Nike China undergoes major channel restructuring: Two major distributors have had their online operations taken back, resulting in a revenue impact of over ten billion yuan that requires reorganization.

Summary of Key Points

Nike has recently launched a major overhaul of its online channels in the Chinese market: it first announced the termination of its online partnership with Taobao in January next year, and then Baosheng International received notice that Nike's online sales would be completely discontinued starting from January 2027. This change caused Baosheng's stock price to drop by 8.7%. Baosheng's online Nike business accounts for 15% of its total revenue (Taobao accounts for 22%), but Baosheng claims that it contributes little to profits. Behind this move is Nike's effort to address channel confusion (inconsistent online prices and poor customer experience among distributors). At the same time, distributors like Baosheng are facing declining performance and high inventory levels; they are trying to survive by diversifying their product lines (e.g., by launching yoga clothing brands that compete with Lululemon) and engaging in live streaming e-commerce. However, whether Nike's direct-operated model can handle the online business volume previously handled by these distributors remains uncertain, which could exacerbate the pressure on Nike's revenue decline in the Chinese market.

Detailed Analysis

1. Nike Takes Control of Its Online Channels: Chaos Needs to Be Fixed

Previously, in order to quickly enter the Chinese e-commerce market, Nike granted online sales rights to many distributors. This led to significant issues: different distributors offered various price discounts, creating confusion for consumers and damaging the brand image. For example, if you buy a pair of Nike shoes for 500 yuan at one store today and see them for 300 yuan at another the next day, you might be less likely to buy from that store in the future. With the new management in place, Nike has decided to take control of its online operations, aiming to unify prices and improve the customer experience by reclaiming these sales rights.

2. Baosheng's Challenges: Declining Performance, High Inventory, and Unprofitable Online Business

Baosheng has been struggling recently, with revenue down by 7.2% in 2025 and profits plummeting by more than 57.1%. The reasons include poor performance in its physical stores and the need to offer aggressive discounts to clear inventory, resulting in lower gross margins (a decrease of 0.7 percentage points). Inventory turnover has also slowed down—what used to sell out in 145 days now takes 160 days. Although old inventory is kept below 7%, higher discounts are required to clear it. Although Baosheng's online Nike business accounts for 15% of its total revenue, it is not very profitable. While live streaming on platforms like Douyin has seen growth (70%), the average transaction value is lower compared to other platforms, and Nike's own high discounts further reduce profits.

3. Distributors Seeking New Opportunities: Diversifying Product Lines to Survive

Realizing that they cannot rely solely on Nike and Adidas, distributors are exploring other brands. For instance, Baosheng has partnered with the Korean yoga brand XEXYMIX, which offers yoga clothing at half the price of Lululemon, aiming to capture a niche market and reduce its dependence on Nike. They have also started live streaming on Douyin, which, although generating lower transaction values, helps to move inventory faster. However, whether these new businesses can make up for the loss of Nike's online business remains to be seen.

4. The Risks of Nike's Reform: Who Will Take Over the Billion-Yuan Business?

The combined annual online sales of Taobao and Baosheng amount to over 8 billion yuan, with other distributors contributing even more. Can Nike manage this volume on its own? Its direct-operated flagship stores have limited capacity—for example, a flagship store might sell at most 1,000 pairs of shoes per day, while distributors used to sell 10,000 pairs. If direct operations cannot handle such high volumes, Nike's already declining revenue in the Chinese market could suffer even more. Given that Nike's revenue in the Chinese market was only 39.6 billion yuan in fiscal year 2026, losing this significant portion of business would be a major blow.

5. The Industry Is About to Be Rebalanced: Distributors Must Transform or Face Elimination

In the past, distributors served as Nike's “free traffic source,” helping to distribute products across various channels, both online and offline. Now that Nike is moving towards direct operations, their survival space is being compressed. They must either find new brands and transition to live streaming (like Baosheng) or face elimination. This reform could lead to a reshuffle in the sports goods industry: smaller distributors may not be able to survive, while larger ones need to quickly find new ways to stay competitive or risk being abandoned by Nike.

In summary, Nike’s channel reform is aimed at long-term growth, but it carries significant short-term risks. Distributors are struggling to adapt; their ability to survive depends on how quickly they can transform. Consumers may see more consistent online prices from Nike, but whether discounts will decrease remains to be seen.