Nike will drastically reduce its number of online distributors in China next year in a move to simplify a crowded stable of channels as the sportswear maker continues to curb slow sales in the region.
Beginning January 1, Nike said on Tuesday that sales will be directed through its website, app and approved retailers Tmall, JD.com and Douyin.
“These new flagships will serve as the single, elevated destination for Nike within these ecosystems, with clearer product presentation, stronger storytelling and more connected consumer journeys,” Cathy Sparks, Nike’s vice president and general manager of Greater China said in a letter. “This is about strengthening the platforms where consumers already begin and end their shopping journey, making sure those experiences are direct, consistent and unmistakably Nike.”
More than 1,000 distributors will be impacted by the move, including smaller outlets while large longtime partners like Topsports, Nike’s biggest distributor in the region, now have months to brace for the change. Topsports has worked with Nike for nearly 30 years but its CEO Yu Wu understands why shift is happening even if his company will have to pivot by the end of the year.
“Topsports has worked with Nike for 27 years based on the principle of mutual benefit and shared growth,” Wu said in a statement. “This adjustment will bring some short-term pressure to our business. But we firmly believe that, over the medium- to long-term, this direction will help promote a healthier, more orderly and more sustainable retail ecosystem in China, while further improving consumer experience and product appeal.”
As China’s largest sportswear retailer, Topsports operates over 4,000 physical stores and has major relationships with Nike’s rivals like Adidas and Puma.
“Looking ahead, we will continue to work closely with Nike, leveraging our strengths in offline retail operations, local consumer service, and deep market development across city tiers,” Wu said. “Through new concept sport stores and high-quality physical retail experiences, we will bring Chinese consumers richer and more meaningful sport experiences.”
Pou Sheng International, another major Nike distributor in China, handles a complicated network of retail store, wholesale, and is a key licensee in the region as it will also be impacted by the change in January.
Meanwhile, Nike’s shares have tumbled around 34 percent this year as investors keep a guarded watch on CEO Elliot Hill’s game plan as Wall Street analysts remain skeptical on whether enough has been done to adjust the brand’s fortunes. Hill is deep into his second year as Nike’s chief as initial seemingly drastic moves to reduce complex layers of management and focus on performance product now seem as if they were necessary.
Nike has faced fierce competition in China from homegrown giant Anta but also in longtime rival Adidas, while New Balance, On and Hoka have turned up the pressure in key segments like performance running. Sales in Greater China have dipped for eight straight quarters for Nike as it continues Hill’s aggressive Win Now campaign to spark a turnaround.
Hill is also banking on rebuilding a robust wholesale network and pushed to capitalize on the intense hype surrounding the World even though it was not among the official sponsors.
Still, the dismantling of the distributor network in China is likely a critical play that could curb Nike’s slide in the region. Many consumers have been introduced to a constant supply of Nike product because of the extensive channels, but the outlets often post conflicting prices, misaligned branding and sales have not rebounded despite the product accessibility.
