Nike plans China online shake-up, cutting off thousands of sellers
Nike says it will concentrate China online sales on its own channels and official stores on Tmall, JD.com and Douyin from January.
By Sal Moretti · Money Reporter
3 min read
Nike is preparing to pull the plug on thousands of online distributors in China in January, a digital reset meant to put its sneakers and apparel back under tighter company control in one of its most pressured markets, Nike said Tuesday.
The company said its online sales in the country will be centered on Nike’s own website and app, along with official stores it runs on Tmall, JD.com and Douyin. Those platforms are among China’s biggest e-commerce and social shopping players.
At present, shoppers in China can buy Nike goods through those official channels, plus thousands of online shops linked to the brand’s physical retail partners and secondary distributors. Nike said that wide reach has helped consumers find its products, but it has also created uneven branding and pricing online.
A tighter grip on the swoosh
Cathy Sparks, Nike’s new vice president and general manager of Greater China, told partners in a letter that the company wants its official digital flagships to become the main Nike destinations inside those online ecosystems.
In the letter, Sparks said the plan is aimed at making Nike’s presentation clearer and the shopping experience more connected across the places where consumers already shop. She also said the move is not intended to reduce consumer access, but to cut down on fragmentation and make the brand experience more consistent.
The reset gives Nike a better chance to control pricing online, according to the company’s stated plan. It also comes as the business tries to return the region to growth after sales in Greater China fell by about 30% over the past five years.
The strategy carries risk. The shift could weigh on revenue in the region, where Nike is already under pressure, and it is expected to hurt some brick-and-mortar partners that have built up online sales operations in recent years.
Analyst sees echoes of a painful U.S. move
Word of Nike’s planned distributor cuts first surfaced late last month in a local Chinese media report. After that report, BNP Paribas equity analyst Laurent Vasilescu wrote that the move looked similar to Nike’s earlier decision to pull back from wholesalers in North America.
Vasilescu said that North American strategy created room for rivals on store shelves and ended badly for Nike, contributing to weaker sales, margins and market position. He wrote that BNP Paribas was keeping its underperform rating on Nike and argued that the company’s problem is tied to product, rather than distributors, including in other markets.
Nike has acknowledged problems with its past direct-to-consumer push in North America, according to CNBC, including a move away from wholesale partners that the company later said went too far.
Top distributor backs the plan
Topsports, Nike’s largest distributor in mainland China, said it supports the new approach, while also acknowledging that the change will create short-term pressure on its business.
Yu Wu, Topsports’ CEO, said in a statement that the company has worked with Nike for 27 years and believes the shift can help create a healthier and more orderly retail system in China over the medium and long term.
Wu said Topsports will keep working with Nike through offline retail, local consumer service and stores across different city tiers. He said the company plans to use new sport store concepts and physical retail experiences to serve Chinese consumers.
This story draws on original reporting from CNBC.