Nike to cut thousands of online distributors in China

Nike The company said Tuesday it plans to cut thousands of online distributors in China starting in January, as the sneaker giant looks to clean up what has become a cluttered digital market and return the region to growth.

Starting next year, Nike’s online footprint will shift primarily to the retailer’s official website and app, and storefronts it operates on Tmall, JD.com and Douyin, some of the largest online marketplaces and social platforms in China.

Currently, consumers can shop through all of these channels as well as thousands of other online storefronts supported by physical Nike partners in the region and a network of secondary distributors. While the vast digital network has led to widespread consumer access to Nike products, it has also created an inconsistent brand experience and pricing and hampered the company’s efforts to reverse declining sales in the region.

“These new brands will serve as a single, elevated destination for Nike within these ecosystems, with clearer product presentation, stronger storytelling, and more connected consumer journeys,” Cathy Sparks, Nike’s new vice president and general manager of Greater China, wrote in a letter. “It’s about enhancing the platforms where consumers actually start and end their shopping journey, and making sure those experiences are direct, consistent and unambiguous from Nike.”

“It’s not about reducing access. It’s about reducing fragmentation and enhancing the consumer journey,” she said. “When the experience is consistent, the brand is stronger.”

Nike’s plans to shrink its online footprint are designed to create a better, more consistent consumer experience and allow it to regain control over online pricing. However, there are also concerns that this could lead to a tangible decline in revenues in the region which has already shrunk by about 30% in the past five years.

News about Nike’s plans to cut online distributors first emerged late last month in a local Chinese media report. This sparked a note from BNP Paribas equity analyst Laurent Vasilescu, who wrote The move is reminiscent of Nike’s ill-fated decision to cut wholesalers in North America, which contributed to the collapse of its market dominance in the region, as well as sharp declines in sales and margins.

“This strategy opened up a lot of space for competitors and the strategy ended poorly for Nike. We believe the same could happen if it follows the same approach in China,” Vasilescu wrote last month, adding that BNB was standing by its underperform rating on the company. “We don’t think Nike has a distribution problem, but rather a product problem that also applies to other markets.”

The change is also expected to hurt Nike’s brick-and-mortar partners in the region, who have expanded their online presence in recent years to grow their own businesses.

However, Topsports, Nike’s largest distributor in mainland China, said it supports the company’s decision.

“Topsports has worked with Nike for 27 years on the principle of mutual benefit and shared growth,” Yu Wu, CEO of Topsports, said in a statement. “This adjustment will impose some pressure on our business in the short term. But we firmly believe that this trend, in the medium to long term, will help foster a healthier, more regulated and sustainable retail ecosystem in China, while further improving consumer experience and product appeal.”

“Looking to the future, we will continue to work closely with Nike, leveraging our strengths in offline retail operations, serving local consumers, and deep market development across city levels,” Wu said. “With new concept sports stores and high-quality physical retail experiences, we will provide Chinese consumers with richer and more meaningful sports experiences.”