Nike's China sales slump amid rise of domestic brands

Nike is facing a significant downturn in its crucial Chinese market, with revenue declining for eight consecutive quarters and overall business size shrinking by approximately 30% since 2021. The fiscal year ending in May saw Nike's China revenue hit an eight-year low, a stark contrast to its past performance as a key growth driver for the global sportswear giant.

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Nike has become somewhat outdated in a way. Young consumers can hardly name any innovative products Nike has recently launched, but when they mention Adidas, they can think of products like pet clothing and Chinese-style jackets that are closer to local culture.

The primary driver of this decline is the surging popularity of "Guochao," or "national trend," favoring domestic brands such as Anta and Li-Ning. Younger Chinese consumers increasingly view these local brands as more fashionable and culturally relevant than Western counterparts. Experts note that while Nike's innovation and product launches have become less memorable to this demographic, competitors like Adidas have successfully tapped into local culture with products like pet apparel and China-themed jackets.

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A few years ago, if you asked a high school boy which sports shoes they wanted to buy, they might have answered Nike or Adidas. But now if you ask them, they will say Anta or Li-Ning. Nike might not be as cool to them anymore.

Analysts point to a disconnect between Nike's global strategy and the specific demands of the Chinese market. A former Nike and Converse executive highlighted that Nike's China team lacks sufficient autonomy to quickly develop and market products tailored to local tastes, with designs largely dictated by the company's headquarters in Portland. This contrasts with Adidas, which has seen a rebound by granting its China team more independence and launching culturally resonant products, such as a Chinese New Year jacket that sold out rapidly.

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So everything, especially in design, actually comes from Nike's global headquarters. The local team has very limited space to create products and design goods that truly meet the needs of Chinese consumers. I think this is actually the biggest problem that Chinese consumers are currently facing.

Adding to Nike's challenges is a complex and fragmented sales channel. The company allowed physical retailers to sell online during the pandemic, but failed to recalibrate this model as consumers returned to physical stores. This has created a confusing shopping experience for customers. Nike is now adjusting its strategy, appointing a senior executive to oversee Greater China and planning to introduce more locally designed products. However, closing these online sales channels is seen as a necessary step to repair the business and re-establish consumer connections.

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After the pandemic ended and consumers returned to physical stores, we did not readjust this model. As a result, the market has formed an extremely fragmented environment, and the consumer shopping experience has become very chaotic.