Cutting Thousands of Online Distributors! Nike (NKE.US) Launches "Channel Shakeup" in China, Bets Big on DTC Model to Reshape Pricing Power

According to Zhitong Financial News APP, Nike (NKE.US) announced on Tuesday that as part of the sneaker giant’s plan to clean up an increasingly fragmented digital marketplace and drive a return to growth in the region, the company plans to cut off supply to thousands of online distributors in China starting from January.

Beginning next year, Nike’s online business in China will focus primarily on the retailer’s official website and app, as well as its official flagship stores operated on Tmall, JD.com, and Douyin.

Currently, consumers can purchase Nike products not only through all of these channels, but also via Nike’s local physical partners and through thousands of other online shops operated by secondary distributor networks. Although the extensive digital network has made Nike products widely accessible to consumers, it has also led to inconsistencies in brand image and pricing experience, hindering the company’s efforts to reverse the sales decline in the region.

Nike’s new Vice President and General Manager of Greater China, Catherine Sparks, wrote in a letter, “These new flagship stores will serve as Nike’s single, premium-focused platforms within these ecosystems, with clearer product displays, stronger brand storytelling, and a more closely connected consumer journey. This is to consolidate the platforms where consumers begin and complete their shopping journeys, ensuring that these experiences are intuitive, consistent, and distinctly Nike.”

She stated, “This move is not intended to reduce access channels, but to reduce fragmentation and enhance the consumer journey. When the experience is consistent, the brand becomes stronger.”

Nike’s plan to scale down its online business aims to provide consumers with a better, more consistent experience and to regain control over online pricing. However, there are concerns that this may lead to a substantial decline in revenue in the region, where the market has already shrunk by about 30% over the past five years.

News of Nike’s plan to cut ties with online distributors was first reported late last month in a local Chinese media article. The report triggered a note by Laurent Vasilescu, an equity analyst at BNP Paribas of France, who wrote that the move is reminiscent of Nike’s unfortunate decision to cut off wholesalers in North America, which led to the loss of its market dominance in the region as well as sharp declines in sales and gross margins.

“This strategy opened up shelf space for competitors, and Nike ultimately lost that round. We believe that if a similar approach is taken in China, the same result could occur,” Vasilescu wrote last month, adding that BNP Paribas would maintain its “underperform” rating on the company. “We believe Nike’s challenge is not about distribution partners, but product issues, and this applies to other markets as well.”

This change is also expected to hurt Nike’s local physical partners, who in recent years have expanded their online presence to grow their own businesses.

Nevertheless, Topsports, Nike’s largest distributor in mainland China, expressed its support for the company’s decision.

In a statement, Topsports said, “Based on the principle of mutual benefit and joint growth, Topsports has cooperated with Nike for 27 years. This adjustment will bring some short-term pressure to our business. But we firmly believe that in the mid to long term, this direction will help build a healthier, more orderly, and more sustainable retail ecosystem in China, while further enhancing consumer experience and product appeal.”

“Looking ahead, we will continue to work closely with Nike, leveraging our strengths in offline retail operations, local consumer services, and deep market penetration across cities. Through new concept sports experience stores and high-quality physical retail experiences, we will bring richer and more meaningful sports experiences to Chinese consumers.”