Nike would rather sacrifice China share than keep discounting through wholesale.com, cutting loose the partner stores that once absorbed excess inventory, a move some analysts call necessary to restore full-price selling.
The rumor has turned out to be true.
Earlier this month Nike’s biggest distributors in China had received a blow from the rumor but no word from Oregon that things were going to change. But Nike announced the change on its website on July 21, and both Topsports International Holdings and Pou Sheng International (Holdings) Limited have responded with equivalent statements: existing online sales of Nike’s products in mainland China are on Jan. 1, 2027, to “terminate completely.”
Nike’s account seeks to soften the blow: “with some exceptions across licensee partners, partner-operated online storefronts will transition out of selling Nike product.” According to Reuters, the change concerns most of Nike’s 16 retail partners in China, which own and manage thousands of Nike stores.
Pou Sheng says Nike’s business accounts for about 15 percent of total revenue and makes an “insignificant” contribution to profit. It “remains committed to fostering a robust business collaboration with Nike […].”
Topsports, by contrast, says the short-term effects of the termination would indeed be “significant,” Nike business having accounted for about 22 percent of revenue for the financial year ended this past Feb. 28. But it too is looking to the future: “This adjustment will bring some short-term pressure to our business. But we firmly believe that, over the medium– to long-term, this direction will help promote a healthier, more orderly, and more sustainable retail ecosystem in China […]”
The stock prices of both Pou Sheng and Topsports have since declined – going from an approximate HK$0.35 to HK$0.32 and from an approximate HK$1.91 to HK$1.35 respectively.
The plan
As of Jan. 1, 2027, Nike’s digital business in China will be running through its own channels – Nike.com.cn, the Nike App and its storefronts on Tmall, JD.com and Douyin – rather than through the more than 1,000 storefronts operated at present by distributors and sub-retailers.
Nike’s announcement comes in the form of a letter from Cathy Sparks, Nike’s Vice President and General Manager of Greater China. In it she explains that Nike’s “presence has become too fragmented. As consumer behavior shifted rapidly during and after COVID, some of the steps we took created an experience that is less consistent, less trusted and not delivering the growth we expect.”
Now, she explains, Nike seeks to create “a more consistent, premium and connected marketplace” and thereby “reduce fragmentation, strengthen trust and deliver a better Nike and Jordan experience.” She further writes of “clearer product presentation, stronger storytelling and more connected consumer journeys.” Also: “When the experience is consistent, the brand becomes stronger.” And: “This is not just a digital strategy.”
Moreover: “We are also developing new locally led retail concepts that will come to market in the next six months.” We have no information yet on what these might be.
The likely motive
Nike probably reached its all-time peak in revenues from China in FY 2021, just after the lockdowns. Aside from a year-on-year bump in FY 2024, the trajectory ever since has been down. Nike is in nominal figures generating about $2.4 billion less in China now than it was five years ago (when China revenues exceeded $8bn). And that difference adjusted for inflation (about 23% from 2021 to 2026) comes to $4.4 billion. That drop exceeds 40 percent.
Source: Nike, Inc. 10-K and annual report filings, SEC EDGAR (FY2018-FY2026 Greater China segment revenue). Figures are reported (nominal), not inflation-adjusted.
Some reactions
Laurent Vasilescu, BNP Paribas: “Our key takeaway: Nike has a product problem. The decision to terminate this very important channel is a strategic misstep in our view. Wholesale.com is a very important channel in China, as it’s how many Chinese shop, particularly young consumers. The online channel is also a crucial channel for distributors to sell excess inventory as there is little to no Nike factory store outlet presence in China. So we are curious to know how Nike will sell excess inventory in China going forward as it terminates wholesale.com for Topsports and Pou Sheng. This official decision reminds us of when Nike decided to exit certain North American wholesale partners and it then ceded market share to competitors. We think the same will happen with the Topsports and Pou Sheng official news. Reiterate Underperform” (SGB Media).
Vasilescu had qualified Nike’s move as a “strategic misstep” back when it was still a rumor.
Paul Lejuez, Citi: “Our initial view is that this is an extreme move and a risky strategy for two reasons: (1) It opens the door for others to capture share in the market as China is an omni-channel market; this may force NKE’s partners […] to focus more on other brands, and (2) We are concerned this move will result in negative press that impacts how the NKE brand is viewed by the China consumer. We expect NKE stock to be pressured as a result of this move” (SGB Media).
Monique Pollard, also of Citi, calls Nike’s move “slightly positive” for Adidas and Puma “given potential opportunity to gain share of shelf” (SGB Media).
Catherine Lim, Bloomberg Intelligence: Nike’s move “underscores a push to recapture pricing power and assert brand control, even if the tradeoff means sacrificing near-term local market share and potentially delaying its China rebound” (Japan Times).
Jonathan Komp, Baird: “Commentary points to headwinds continuing through fiscal 2027, but we see the move as necessary to return the market to healthy, full-price selling alongside efforts to make the brand more culturally relevant and sport/innovation rooted” (WWD).
Jiang Han, Pangoal Institution (paraphrasis machine-translated from Shenzhen News): “Nike’s core demand in suspending its dealer cooperation is to reshape its pricing system and brand premium. [… Nike’s] overly fragmented online channels led to disorderly price wars, severely eroding brand value. By terminating the partnership, Nike aims to regain control of its core assets, directly accessing all user data and the membership system to support localized product customization. Simultaneously, it seeks to optimize its channel profit structure, converting wholesale business into higher-margin direct sales revenue to address the continued performance pressure from the Greater China region.”
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