Summary of Key Points
This news article discusses how the traditional model in the sports footwear and apparel industry, where brands sought out large distributors to quickly open numerous stores in a bid for market expansion, is no longer effective. For example, Aokang, which was responsible for distributing Skechers in China, failed to meet its goal of opening 1,000 stores and eventually closed all of them; Taobo, on the other hand, shut down more than 3,000 stores within four years. Nowadays, brands place greater emphasis on the profitability of individual stores and customer loyalty programs as part of more refined business strategies, rather than simply focusing on the number of stores they own. Although brands wish to directly connect with consumers (DTC: Direct-to-Consumer), completely abandoning distributors is not feasible, especially in lower-tier markets where local partners are essential. New players, such as Hailan Home, have seized this opportunity by collaborating with Adidas to open cost-effective stores in these regions, emerging as dark horses in the industry. The overall industry is still growing, but the transformation of distribution channels is just beginning.
Why Has the Traditional “The More Stores, the Better” Model Suddenly Failed?
In the past, when international brands entered China, they would partner with large distributors to expand rapidly—Skechers chose Aokang in 2015 precisely because of its strong presence in lower-tier markets in Jiangsu and Zhejiang, aiming to open 1,000 stores within five years. However, Aokang only managed to open 16 stores before closing them all. Taobo fared even worse, closing over 3,000 stores in four years, reducing its total from a peak of 8,000 to 4,360.
The reason for this failure is that the era of “opening a store and immediately generating sales” is over. Consumers are now more selective, and brands need to focus on quality rather than quantity—specifically, whether each store is profitable, whether there is excess inventory, and whether customers will return for future purchases. Skechers has acknowledged this shift, stating that it no longer relies on the number of stores but instead targets high-quality shopping centers and outlet malls. Distributors who cannot adapt to these changes become a burden rather than a source of growth for brands.
Brands Are Now Focusing on “Refined Operations”: Optimizing Each Store’s Performance
What does refined operation entail? Simply put, it means opening stores strategically with the intention of making each one profitable. This includes:
- Store Efficiency: Can the same-sized store sell more products?
- Customer Loyalty: How can brands encourage repeat business from existing customers?
- Inventory Management: Avoid overstocking to prevent discounts and maintain a positive brand image.
- Location Selection: Choose prime locations for stores, such as popular shopping areas or outlet malls, rather than random street locations.
Skechers is taking this approach by shifting from mass store opening to high-quality operations and has even taken over some of Aokang’s stores for direct management. Taobo’s declining performance reflects its failure to keep up with these new requirements; having many stores with low efficiency naturally leads to closures.
DTC Is Not a Panacea, and Distributors Still Have Their Role
Many brands want to connect directly with consumers (e.g., by opening their own stores or using online platforms/direct sales), but can they do without distributors? The answer is no.
- Nike’s Lesson: Nike’s aggressive DTC strategy led to the loss of market share to new brands like HOKA and Asics, prompting it to revert to partnerships with wholesalers.
- The Size of the Chinese Market: Brands like Skechers, with 3,500 stores, cannot operate all of them directly; even Lululemon, which operates exclusively through direct sales, has only opened 170 stores in over a decade, limiting its growth.
- The Importance of Local Partners in Lower-Tier Markets: Companies like Hailan Home, with their extensive network of stores in lower-tier areas, can quickly expand by collaborating with brands like Adidas to target these markets effectively.
Therefore, brands will not completely abandon distributors but instead partner with “high-quality core agents” to help improve store efficiency.
How New Players Are Seizing Opportunities: Hailan Home’s Success in Lower-Tier Markets
Originally a leader in men’s clothing, Hailan Home saw the rise of the sports trend and sought new growth opportunities. In 2023, it partnered with Adidas to open FCC (Factory Direct Concept) stores tailored for lower-tier markets, offering products at prices between regular and outlet prices, including both current and seasonal collections with a focus on value for money.
This strategy was successful because the partnership was mutually beneficial: Adidas needed to expand into these markets, while Hailan had the necessary distribution network. By 2025, Hailan had opened 723 Adidas stores, helping Adidas gain traction in lower-tier areas and also entering the sports apparel market itself.
The Industry Is Still Growing, but Channel Transformation Is Just Beginning
Despite the failure of the traditional model, the sports footwear and apparel industry continues to grow—its revenue increased by 7.38% year-over-year in 2025, with e-commerce sales growing by 15.89% (faster than the overall online retail growth).
What are the future trends?
- More Sophisticated Channels: Brands will continue to streamline their distribution networks, focusing on high-quality outlets.
- Selected Distributors: Only those who can support refined operations will remain in the industry.
- Diversified Competition: Both domestic brands (such as Anta and Li Ning) and niche brands (like HOKA) will play a bigger role in reshaping the distribution landscape.
In summary, there are still opportunities in the Chinese market, but the approach has changed from aggressive expansion to more targeted, quality-driven strategies. Both brands and distributors must adapt to consumer demands and market changes to remain competitive.