Summary of Key Points
Nike has announced that it will cease selling through online agents in China starting from January 2027, retaining only its official e-commerce channels (flagship stores, website, and app). This move has caused the stock prices of core agents such as Taobao and Baosheng to plummet (Taobao's stock price dropped by 24% in a single day, resulting in a market value loss of HK$2.8 billion). The underlying reasons include Nike's consecutive eight quarters of negative revenue growth in the Greater China region (a 30% decline over five years) and competition from domestic brands such as Anta. However, Nike's approach was abrupt (the notification was given just three weeks in advance), putting pressure on agents' inventory levels and damaging their confidence. This could also lead to the risk of Nike becoming more like a discount brand, while domestic brands are taking advantage of the situation to accelerate their market penetration.
I. Why Did Nike Suddenly “Kick Out” Its Online Agents?
Nike's decision was not impulsive but rather a result of poor performance:
- Poor Performance: The Greater China region has experienced eight consecutive quarters of negative revenue growth. In the fiscal year 2026, revenue was $5.847 billion (about RMB 39.5 billion), a year-on-year decrease of 11%. The decline in the fourth quarter widened to 17%, representing a 30% reduction in business over five years, making it Nike's worst-performing core market globally.
- Disorderly Online Pricing: After obtaining online distribution rights, agents competed by cutting prices on the same products—Product A was sold for RMB 350 by one agent, then RMB 330 by another, and finally RMB 300 by yet another. As a result, no agent was making a profit, and Nike's premium image was damaged (the CEO even acknowledged that frequent discounts affected its premium positioning).
- Desire to Increase Profit: By taking back online sales, Nike can control prices and boost the revenue and profit margins of its direct sales channels (direct sales are more profitable than wholesale).
II. What’s Happening to the Agents?
The agents have faced a dramatic decline in their financial situation:
- Stock Price Plunges: Taobao's stock price dropped by nearly 30% during trading and closed down 24%; Baosheng’s stock price fell by 8.7%. Investors are signaling their disapproval, realizing that the online business is no longer profitable for agents.
- Difficulties in Selling Inventory: Online sales were a major channel for agents to clear their inventory (for example, Taobao's mini-program often offered discounts). Now, with the loss of this option, agents must rely on offline stores, but their impact is limited (a single store can only serve a radius of 3-5 kilometers), leading to an accumulation of out-of-season inventory and potentially lower discounts in the future.
- Caught Off Guard: The notification came just three weeks after rumors began, leaving agents with little time to prepare. Some are even considering suing Nike—this is like being hit without any warning, which would infuriate anyone.
III. The Risks of This Move
Nike’s actions may backfire and lead to a transformation into a discount brand:
- Risk of Discount Brand Status: If agents cannot sell their inventory, they will have to dispose of it through discount platforms like VIP.com or JD.com’s Ola channels. Over time, consumers may associate Nike with discounted products, causing fewer people to visit its regular stores (similar to GAP, where Ola stores outnumber regular ones).
- The Unique Nature of Sports Goods: The difference between this year’s and next year’s sports shoes and pants is minimal, so consumers are more likely to wait for discounts. This will further harm Nike’s regular store performance and dilute its brand value.
IV. Are Domestic Brands Taking Advantage?
Domestic brands are seizing the opportunity:
- Anta’s Strong Portfolio: High-end brands such as Asics, Descent, and Kelon are growing rapidly (Descent’s retail sales exceeded RMB 10 billion, and Kelon’s exceeded RMB 6 billion). Anta and Fila’s mid-range products are also targeting the mass market, with overall revenue increasing by 13.3%, while Xiamen Amalfi Sports grew by 26.7%. These brands are comprehensively encroaching on Nike’s market share.
- Anta’s Strategy Against Nike: Anta is set to become PUMA’s largest shareholder and plans to compete directly with Nike using PUMA as a weapon.
- Nike’s Decline in Shopping Centers: Nike used to be a must-have brand in shopping centers, but now many malls no longer consider it essential due to its poor performance.
V. What’s the Future for Nike and Its Agents?
This situation is not set in stone:
- Nike May Adjust Its Strategy: The industry suggests a gradual approach: first controlling online prices, then gradually reducing inventory, and finally taking over offline stores, rather than making a complete switch all at once.
- Agents’ Responses: Taobao may focus more on creating an offline experience (e.g., opening experience stores) and seeking partnerships with new brands to reduce its reliance on Nike. However, developing their own brands is challenging due to a lack of resources and expertise.
- Product Quality Is Key: Ultimately, it’s the quality of products that matters. If Nike cannot introduce innovative new products, even if it takes back all its distribution channels, it won’t be able to stop the advancement of domestic brands.
In summary, Nike’s decision to take back online sales rights is not wrong in principle, but its aggressive and abrupt approach has harmed its partners and may push it towards a discount brand status. Domestic brands are taking advantage of the situation to gradually challenge Nike’s dominance in the Chinese sports market. This battle is just beginning.