China at an eight-year low

The business of sports giant Nike in China is in a deep crisis. Although the sportswear market in the country has grown by 51% over the last five years, the company's sales in the region have fallen for eight consecutive quarters. Since 2021, Nike's business in China has shrunk by 30%, and its annual revenue has reached an eight-year low. China, which was once Nike's fastest-growing and most profitable market, has become its smallest market and is weighing on the company's global recovery efforts.

Young people prefer local brands

Nike's retreat is mainly due to a change in the tastes of young consumers in China. Following a storm that erupted in 2021 around Nike's statement regarding the use of forced labor in cotton production in the Xinjiang province, a political campaign encouraging pride in local production has strengthened in the country. Today, young buyers prefer Chinese brands like Anta and Li-Ning over expensive foreign brands. Experts explain that local companies have improved their production and marketing, while Nike is perceived as too generic a brand whose pace of innovation is slow.

While competitors like Adidas and Lululemon are growing in China thanks to local design, Nike managed most of its designs from the company's headquarters in the USA. This limited the local team's ability to respond quickly to the market. To solve this, Nike appointed a new regional manager, Cathy Sparks, and for the first time hired a vice president for local product design. The company plans to launch unique collections as early as the upcoming holidays that will be specially adapted to the tastes, cuts, and colors preferred by consumers in China.

The price of reorganizing the distribution network

Beyond product design, Nike is now working to fix its complex distribution model in China. During the COVID-19 pandemic, the company allowed its physical distributors to sell products online, which created a fragmented market based on deep discounts. Sparks decided to close these network stores to restore the premium brand experience. However, the move has a heavy price: analysts estimate that closing the online stores could reduce Nike's revenue in China by up to 1 billion dollars per year.

Despite the financial damage in the short term, Nike's management believes that the reorganization is necessary for long-term stability. Sparks emphasized that the company expects to replace the lost revenue through full-price sales and a higher-quality shopping experience, with the goal of regaining the trust and wallet of the sophisticated Chinese consumer.