Nike is restructuring its online distribution network in China, a move that could affect roughly $1 billion in wholesale revenue—about 17% of its Greater China sales last fiscal year. The plan, which involves taking back some online channel operations from partners including Top Sports, has been confirmed by sources close to the company, though Top Sports said it has not received formal notice. Nike CEO Elliott Hill acknowledged on an earnings call that the company is adjusting its online and offline channels to deepen local partnerships, but did not directly address the specifics.
A shift toward 'distributor direct' operations
The reform is not a simple revocation of distribution rights but an attempt to rebuild Nike's retail ecosystem so that distributors operate with the efficiency of a direct-to-consumer (DTC) model. Nike's digital business in China fell 25% year-over-year in the fiscal fourth quarter, dragging down overall direct revenue by 17%. Management blamed intense online promotions and price competition. By unifying product timing, membership systems, digital capabilities, and inventory management across its wholesale network, Nike aims to extend full-price selling cycles and control discounting, even if it means short-term pain. The company expects a real recovery may not come until 2027 or 2028.
Learning from past DTC mistakes
Nike previously pursued an aggressive DTC strategy around 2020, cutting wholesale partners to gain direct consumer access. That backfired: the company lost retail reach and local execution, leading to inventory mismanagement and weaker market coverage, especially in North America. Now it is reversing course, reinvesting in wholesale partners while equipping them with digital tools. In China, where e-commerce is hyper-competitive and gray markets thrive, Nike wants distributors to sell at full price longer and avoid dumping inventory into discount channels. The approach mirrors recent moves in North America, where Nike restored relationships with Foot Locker, DSW, and Macy's, and returned to Amazon in 2025.
China's unique challenges
Unlike in the U.S., Nike has long relied on partners like Top Sports and Pou Sheng for its retail network in China. The rise of e-commerce has made price control nearly impossible: a shoe with a suggested retail price of 800 yuan can quickly drop to 600 yuan online or 400 yuan in livestreams. Gray markets, including platforms like Dewu and Taobao, further erode pricing power. The new strategy aims to give distributors the same capabilities as Nike's own stores, including data-driven inventory management and brand training. If successful, the model could become a blueprint for Nike's global channel strategy. CEO Elliott Hill noted that a series of new footwear products will launch in the second half of fiscal 2027, with the first locally designed products arriving for the 2027 holiday season.