Nike Cuts Number of Online Distributors in China, Restructures Digital Footprint

Nike is planning to cut off thousands of online distributors in China beginning in January as the sneaker giant looks to clean up what’s become a messy digital marketplace and get the region back to growth, the company said Tuesday. Starting next year, Nike’s online footprint will shift primarily to the retailer’s official website and app, and the storefronts it operates on Tmall, JD.com and Douyin, some of China’s largest online marketplaces and social platforms. Currently, consumers can shop the athletic brand through all of those channels as well as thousands of other online storefronts powered by Nike’s brick-and-mortar partners in the region and a network of secondary distributors.

Total Retail's Take: This decision reflects Nike's belief that its biggest problem in China isn't simply declining consumer demand for its products, but rather a fragmented customer experience that has weakened its pricing power, brand perception and consumer trust. Expanded distribution in China delivered additional revenue for Nike, but it came at an expense — a weakening of brand consistency and authority. To re-establish its once dominant presence in China, Nike is scaling down to create a more consistent shopping experience for its customers.

Rebuilding its China business will be another critical test of Nike CEO Elliott Hill's turnaround strategy. He is sacrificing near-term disruption in the market (e.g., decreased sales, less product availability for consumers) for potentially long-term gain in the form of a stronger, premium brand presence. The strategy doesn't come without risk, but it would seem to be time for a new approach. In fact, Hill might be heeding a famous Nike tagline, "Just Do It," with his plan for turning around the brand's business in China.